Capital asset

dear sirs/friends

my doubt...

purchase of capital asset (land/site)      Rs.5,00,000

Stamp Duty & Registration                   Rs.  70,360

                                                          -----------------

                                                         Rs.5,70,360

                                                         =========

further, for purchase of the above asset a loan has been taken from bank/third parties

of Rs.3,00,000 @ 12% rate of interest - loan repayable in 3 years

Ex : on the above loan, we have incurred an amount of Rs.1,08,000

now,

---> can we capitalize the interest on borrowed amount the fixed asset 

---> can we consider the total amount of Rs.6,78,360 (Rs.500000+Rs.70360+Rs.108000)

      or eligible only Rs.5,70,360/-

      by the time we sell it  - for the purpose of calculating Short Term/Long Term Capital Gains

 

 

             

 

Replies (1)

If interest relates to qualifying assets as per AS-16, then, interest can be capitalised. 

As per AS-16, an asset which takes a substantial period of time to get itself ready for it's intended use is considered as an qualifying asset.

So, acc to me, since land/site is not a qualifying asset , borrowing costs on the same cannot be capitalized.
 

 

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