dear friends
what is the treatment of pre construction interest in accounts and in income tax.loan is used for business
purposes.plz reply as soon as possible
thanks & regards
tarun rustagi
P-A-W-A-N
(TAX - MANAGER AT GURGAON)
(541 Points)
Replied 01 June 2010
Pre Construction Period Interest as AS 16 Borrowing Cost, Should be Capitalised.
under the Income Tax Pre Construction interest Allowed Deduction in 5 Years.
kantijain
(Chartered Accountant in Practice)
(385 Points)
Replied 01 June 2010
Dear tarun,
Accounting for borrowing costs (AS 16): AS 16, on borrowing costs, requires the interest attributable to acquiring the qualifying asset to be capitalised and added to the cost of the asset till such time the asset is brought to a usable condition, subject, however, to certain terms and conditions for suspension of such borrowing costs.
Even income-tax act also provide for similiar treatment. The interest upto the date of asset is put to use has to be capitalised as cost of the fixed asset.
Regards
Kanti Jain
CAclubindia
