Income tax return of new private limited company

Save Share

This query is : Resolved

Rahul Agarwal (Querist)
Follow

30 July 2013 A new private limited company is formed in February 2013.No transaction took place in February and March. Should the company still file Income tax return for AY 2013-14. Or it can file income tax return next year with Financial year being Feb 2013 to March 2014?

CA UMESH DULAL

CA UMESH DULAL (Expert)
Follow

30 July 2013 you have to file the return for AY 13-14 as there is no exemption for not filing of return.

Rahul Agarwal

Rahul Agarwal (Querist)
Follow

30 July 2013 Sir, can I not file Income tax next year by making by First year as say 27th February, 2013(Date of incorporation) to 31st March, 2014 ? (1 year 1 month and 2 days)

CA UMESH DULAL

CA UMESH DULAL (Expert)
Follow

30 July 2013 there is no such provision in income tax like in companies act.

Rahul Agarwal

Rahul Agarwal (Querist)
Follow

30 July 2013 Dear Sir, can we file belated return of FY 2012-13 next year along with return of FY 2013-14....since if we file return for FY 2012-13 now then we will have to follow ROC compliances also for FY 2012-13?

Is there any way in which I can do all the filings next year?

Yours views would be appreciated!!!
Thanks!!!

CA UMESH DULAL

CA UMESH DULAL (Expert)
Follow

30 July 2013 you can file belated return but remember following consequences

1. you shall be liable for penalty of 5000

2. you can not carry forward loss other then deprecition

Message likes : 1 times

Rahul Agarwal

Rahul Agarwal (Querist)
Follow

30 July 2013 Dear Sir, according to you company will not be able to claim loss for amortizing pre-incorporation expenses incurred by promoters/ first directors?

Thanks for your views!!!

Aashok Kumar Sharma

Aashok Kumar Sharma

(Expert)
Follow

31 July 2024 Pre-incorporation expenses are costs incurred by the promoters or first directors before the company is legally formed. These expenses often include costs related to incorporation, legal fees, preliminary research, and other start-up costs. The treatment of these expenses for tax purposes depends on whether the company can capitalize and amortize them.

### Tax Treatment of Pre-Incorporation Expenses:

1. **Capitalization and Amortization:**
- Under the Income Tax Act, 1961, pre-incorporation expenses can be treated as preliminary expenses.
- Section 35D of the Income Tax Act allows for the amortization of certain specified preliminary expenses over a period of five years.
- These expenses should be incurred before the commencement of business or in connection with the extension of an industrial undertaking or the setting up of a new industrial unit.

2. **Eligible Preliminary Expenses:**
- Expenditure incurred in connection with:
- Preparation of a feasibility report.
- Conducting market surveys or any other survey necessary for the business of the assessee.
- Engineering services related to the business of the assessee.
- Legal charges for drafting agreements.
- Expenses incurred for the incorporation of the company.

3. **Conditions for Deduction under Section 35D:**
- The expenses must be incurred before the commencement of business or after the commencement, in connection with the extension of the industrial undertaking or setting up a new unit.
- Only certain specified expenses are eligible, and there are limits to the amount that can be amortized.

### Key Points for Companies:

1. **Incorporation Expenses:**
- Expenses directly related to the incorporation process (such as fees paid to the Registrar of Companies, stamp duties, and professional fees) can be amortized over a period of five years.

2. **Promoters' Expenses:**
- Expenses incurred by promoters before the company is formed may not directly qualify for amortization unless they are reimbursed by the company and meet the criteria under Section 35D.

3. **Documentation and Proof:**
- Maintain proper documentation and records of all pre-incorporation expenses.
- Ensure that these expenses are verified and substantiated for claiming amortization.

4. **Claiming the Deduction:**
- Amortized expenses should be claimed in the income tax return over five years, with each year being allowed a deduction of one-fifth of the total eligible expenses.

### Conclusion:

While a company can claim amortization for pre-incorporation expenses under Section 35D, it must ensure that these expenses fall within the specified categories and are incurred within the allowable timeframe. If the expenses are directly related to the incorporation process and meet the conditions laid out in the Income Tax Act, they can be capitalized and amortized over five years.

However, if the expenses are incurred by promoters before the company is incorporated and not reimbursed by the company, they may not be eligible for amortization by the company. Proper documentation and substantiation are crucial for claiming these deductions.

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now