Capitalisation of pre-operative expenses on machinery
This query is : Resolved
06 April 2015
Case 1: New company started its business in Year 1991 & purchased first machinery of Rs.50 lacs in year 1991 (production started in 1991). Loan of Rs.50 lacs taken & tenure of loan is 10 years & total Interest of 10 yrs will be Rs.30 lacs (approx) i.e. say 3.50 lacs per year.
In such case Machinery capitalized in 1991 = Rs.50 lacs & how much pre-operative expesnses (Int on loan ) can capitalize? 3.50 lacs or 30 lacs.
Pl explain.
Case 2: Existing company & purchased machinery of Rs.50 lacs in year 1991 (production started in 1991). Loan of Rs.50 lacs taken & tenure of loan is 10 years & total Interest of 10 yrs will be Rs.30 lacs (approx) i.e. say 3.50 lacs per year.
In such case Machinery capitalized in 1991 = Rs.50 lacs & how much pre-operative expesnses (Int on loan ) can capitalize? 3.50 lacs or 30 lacs.
Pl explain.
In such case Machinery capitalized in 1991 = Rs.50 lacs & how much pre-operative expesnses (Int on loan ) can capitalize? 3.50 lacs or 30 lacs.
Pl explain.
Case 2: Existing company & purchased machinery of Rs.50 lacs in year 1991 (production started in 1991). Loan of Rs.50 lacs taken & tenure of loan is 10 years & total Interest of 10 yrs will be Rs.30 lacs (approx) i.e. say 3.50 lacs per year.
In such case Machinery capitalized in 1991 = Rs.50 lacs & how much pre-operative expesnses (Int on loan ) can capitalize? 3.50 lacs or 30 lacs.
Pl explain.
CA R SEETHARAMAN
(Expert)
06 April 2015
Interest on loan can be capitalized up to the date of commissioning of the equipment. So only part of 3.50 lacs can be capitalized and not 30 lacs.
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