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Treatment of preliminary expenses U/s 115JB

(Guest)

What is the treatment of preliminary exps. for calculating book profits U/s 115JB ? whether full amount as appearing in the Balance Sheet is to be deducted for calculating book profits? please go through this POST for further clarification : /forum/messages/2010/1/61905_tax_calculation_.asp

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6 Replies

Amir (Learner) (4016 Points)
Replied 06 January 2010

Dear Shashin,

its NOT like "Full amount appearing in the Balance sheet is to be deducted"

The amount of prelinimary expenses debited to P/L A/c shall be deducted only while computing book profits as per sec 115 JB...

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(Guest)

Thanks Amir for further clarification

Actually i haven't find it anywhere in the section, however it is given as a Hint for Tax Planning In Singhania's Book after Section 115 JB:-

"As a measure to reduce the impact of section 115JB on computation of tax incidence, expenditure on acquisition of patent rights or copyrights, preliminary expenses and expenditure on prospecting, etc., for certain minerals should be amortised for accounting purposes according to the provisions of sections 32, 35A, 35D and 35E."

Please let me know whether it is given specifically under any section.

Amir (Learner) (4016 Points)
Replied 06 January 2010

BROTHER,

Sec 35A WHICH DEALS WITH PATENT/COPYRIGHTS IS MORE PRACTICALLY APPLICABLE SINCE NOW DEPRECIATION ON INTANGIBLE ASSETS IS ALLOWED..

Further, in case of remaining Sections, Yes there is scope of planning in order to increase or reduce ur Book Profits, Because assessee can write off such expenses completely in it's books and once that is done then it will not be added while calculating Book Profits..

Further such type of planning can be done for 1 year only...

And if assessee wants to defer these expenses by amortization then only the amount debited to P/L A/c will be deducted from Book Profits..

Amir (Learner) (4016 Points)
Replied 06 January 2010

Plz let me know if u want anything else on this to get clarity..

(Guest)

Thanks A Lot, nothing to ask right now

kumarsatish022 (Professional) (165 Points)
Replied 06 January 2010

Amir is correct in this regard as no provision exist u/s 115JB to Deduct Prem. Exps, hence amount debited in PEL A/c is permissible as such . but again planning can be for one year only.....