Building renovation

[A J DEORA & ASSOCIATES]

Need info on accounting for renovation of building? Need taxation view and accounting view. 

[CA Rachit Agarwal]

If the renovation expenditure enhances the value of buildings and also increases the life-cycle of the building. Hence the same to be treated as Capital Expenditure. However if the same expenditure is incurred by tenant then it is revenue expenditure.

Refer: Modi Spg. & Wvg. Mills Co. Ltd. v. CIT [1993] 200 ITR 544 (Delhi)

AI Summary

Capital expenditure on building renovation treated as capital if it enhances value and life cycle; tenant-paid works treated as revenue. Where renovation expenditure enhances the value of the building or materially extends its useful life, it is treated as Capital Expenditure and capitalised for accounting and taxation; expenditure incurred by a tenant in the course of occupation is treated as Revenue Expenditure and recognised as a period expense.