Pre-operative expenses

This query is : Resolved

Neha Chawla (Querist)
Follow

19 February 2013 What should be the treatment of Trial-Run Expenses (consisting of all revenue expenses). Will these be capitalised by apportionemet in Fixed Costs??

Sumit Grover

Sumit Grover (Expert)
Follow

19 February 2013 It should be capitalised as an indirect element of the construction cost.(Para 9.3. of AS-10).But,the expenditure incurred after the plant has begun commercial production, is not capitalised

Nikhil Kaushik

Nikhil Kaushik (Expert)
Follow

19 February 2013 Dear Neha,

such expense should be capitalized.

For the tax treatment the same has been validated by Supreme Court in the case of Challapalli Sugars Limited Vs. CIT (supra) and CIT Vs. Hindustan Petroleum Corporation, (1975) 98 ITR 167.

Another recent ITAT (delhi bench) judgment in the case of Cosmic Kitchen Pvt Ltd v ACIT (ITA No. 5549/Del/2010) also relied on the above judgments to rule in the similar treatment of pre-op or trial run expenses.

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

Summarize this with AI

ChatGPT Perplexity Claude Google AI Grok