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    Question

    A company incurs ₹10 lakh as interest on a term loan

    used to acquire plant and machinery. When can this interest be claimed as a tax-deductible expense?
    A After commissioning of asset only Correct Answer Incorrect Answer
    B Fully amortized over 10 years Correct Answer Incorrect Answer
    C Capitalized and amortized until asset is ready for use Correct Answer Incorrect Answer
    D Deducted under Section 80C Correct Answer Incorrect Answer
    E Not deductible under Income Tax Correct Answer Incorrect Answer

    Solution

    Interest incurred before commencement of commercial operations is capitalized as part of the asset’s cost under Section 43(1) of the Income Tax Act and relevant AS/Ind AS.

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