TMI BlogBorrowing Costs - only for AY 2016-17X X X X Extracts X X X X X X X X Extracts X X X X ..... account. In the case of conflict between the provisions of the Income-tax Act, 1961 ('the Act') and this Income Computation and Disclosure Standard, the provisions of the Act shall prevail to that extent. Scope 1. (1) This Income Computation and Disclosure Standard deals with treatment of borrowing costs. (2) This Income Computation and Disclosure Standard does not deal with the actual or imputed cost of owners' equity and preference share capital. Definitions 2. (1) The following terms are used in this Income Computation and Disclosure Standard with the meanings specified: (a) Borrowing costs are interest and other costs incurred by a person in connection with the borrowing of funds and include: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raph 2means addition of borrowing cost to the cost of inventory. Borrowing Costs Eligible for Capitalisation 5. To the extent the funds are borrowed specifically for the purposes of acquisition, construction or production of a qualifying asset, the amount of borrowing costs to be capitalised on that asset shall be the actual borrowing costs incurred during the period on the funds so borrowed. 6. To the extent the funds are borrowed generally and utilised for the purposes of acquisition, construction or production of a qualifying asset, the amount of borrowing costs to be capitalised shall be computed in accordance with the following formula namely : - A X B C Where A = borrowing costs incurred during the previous y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of sub-paragraph (1) of paragraph 2, when such asset is first put to use; (b) in case of inventory referred to in item (iii) of clause (b) of sub-paragraph (1) of paragraph 2, when substantially all the activities necessary to prepare such inventory for its intended sale are complete. 9. When the construction of a qualifying asset is completed in parts and a completed part is capable of being used while construction continues for the other parts, capitalisation of borrowing costs in relation to a part shall cease: - (a) in case of part of a qualifying asset referred to in item (i) and (ii) of clause (b) of sub-paragraph (1) of paragraph 2, when such part of a qualifying asset is first put to use; (b) in case of part of inventor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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