Treatment in it and capitalisation of expense

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Gunjan Tulsyan (Querist)
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08 June 2012 Company A has availed a term of Rs.100 Lacs for construction of a warehouse, for this purpose it got a valuation report made from a professional who charged a fee f Rs. 6Lac and the company had to also pay Rs. 11 Lac as franking charges for the term loan. So can these charges be capitalised under the fixed asset of warehouse later its construction gets completed. Can u provide me with refrences for this? also can u tell me what would be the effect of the franking and professional charges under the Income tax computation whether it will allowed as an expense or disallowed?

CA Rajendra Purohit

CA Rajendra Purohit (Expert)
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09 June 2012 The borrowing costs that are directly attributable to acquisition,construction or production of a Qualified Assets are those borrowing costs that would have been avoided if the expenditure on the Qualified Assets had not been made.

11 lacs for franking on 100 lacs loan??

As the expense is not recurring in nature and its directly attributable to the asset, it can be added to the cost of the asset so constructed.

Professional fees of Rs. 6 lacs will be considered as revenue in nature due to avoidable circumstances and will be eligible as expenditure for income tax purpose.

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Gunjan Tulsyan

Gunjan Tulsyan (Querist)
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09 June 2012 Thnx for the reply

Gunjan Tulsyan

Gunjan Tulsyan (Querist)
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09 June 2012 can u give me a bit more detailed analysis of the above question...???

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