IDC on project which is temporarily suspended - capitalised or not ?

Nagarjuna Baabu (Apprentice) (35 Points)

15 May 2020  

Hi Friends,

Please give suggestions whether or not to capitalize Interest During Construction (IDC) on construction project which is temporarily suspended..

a) An amount of 60 crs were given as advance to contractor XYZ on 01.01.2018 for construction of the project, the said amount was borrowed from project specific loan sanctioned by Financial Institution (F.I)..

b) Interest paid to F.I on the above loan was capitalized in the books of accounts for the FY 2018-19

c) New Govt came into power after April 2019 elections..

d) Contract with XYZ was terminated by the new Govt on August 2019, citing the reason that the contract value is too high and revised tenders were called for...

f) F.I has been charging interest on the above loan for the FY 2019-20 and our company has paid the interest promptly..

please suggest us whether to capitalize the interest paid during the period from August 2019 to March 2020 in the books of accounts