Hi
My client has got company incorporated on January 5 , 2016. The share capital is Rs 100,000. They have incurred Rs 17,500 as preliminary expenses within the meaning defiend under secition 35 D.
However total Preliminary expenses under the above section is allowed is Rs 5,000 ( 5% of Share Capital). My client wants the balance Rs Rs 12,500 ( Rs 17,500-5,000) to be allowed as normal business expneses
Is it allowed?
It cannot be allowed as any other expenses.if department want to allow such balance expenses why it will restrict to 5%of cost of project or capital
As per my opinion,the balance Rs Rs 12,500 ( Rs 17,500-5,000) shall not be allowed as normal business expneses u/s 37 as Section 37 covers only those expenditure which are not covered under section 30 to section 36.
Sec 37 (1) says that any expenditure (not being expenditure of the nature described in sections 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee, laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable under the head “Profits and gains of business or profession”.
CAclubindia
