Difference in ICAI and Income Tax Standard :Borrowing Costs

The CBDT has now notified the Income Disclosure and Tax Accounting Standards vide notification no. 32/2015, F. No. 134/48/2010-TPL, dated March 31, 2015. Comparative study of Accounting Standard issued by ICAI, and notified TAS has been given hereunder

Income Computation and Disclosure Standard IX relating to borrowing costs

This Income Computation and Disclosure Standard is applicable for computation of income chargeable under the head “Profits and gains of business or profession” or “Income from other sources” and not for the purpose of maintenance of books of accounts. 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

Accounting Standards issued by ICAI	Income Computation and Disclosure Standards (ICDS)
BORROWING COSTS
A. Borrowing cost eligible for Capitalization
AS-16 provides that judgment should be used for determining whether general borrowings have been utilized to fund Qualifying Assets The capitalization rate should be the weighted average of the borrowing costs applicable to the borrowings of the enterprise that are outstanding during the period, other than borrowings made specifically for the purpose of obtaining a qualifying asset	ICDS provides following formula for capitalizing borrowing costs relating to general borrowings: A x B C Where A= Borrowing cost incurred during the previous year except on borrowings directly relatable to specific purposes B= Average cost of qualifying asset (except which are directly funded out by specific borrowing) as appearing on the first and last day of previous year. a) If qualifying asset does not appear in the balance sheet on the first day or both on the first day and the last day of previous year - 50% of cost of qualifying asset b) If qualifying asset does not appear in the balance sheet on the last day of previous year – the average cost of qualifying asset as appearing in the balance sheet on first day of previous year and on date of completion of asset or on the date of put to use as the case may be. C= Average cost of total asset (except which are directly funded out by specific borrowing) as appearing on the first and last day of previous year.
B. Transitional Provisions
	All the borrowing costs incurred on or after 01-04-2015 shall be capitalized for the previous year commencing on or after 01-04-2015 in accordance with the provisions of this standard after taking into account the amount of borrowing costs capitalized, if any, for the same borrowing for any previous year ending on or before 31-03-2015.