Capitalisation of borrowing costs

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SANJEEV GUPTA

PROP.

28 Points Posted on 14 February 2013

A person takes loan against his existing property (LAP) and purchases another property with this amount. The new property purchased is fully constructed and completed. He wants to give this property on rent to some firm/company in which he is partner/director. He wants to capitalise the interest paid on LAP till the period the business is commenced by new firm/company in this property into the cost of property. can he do so. Pls. answer along with relevant section/case law etc.

What is the position if he wants to strart new business in this property as proprietor of some firm. can he capitalize interest paid till the commencement of business into cost of property.

Thanks & regards

CA Sanjeev Gupta

Replies (3)

CA. Ankit Bhansali

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123 Points Posted on 16 February 2013

i would like to hear view of other members too..

i feel that here property is completed so after completion nothin qualifies capitalisatiion of interest.

if person starts business in property as frim or company, company/firm can claim expenses and person would treat as income.

if he starts business as proprietor he can himself claim expense

Dhawal Mohnot

Practicing

567 Points Posted on 16 February 2013

My Views! I suppose the issue revolves around Interest.

Regarding the first query on whether interest can be capitalised on the property. I feel it can be capitalised upto the point where the asset is ready for use and not upto the point of commencement of business.

After the asset is ready the interest would be expensed in the books of the individual irrespective of the whether the property is taken over by company/firm or propriety concern.

Members feel free to correct my statement.

Regards.