Preliminary expenses

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

23 August 2013 Company in the current financial year increased its authorized Share Capital and the expenses relating to it are Preliminary Expenses.
1.Whether it is Capital Expenditure or Revenue Expenditure? & why ?
2.What is the treatment of Preliminary in Revised Schedule VI and
3.What is the treatment prescribed in Accounting Standard 26.
4.What is the Treatment As per IT act (sec 35D).

Thanks in Advance

Ganeshbabu K

Ganeshbabu K (Expert)
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23 August 2013 1)It is Revenue expenditure.

if company already started its commercial operations it cannot be treated as preliminar expences,,and it can be charged to Profit and loss account under head "Rates & Taxes"

2)Hence Fee paid to ROC for increase in authorized share capital can be treated as "Revenue expenditure"

3)In your case it is not preliminary expences if compnay is started it commercial operation,,however for acadamic knowledge let me share with you
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under reversecharge "preliminary expences " can be treated as "Other Non-Current assets"

4)AS 26 is not relevant to present case

5)Expences are allowed as it is treated as revenue expenditure..

Note:- views expressed by me was to the best of my knowledge always recommended to obtain a professional opinion for clarification purposes,,

Thanks & regards
Ganesh babu k

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