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As-borrowing cost

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Querist : Anonymous

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Querist : Anonymous (Querist)
15 November 2011 If I have purchased a Flat of rs.50 Lacs by taking a hosing loan of rs. 50 lacs, can i add Interest on this loan for the 1st month and processing charges of the loan to the value of Flat???????
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CA Siddhartha Bhardwaj

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CA Siddhartha Bhardwaj (Expert)
16 November 2011 As per AS 16 Borrowing Cost, borrowing cost is capitalised only in case of an eligible asset. An eligible asset is one which takes substantial period of time to get ready for use.

Since the house has been purchased and not constructed, it is not an eligible asset. Accordingly, interest on loan cannot be capitalised.

The processing charges can be capitalised.
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