capital exp.

[Guest]

interst paid on purchase of land after startd of production is capital exp. or rev. exp. 

if its a rev. exp. then suggest proper case law or sec.

[CAGOPALJI AGRAWAL]

The basic principles of accounting decide whether an expenditure is revenue or capital. AS 16 on borrowing costs reply yr query that once the asset is ready to use, the subsequent costs are revenue but in income tax law, it is the date the asset is put to use hence once the production is started, the expense is revenue on account of interest.

AI Summary

Interest on land purchase treated as revenue expenditure once the asset is put to use for tax purposes. Interest incurred on acquisition of land after commencement of production is treated as revenue expenditure rather than capital expenditure; borrowing costs are capitalised only until the asset is ready for its intended use, and once the asset is put to use or production starts, subsequent interest is revenue in nature for income tax purposes.