treatment the same in audit.

[ashok joshi]

dear sir,

sub- income tax

Mr. Love import a machinery from japan worth Rs. 1 crore., but that such machinery\'s there is no such operator in india., so, Mr. Love say to him(exporter) please provide me a operator for the same because of their (india) is no operator., so, he (exporter) provide his employee for the same for 1 year agreement/contract for Rs. 10 lacs.
now Question is arise that what will be the total value of machinery ? what will be the value revenue and capital expenditure ? what will be treatment for the same ?
Rs. 10 Lacs will be shown under which head and either this expenditure is capitalizes or not ???

contact - [email protected]

with regrads
Ashok Kumar Joshi

[CA Rachit Agarwal]

Rs. 10 Lacs will be revenue expenditure.

It is immaterial that whether the machine is run by the reisdent or non resident.

However if Rs. 10 Lacs is paid under Trial production phase, then it would be capitalized. Further if the business does not commences withing that period then only the Rs. 10 Lacs would be capitalized.

AI Summary

Revenue expenditure treatment for operator fees may be replaced by capitalisation when incurred during trial production phase. Payment to a foreign exporter's employee for operating imported machinery is generally treated as revenue expenditure, with the operator's residence being immaterial; however, payments made during a trial production phase incurred to bring the asset into working condition should be capitalised, and if business does not commence within that trial period those payments are to be capitalised.