Interest amount expended should be capitalized whether or not the assest is put to use.However the said salary expenses should be treated as pre-operative if the said project is not ready for use otherwise to be charged to Income & Expenditure account.
Very very urgent
Page no : 2
Manoj BG
(Tax Professional and in Service)
(1795 Points)
Replied 07 June 2010
Hello madam,
The case study u are talking about is governed by AS 16 for borrowing cost on loan taken for purchase of land, plant and machinery, and construction of building. All this assets are qualifying assets as per AS 16 and thus all the borrowing cost incurred in relation to the qualifying assets should be capitalised and should form part of fixed asset.
U'r second query about the salaries, it should be capitalised as far as it is specifically attributable to construction of a project or to the acquisition of a fixed asset or bringing it to its working condition, and therefore should form part of the cost of the construction project or as a part of the cost of the fixed asset.
Regards,
Manoj
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