07 March 2009
A Machinery was purchased which is not a qualifying asset as per AS 16. A loan was obtained to purchase the machinery. While the loan was obtained, Stamp Duty Charges were incurred.
Pls clarify whether the Stamp Duty Paid for obtaining loan can be capitalised? or stamp duty charges can be treated as borrowing costs and accordingly charged to P&L Account as the machinery is not a qualifying asset?
If your answer is "Yes, You can capitalise", Pls consider the following points.
As per AS 10, any costs directly attributable to bringing the asset to its working condition for its intented use, can only be capitalised.
And finance and borrowing costs (Ancillary costs such as Stamp Duty, Processing Charges, etc. are also included in the finance & borrowing cost )can be capitalised and included as an element of cost of Fixed Asset, provided the asset is qualifying asset under AS 16.
In the above case, the asset is not a qualifying asset. How can i capitalise?
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