Pre incoporation exp
Querist : Anonymous
A newly company incorporated with capital of Rs. 1 lac in dec 14, not any business done till 31st Mar 15. Director has incurred 24250 for incorporation exp. Now how it will be treated under income tax and AS 26. As per AS 26 total exp should be debited to P&L, but as per section 35D only max 5% of capital employed, so if we take 5% of capital then only 5000 can be treated as exp under income tax and amortised will be in 5 years.
Please explain here treatment. m i correct?
Computation of income be done as per 35D
Querist : Anonymous
so here in first year only 1000 will be allowed under income tax and in the books of accounts permanent difference is here of Rs.19250(24250-5000) and timing difference is only of Rs 4000 so DTA will be calculated on 4000.
M i correct and DTA will also be calculated on Loss carried forward under income tax?
please confirm
But tell me why do you say 1000? Where has that figure come from?
Querist : Anonymous
and in book total pre incorporation exp will be allowed as per AS 26
Sec 35(2) gives the details of expenditure entitled to be included for deduction.
Sec 35(3) limits the expenditure to 5% of capital employed.
Why do you think that 5% is for ALL five years?
Why do not you think that 5% is for each of the 5 years?
Querist : Anonymous
Sir, but Sec 35D specifically mentions that the deduction shall be an amount equal to 1/5th of such expenditure for each of the five successive years beginning with the previous year in which business commences.
and further amount of such expenditure is limited to 5%.
Sir other query is here if pvt co incorporated on 11.03.14 and not operating till 31.03.14 it is operating from 08.04.14, then can we take previous year started from 08.04.2014 to file ITR? Sir what is your view here?
02. For pvt limited company, commensement of business is NOT required. So? You have a choice...file a NIL return for financial year 2013-14 OR start filing return from financial year 2014-15. Choice is with you.
Querist : Anonymous
can u please guide me how to show pre incorporation exp disallowed u/s 35D will be shown in ITR 6. I m unable to find respective field in schedule BP.
Querist : Anonymous
Office partition like with Timber, Aluminium for cabin, it will be covered under temporary builing eligbile for 100% dep under income tax?
and exp for 16000 incurred for website creation for company is intangible assets or should be debited to P&L as exp?
please guide
02. Normally these charges include different parts viz domain registration, hoisting charges, annual subscription.
While domain registration AND Hoisting Charges may be capitalised, annual subscription shall be treated as revenue expenditure.
(Taking into account your quantum, the whole of 16000, may even be charged off to P & L account)
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