CA Mehul Thakker
Quick Summary
Dear Students/Readers, Let us start with a small practical scenario. Vita biscuit Limited (VBL) was incorporated on 1st November, 2019. However, it started commercial production on 14th February, 2021. VBL incurred various preliminary expenses of Rs.9,00,000 before commencement. Following
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FAQ :
An Indian company or a non-corporate resident assessee can claim a deduction under Section 35D.
Preliminary expenses are those incurred before the commencement of business for setting up an undertaking or business, or after commencement for extending an undertaking or setting up a new unit.
For a corporate assessee, the upper limit is 5 percent of the cost of the project or 5 percent of the capital employed, whichever is higher.
Capital employed is defined as the aggregate of issued share capital, debentures, and long-term borrowings as of the last day of the previous year in which the business commences.
The value date for computing capital employed and cost of project is the last day of the previous year in which the assessee commenced business operations.
The maximum qualifying expenditure is allowed as a deduction in 5 equal instalments, starting from the previous year in which the assessee commences business.
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