A project company has been sanctioned with some amount by the financial institution for the project as loan.
In the process of construction the company has received some intrest on that unused amount which is kept as deposit,as per guidelines it is deducted from cwip(capital working in progress) cost.
Now the query is that the company is liable to pay income tax on that intrest income.whether this tax on intrest can be included in the cwip(as it will be
captalised in future)???
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Tax on intrest that is deducted in cwip
Replies (2)
No. Income Tax on interest earned cannot be capitalised as part of CWIP. Going by AS-16, the income from temporary investment of borrowed funds is to be deducted from borrowing cost and the balance cost to be capitalised as part of CWIP. However, AS 16 and AS 10 do not provide for capitalisation for income tax, since income tax is not a cost that is directly attributable to the CWIP.
then what u mean is the interest part is allowed as income in cwip and deducted from the cost of cwip and before this set-off we should set-off the interest income with the IT paid. Is this what ur tring to say????
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