Allowability of expenditure made by private company.

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parul goyal (Querist)

16 May 2012 Dear All,

I have query that -

1. Can a company write off revenue expenditure incurred during the financial year but business operations have not been started.
2. Can a company claim depreciation as per income tax act if business activities have not been started.

CA Mayank Chopra

CA Mayank Chopra (Expert)

19 May 2012 Dear Parul

Answer to Query 1:

a) Till the time business operations have not been started all the revenue expenses has to be booked as preliminary expenses.

b) Preliminary expenses will be allowed as expense the moment business comes into operation at one-tenth of preliminary exp subject to provisions of section 35D.

Answer to Query 2:

Company cannot claim the depreciation. Same answer as mentioned above.

parul goyal

parul goyal (Querist)

19 May 2012 Dear Mayank Chopra Ji,

Can a company book general running & maintenance expenditure like office exp. , staff welfare , salary and other revenue expenditure?

CA Mayank Chopra

CA Mayank Chopra (Expert)

20 May 2012 yes company can book such expenses as work in progress but can only claim it in the year of commencement of business & sec 35 D will apply.

CA Mayank Chopra
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