Pre production expenses

This query is : Resolved

Narendra (Querist)
Follow

02 August 2011 in one of my clients , i have noticed that the some of the expenses is appearing in rates and taxes and professional charges relating to a new project which is all together a new line of business in comparison to the present business.

My doubt is whether the expenses can be booked in the normal business P &L or should the same to be shown under expenditure during construction pending allocation as per the guidance note.

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
Follow

03 August 2011 The Council of ICAI, at its 280th meeting, held on August 7-9, 2008, has decided to withdraw the Guidance Note on Treatment of Expenditure during Construction Period, as the same is no longer relevant in the present day context.
In view of the above, for accounting purposes, the said expenses may be expensed out through p & l account and may be disallowed for income tax purposes since no income is generated from the new project.

Message likes : 1 times

C A S.S.Agarwal, M.Com.,LL.B,

C A S.S.Agarwal, M.Com.,LL.B, (Expert)
Follow

03 August 2011 The expert has given correct reply to your question.
In addition to the above I would like to let you know that it is not necessary the against each expenses there should be income and accordingly it can be claimed in P & L A/c. As per income Tax Act it can be treated as deferred Revenue expenses to be adjusted in 2 - 5 years of time as the case may be.

Message likes : 1 times

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