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of <h1>Tax Board Clarifies: Only Pre-Commencement Interest Can Be Capitalized for Depreciation; Post-Commencement is Revenue Expense.</h1> The Board has identified that some taxpayers are capitalizing the entire interest paid on loans for acquiring machinery, claiming investment allowances and depreciation on both the principal and capitalized interest. It distinguishes pre-commencement interest as part of asset costs, eligible for depreciation, from post-commencement interest, which is a revenue expense affecting profit and loss. The Board instructs that post-commencement interest should not be capitalized, and claims for investment allowance or depreciation on such interest should be rejected. This prevents enhanced depreciation claims that could lead to unjust tax benefits, despite restrictions under section 80VVA effective from April 1, 1985.
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