What is the treatment of expenditure incurred on test runs.

Manual - ICDS V : Tangible Fixed Assets

The expenditure incurred on start-up and commissioning of a project including expenditure on test runs and experimental production is to be capitalized while the expenditure incurred after the plant begins commercial production is to be treated as revenue expenditure.

However, 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. Such expenditure should, therefore, be allowable as revenue expenditure.

Dated: 29-8-2017