Economics · Financial Accounting and Taxation
A mid-sized manufacturing firm provides the following operational data for its evaluation: 1. Self-constructed a machine costing 10,00,000 in materials and 2,00,000 in direct labor, spending an additional 30,000 on an inauguration party. 2. Incurred a penalty for GST evasion of 2,00,000 (Fraud case). 3. The owner made investments of 1,40,000 in PPF and paid a premium of 50,000 for a 20,00,000 Life Insurance policy. Which of the following statements accurately represents the regulatory/accounting treatment of these items?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1The capitalized cost of the machine is 12,30,000; GST fraud penalty is deductible.
- 2The capitalized cost of the machine is 12,00,000; GST fraud penalty is 2,00,000; the maximum Section 80C deduction allowed is 1,50,000.✓
- 3The capitalized cost of the machine is 12,00,000; the maximum Section 80C deduction allowed is 1,90,000.
- 4The capitalized cost of the machine is 12,30,000; the maximum Section 80C deduction allowed is 1,50,000.
Correct answer
The capitalized cost of the machine is 12,00,000; GST fraud penalty is 2,00,000; the maximum Section 80C deduction allowed is 1,50,000.
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