INTEREST ON LOAN

[Shipra Agarwal]

Whether the interest payment for the unused leasehold land in the partnership firm is to be capitalised or is a revenue expenditure? The land ia idle and there is no any use of it and also it is not kept aside for any specific project or purpose. Is there any case law relating to it?

[DR.MARIAPPAN GOVINDARAJAN]

It is revenue expenditure.

AI Summary

Interest on idle leasehold land treated as revenue expenditure, not capitalised, affecting partnership firm expense treatment. Interest on loans for unused, unallocated leasehold land in a partnership firm should be treated as revenue expenditure rather than capitalised, because the land is idle and not earmarked for any specific project, so the interest does not create or enhance a capital asset and is charged to profit and loss.