AS-13 and Income Tax

Amir (Learner) (4016 Points)

09 April 2010  

Hi Members,

Pls help me in this small situation -

AS-13 Accounting for Investments says that “Any Interest received in respect of pre-acquisition period shall go on to reduce the cost price of Bonds / Debenture”(same thing can also be applied to equity shares provided other conditions gets fulfilled in this regard)

Now I have a small confusion regarding the treatment of the above Interest under Income Tax Act.

Whether it will be treated in a usual way – I mean taxable as other sources or will it reduce the cost of acquisition???

I am aware that no such provision is there in Income Tax that sets the treatment of this interest but then there is no provision for determining the “cost of acquisition” also in such case.

To put it differently I would say can “Accounting principles (as enumerated by AS-13)” be applied in determining the cost of acquisition even in the absence of any such provision.

Thanks & Regds