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Allowability of Loan Processing Charges
As per proviso to Sec-36(1)(iii) of IT Act Interest expense upto date on which assets are put in use to be capitalised but this clause not speaks about Processing Charges paid at the time of sanction of loan. Whether processing charges are allowable as deduction in the year of expenditure incurred or to be capitalised with relevant asset/project.
Replies (2)
Processing charges paid on purchase of assets will be capitalised
It should be remembered that processing charges are not paid for the asset , its paid for the sanction of the loan for acquiring the asset . I think the bank charges processing fees before the sanction of the loan in mega cases . what if the loan is not sanctioned ?
I think its a revenue expense cos of inclusion in defintion u/s sec 2(28A)
AS 16 advises that borrowing costs have to be capitalised .so it becomes a lil dicey .
I couldnt locate any case law relating to this . If anyone finds any proper solution pls let me know , Thanks
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