07-04-2009, 06:29 AM
My dear,
Thanks for the explanation,
<b>For Financial reporting purpose</b>, These assets will be capitalized since they must have been bought primarily for business purpose and are also being used for business, some of the assets remain unutilized in busiess for many years, but they are maintained on company's expenditures, depreciation is also charged (And claimed as expenditure for financial reporting purpose) these assets,inspite of the fact whether used in business or not, are shown as property of company in its accounts,as far as the Economic benefits are concerned , these assets add values to the business, being part of networth, and how networth creates value, it does not require any explaination.
<b>For Income Tax purpose</b>
As per section 22(3),Only such proportion of the depreciation will be allowed as deduction, which fairly relates to the business.(As per rates specified in part 1 of Third Schedule)
All those facilities, which are being used by the director will be dealt as per section 149 and be considered as perquisites to the director while calculating his taxable income.
All expense will be claimed, however there would have a differentiation of treatment,if, these expense relates to the director and company claims them, then this will be treated as a perquisite to the director and would increase his(Director's) taxable income.
however, If the expense are fairly relates to the business, then they will be claimed under business expense rather than treating the same as salary expense , as in prior case.
Best Regards,
Thanks for the explanation,
<b>For Financial reporting purpose</b>, These assets will be capitalized since they must have been bought primarily for business purpose and are also being used for business, some of the assets remain unutilized in busiess for many years, but they are maintained on company's expenditures, depreciation is also charged (And claimed as expenditure for financial reporting purpose) these assets,inspite of the fact whether used in business or not, are shown as property of company in its accounts,as far as the Economic benefits are concerned , these assets add values to the business, being part of networth, and how networth creates value, it does not require any explaination.
<b>For Income Tax purpose</b>
As per section 22(3),Only such proportion of the depreciation will be allowed as deduction, which fairly relates to the business.(As per rates specified in part 1 of Third Schedule)
All those facilities, which are being used by the director will be dealt as per section 149 and be considered as perquisites to the director while calculating his taxable income.
All expense will be claimed, however there would have a differentiation of treatment,if, these expense relates to the director and company claims them, then this will be treated as a perquisite to the director and would increase his(Director's) taxable income.
however, If the expense are fairly relates to the business, then they will be claimed under business expense rather than treating the same as salary expense , as in prior case.
Best Regards,
