INDAS 23 capitalisation rate

As per Para 14 of Ind AS 23: ' To the extent that an entity borrows funds generally and uses them for the
purpose of obtaining a qualifying asset, the entity shall determine the amount
of borrowing costs eligible for capitalisation by applying a capitalisation rate
to the expenditures on that asset. The capitalisation rate shall be the
weighted average of the borrowing costs applicable to the borrowings of the
entity that are outstanding during the period, other than borrowings made
specifically for the purpose of obtaining a qualifying asset. The amount of
borrowing costs that an entity capitalises during a period shall not exceed the
amount of borrowing costs it incurred during that period.'

According to this, term "during the period" here may be full Financial Year under concern or Period of Capitalisation. It is Weighted avg of borrowing outstanding during the period.

Borrowing cost incurred need Not be ullu capitalised, only that portion is capitalised which doesn't exceed amount after applying Capitalisation Rate. However if amount after applying capitalisation rate exceeds actual borrowing costs incurred, then Capitalisation will be restricted to actual amount.

Hope your doubt is cleared

Thank you for your answer ,
but my doubt is what's the logic of such provision which results in compounding effect on asset (as we apply WACR on asset amount , due to excess of borrowing fund) for interest portion( of last year) which has already been paid..

Can you briefly elaborate your doubt, what you are taking abt last year❓

because we apply the capitalisation rate on the expenditures incurred on the Asset for effective capitalisation period . We capitalise the borrowing cost because the Asset takes substantial period of time to get ready for its intended use. It is not the compounding effect on the Asset Value; to summarise- it is total expenditure incurred on the Asset + eligible capitalisation of borrowing cost .
It is just like we add installation charges of Machinery when machinery is acquired.