06 January 2009
My company is engaged in construction of buildings. One of the construction contracts specifies that the building should be completed before 12.04.2008 and it is specifically stated in the contract that "time is the essence of the contract". The building could not be completed as yet and construction is expected to be completed within 6 months and there is no document with the company evidencing extension of time period. The contract also contains a clause which gives right to the company to charge interest on late payments.
The issue is that whether the interest income is to be recognised even when the party can refuse to pay the contract amount on account of late complition?
26 November 2010
Dear the whole contract needs to be read in details.
However in such cases, unless & until construction company have fulfilled their part of conditions they cannot recognise the interest income because the auditors will not allow the same on the pretext that the party is not going to pay the interes as the project is not compelted in time.
CAclubindia
