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ICDS V : Tangible Fixed Assets

Income Tax - Income computation and disclosure standards - 06 - This ICDS covers assets being land, building, machinery, plant or furniture held with the intention of being used for the purpose of producing or providing goods or services and not held for sale in the normal course of business. The principal aspect dealt with by this ICDS is the treatment with respect to what would constitute Actual Cost i.e. determination as to whether an expenditure incurred in connection with a Tangible Fixed A .....

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ture. Since intangible assets are excluded from the scope of this ICDS, for the purpose of computation of income, the treatment of intangible assets would be based on the normal provisions of the Act and accounting principles. Tangible fixed assets:- Asset being land, building, machinery, plant or furniture held with the intention of being used for the purpose of producing or providing goods or services and is not held for sale in the normal course of business. 2. Identification of Tangible Fixe .....

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talised. Note:- An item of Property, Plant and Equipment shall be recognised as asset, if and only if, it is probable that future economic benefits associated with the item will flow to the entity and the cost can be measured reliably. 3. Components of Actual Cost:- The actual cost of an acquired tangible fixed asset shall comprise its purchase price, import duties and other taxes, excluding those subsequently recoverable, and any directly attributable expenditure on making the asset ready for i .....

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be excluded from the actual cost of the asset. In case of an asset acquired from a country outside India, the increase or reduction in liability of the assessee while making payment towards the cost of the asset or repayment of the moneys borrowed for acquiring the asset in consequence of change in the rate of exchange, shall be added to or deducted from the actual cost. In a situation where assets are acquired in India by availing a foreign currency loan or borrowing, ICDS VI does not specific .....

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cost of the project or the asset, as the case may be. However, administration and general overheads in case of a running concern would be considered as revenue expenditure unless such expenditure is specifically attributable to the construction of an asset and hence would not form part of the actual cost. The expenditure incurred on start-up and commissioning of the project, including the expenditure incurred on test runs and experimental production, shall be capitalised. The expenditure incurr .....

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uded in actual cost. Any internal profits (e.g. inter-departmental/inter-branch profits in case of self-constructed asset) are to be eliminated in arriving at such cost. 5. Non- monetary Consideration:- This ICDS provides that where an asset is acquired in exchange for another asset or in exchange for shares or other securities, the actual cost of the asset acquired to be recognised, is the fair value of the asset so acquired. 7. Improvements and Repairs:- An asset may undergo improvement and re .....

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gible fixed asset is to be added to its actual cost. Any addition or extension, which has a separate identity and is capable of being used after the existing tangible fixed asset is disposed of, shall be treated as separate asset. 8. Valuation of Tangible Fixed Assets in Special Cases:- Where a fixed asset is owned jointly with others, the proportionate share of actual cost, depreciation and written down value is to be grouped with similar assets that are fully owned by the assessee. In case of .....

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