1. ICDS
CA Subodh V. SHAH

2. Icds v : TANGIBLE FIXED ASSETS
CA Subodh V. Shah

3. ICDS V: Tangible Fixed Assets
“Tangible fixed asset” is an 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
CA Subodh V. Shah

4. ICDS V: Tangible Fixed Assets
Thus there is no option to expense off immaterial assets which will result in burdensome compliances and record keeping.
AS10 allows us to expense off such items
CA Subodh V. Shah

5. ICDS V: Tangible Fixed Assets
“Fair value” of an asset is the amount for which that asset could be exchanged between knowledgeable, willing parties in an arm’s length transaction.
CA Subodh V. Shah

6. ICDS V: Tangible Fixed Assets
Stand‐by equipment and servicing equipment are to be capitalised.
Machinery spares shall be charged to the revenue as and when consumed.
CA Subodh V. Shah

7. ICDS V: Tangible Fixed Assets
When such spares can be used only in connection with an item of tangible fixed asset and their use is expected to be irregular, they shall be capitalised.
AS-10 allows us to allocate such total cost on a systematic basis over a period not exceeding useful life of the asset.
CA Subodh V. Shah

8. ICDS V: COMPONENTS OF ACTUAL COST
Purchase price
Import duties
Other taxes excluding recoverable
Direct expenditure
Trade discounts / rebates to be reduced
CA Subodh V. Shah

9. ICDS V: COMPONENTS OF ACTUAL COST
Actual cost may change due to
price adjustment, changes in duties or similar factors
exchange fluctuation
CA Subodh V. Shah

10. ICDS V: COMPONENTS OF ACTUAL COST
Administration and other general overhead expenses are to be excluded if they do not relate to a specific tangible fixed asset
CA Subodh V. Shah

11. ICDS V: COMPONENTS OF ACTUAL COST
Costs will include
Expenses on start up & commissioning
Expenses on test runs
Expenses after the plant has begun commercial production shall be treated as revenue
CA Subodh V. Shah

12. ICDS V: COMPONENTS OF ACTUAL COST
Thus expenses after the project is ready to commence commercial production but before it actually commences commercial production will also have to be capitalised.
In AS 10 we can write off such expenditure as revenue or treat it as deferred revenue
CA Subodh V. Shah

13. ICDS V: NON MONETORY CONSIDERATION
The fair value of a tangible fixed asset acquired in exchange for shares or other securities or another asset shall be its actual cost.
CA Subodh V. Shah

14. ICDS V: NON MONETORY CONSIDERATION
In AS-10 the fair value of the asset acquired or the asset given up whichever is more evident is to be taken.
CA Subodh V. Shah

15. ICDS V: Improvements and Repairs
An Expenditure that increases the future benefits from the existing asset beyond its previously assessed standard of performance is added to the actual cost
CA Subodh V. Shah

16. ICDS V: Improvements and Repairs
Any extension to existing asset which becomes integral part of such asset to be capitalised.
If such addition / extension has a separate identity and can be used separately then treat as separate asset
CA Subodh V. Shah

17. ICDS V: joint ownership
Details of jointly owned tangible fixed assets shall be indicated separately in the tangible fixed assets register.
Where several assets are purchased for a consolidated price, the consideration shall be apportioned to the various assets on a fair basis
CA Subodh V. Shah

18. ICDS V: Tangible Fixed Assets
The ICDS also provides that depreciation on such assets and income arising on transfer of such assets shall be computed in accordance with the provisions of the Income-tax Act, 1961
CA Subodh V. Shah

19. ICDS V: Tangible Fixed Assets
ICDS prescribes disclosure requirement similar to requirement of Tax Audit Report.
Even the persons not subject to tax audit have to comply with such disclosure requirement.
CA Subodh V. Shah

20. ICDS V: revaluation Revaluation is not permitted by the ICDS.
Income / expense is to be recognised only on actual realisation.
CA Subodh V. Shah

21. ICDS VIII : SECURITIES
CA Subodh V. Shah

22. ICDS VIII: Securities
This ICDS deals with securities held as stock‐in‐trade.
Does not apply to
interest and dividends on securities
securities held by a person engaged in the business of insurance
securities held by mutual funds, venture capital funds, banks and public financial institutions
CA Subodh V. Shah

23. ICDS VIII: Securities
“Securities” shall have the meaning assigned to it in clause of Section 2 of the Securities Contract Regulation Act, of 1956, other than Derivatives
referred to in sub‐clause 1a of that clause
CA Subodh V. Shah

24. ICDS VIII: initial recognition
It requires securities to be recognized at actual cost on acquisition, which shall comprise of its purchase price and include acquisition charges like brokerage, fees, tax, duty or cess.
CA Subodh V. Shah

25. ICDS VIII: initial recognition
The actual cost of a security acquired in exchange for other securities or another asset shall be the fair value of the security so acquired.
CA Subodh V. Shah

26. ICDS VIII: initial recognition
In case unpaid interest has accrued prior to the acquisition of the security and is included in the purchase price then:
Interest should be allocated between pre‐acquisition and post‐acquisition periods.
Pre-acquisition interest should be reduced from cost
CA Subodh V. Shah

27. ICDS VIII: SUBSEQUENT RECOGNITION
At the end of the year securities held as stock-in trade have to be valued at actual cost initially recognized or net realizable value at the end of that previous year, whichever is lower.
Comparison of actual cost initially recognized and net realizable value has to be done category-wise and not for each individual security.
CA Subodh V. Shah

28. ICDS VIII: SUBSEQUENT RECOGNITION
The categories are as under
shares;
debt securities;
convertible securities; and
any other securities not covered above.
CA Subodh V. Shah

29. ICDS VIII: SUBSEQUENT RECOGNITION
Comparison of actual cost and net realizable value to be done category- wise may cause unrealized income to be recognized which is against the policy of prudence.
CA Subodh V. Shah

30. ICDS VIII : new business
If an assessee starts the business of securities during the previous year then value of securities shall be the cost of securities on the day of commencement of the business.
CA Subodh V. Shah

31. ICDS VIII: Securities
Valuation of unlisted or irregularly traded securities at actual cost initially recognized.
Securities not listed on a recognized stock exchange; or
Securities listed but not quoted on a recognized stock exchange with regularity from time to time.
This will impact the tax liability.
CA Subodh V. Shah

32. ICDS VIII: Securities
If actual cost cannot be specifically ascertained then cost of such security shall be determined on FIFO basis.
CA Subodh V. Shah

33. THANK YOU
CA Subodh V. Shah