A co. was alloted a land on 30-8-2007 from state development authority. Co. exercised the option of paying installments of land for 4 years.
Till now both principal amount and interest amount has been charged to Capital WIP.
Co. got possession of land on 30-4-2008. Land is meant for expansion of co. but still no active construction has been started yet.
Now as per AS-16 -
1) land is not covered under definition of Qualifying asset and,
2) Since no construction has been started yet. Thus interest amt. cannot be capitalised. ( as per AS- 16)
But Co. got possession after paying 2 installments and As per As- 16 it was ready to use only after possession date.
Whether interest amt . shall be charged to P&L a/c.If yes,then for which period ?
What should be the treatment in Capital Wip if interest of 2008-09 had to be charged to P&l A/c ?
also tell the implications of Sec 43(1) of Income Tax act and its treatment in income tax.
CAclubindia
