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Please answer the following query in light of all applicable provisions:
We are a manufacturer of light and heavy commercial vehicle. Two new prototype buses were manufactured in F.Y 2012-13 and were accounted for as an inventory in books of accounts for year ending March 31, 2013. However our R & D department wants to capitalize these buses for carrying out certain durability tests in the current year 2013-14.
1. What all implications would be there if we capitalize the bus as R&D asset which was earlier being shown as inventory in the previous year?
2. Raw Material for 3 such buses was bough and till date only one bus has been manufactured. Should the benefit of sec 35 (2AB) be claimed on such material lying in raw material inventory till date by booking it as an expense for R&D in the case where these 3 buses were required by R&D for carrying out certain tests, however it is not certain that R & D will use all of the 3 buses.
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