Pre-operative expenses
This query is : Resolved
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??
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
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.
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.
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