Booking of Expenses

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

12 July 2010 we start a factort from 30-01-2010 I want to know what is tratment of expenses like Bank Interest & other expenses which incurred before 30-01-2010. capitalised in plant & machinery or book as a expenses for the FY 2009-2010

Aditya Maheshwari

Aditya Maheshwari (Expert)
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12 July 2010 Explanation to Section 43 states as under:

20[Explanation 8.—For the removal of doubts, it is hereby declared that where any amount is paid or is payable as interest in connection with the acquisition of an asset, so much of such amount as is relatable to any period after such asset is first put to use shall not be included, and shall be deemed never to have been included, in the actual cost of such asset.]

And section 36(iii) reads as

iii) the amount of the interest34 paid in respect of capital34 borrowed for the purposes of the business34 or profession :

35[Provided that any amount of the interest paid, in respect of capital borrowed for acquisition of an asset for extension of existing business or profession (whether capitalised in the books of account or not); for any period beginning from the date on which the capital was borrowed for acquisition of the asset till the date on which such asset was first put to use, shall not be allowed as deduction.]

So any interest expended before that should be capitalised.