Preamble
This Income Computation and Disclosure Standard is applicable for computation of income chargeable under the head “Profits and gains of business or profession” or “Income from other sources” and not for the purpose of maintenance of books of accounts.

In the case of conflict between the provisions of the Income-tax Act, 1961 („the Act‟) and this Income Computation and Disclosure Standard, the provisions of the Act shall prevail to that extent.

Scope
1. This Income Computation and Disclosure Standard deals with the treatment of tangible fixed assets.

Definitions
2(1) The following terms are used in this Income Computation and Disclosure Standard with the meanings specified:
(a) “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.
(b) “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.

2(2) Words and expressions used and not defined in this Income Computation and Disclosure Standard but defined in the Act shall have the meanings assigned to them in that Act.

Identification of Tangible Fixed Assets
3. The definition in paragraph 2 (1) (a) provides criteria for determining whether an item is to be classified as a tangible fixed asset.

4. Stand-by equipment and servicing equipment are to be capitalised. Machinery spares shall be charged to the revenue as and when consumed. 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.

Components of Actual Cost
5. 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 its intended use. Any trade discounts and rebates shall be deducted in arriving at the actual cost.

6. The cost of a tangible fixed asset may undergo changes subsequent to its acquisition or construction on account of
(i) price adjustment, changes in duties or similar factors; or
(ii) exchange fluctuation as specified in Income Computation and Disclosure Standard on the effects of changes in foreign exchange rates.

7. Administration and other general overhead expenses are to be excluded from the cost of tangible fixed assets if they do not relate to a specific tangible fixed asset. Expenses which are specifically attributable to construction of a project or to the acquisition of a tangible fixed asset or bringing it to its working condition, shall be included as a part of the cost of the project or as a part of the cost of the tangible fixed asset.

8. 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 incurred after the plant has begun commercial production, i.e., production intended for sale or captive consumption, shall be treated as revenue expenditure.

Self- constructed Tangible Fixed Assets
9. In arriving at the actual cost of self-constructed tangible fixed assets, the same principles shall apply as those described in paragraphs 5 to 8. Cost of construction that relate directly to the specific tangible fixed asset and costs that are attributable to the construction activity in general and can be allocated to the specific tangible fixed asset shall be included in actual cost. Any internal profits shall be eliminated in arriving at such costs.

Non- monetary Consideration
10. When a tangible fixed asset is acquired in exchange for another asset, the value of the tangible fixed asset so acquired shall be its actual cost.

11. When a tangible fixed asset is acquired in exchange for shares or other securities, the value of the tangible fixed asset so acquired shall be its actual cost.

Improvements and Repairs
12. An Expenditure that increases the future benefits from the existing asset beyond its previously assessed standard of performance is added to the actual cost.

13. The cost of an addition or extension to an existing tangible fixed asset which is of a capital nature and which becomes an integral part of the existing tangible 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.

Valuation of Tangible Fixed Assets in Special Cases
14. Where a person owns tangible fixed assets jointly with others, the proportion in the actual cost, accumulated depreciation and written down value is grouped together with similar fully owned tangible fixed assets. Details of such jointly owned tangible fixed assets shall be indicated separately in the tangible fixed assets register.

15. Where several assets are purchased for a consolidated price, the consideration shall be apportioned to the various assets on a fair basis.

Transitional provisions
16. The actual cost of tangible fixed assets, acquisition or construction of which commenced on or before the 31st day of March, 2015 but not completed by the said date, shall be recognised in accordance with the provisions of this standard. The amount of actual cost, if any, recognised for the said assets for any previous year commencing on or before the 1st day of April, 2014 shall be taken into account for recognising actual cost of the said assets for the previous year commencing on the 1st day of April, 2015 and subsequent previous years.

Depreciation
17. Depreciation on a tangible fixed asset shall be computed in accordance with the provisions of the Act.

Transfers
18. Income arising on transfer of a tangible fixed asset shall be computed in accordance with the provisions of the Act.

Tangible Fixed Assets Register
19. The record of tangible fixed assets shall be maintained in the tangible fixed asset register containing the following details:
(a) Description of asset
(b) Location and identification of asset
(c) Actual cost including adjustments on account of :
    (i) Central Value Added Tax credit claimed and allowed under the Central Excise Rules, 1944, in respect of assets
        acquired on or after 1st March, 1994,
    (ii) change in rate of exchange of currency, and
    (iii) subsidy or grant or reimbursement, by whatever name called.
(d) Date on which the asset is first put to use

Disclosures
20. Following disclosure shall be made in respect of tangible fixed assets:
(a) Description of asset/block of assets.
(b) Rate of depreciation.
(c) Actual cost or written down value, as the case may be.
(d) Additions/deductions during the year with dates; in the case of any addition of an asset, date put to use; including adjustments on account of-
   (i) Central Value Added Tax credit claimed and allowed under the Central Excise Rules, 1944, in respect of assets
       acquired on or after 1st March, 1994,
   (ii) change in rate of exchange of currency, and
   (iii) subsidy or grant or reimbursement, by whatever name called.
(e) Depreciation Allowable.
(f) Written down value at the end of year.