ROC Expenses Capitalisation

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This query is : Resolved

Naga Bharathi (Querist)

15 July 2011 The company has gone for the expansion, for that purpose it has increased it's authorised Share Capital. The ROC Expenses paid to increase the Authorised Share Capital has been taken in the Development Expenditure & later on at the end of the year that development expenditure is transfered to Plant & machinery A/c. Is the Companies Treatment is Correct? Will the Income tax Department accept that treatment?

Amol Gopal Kabra (CA,CS,DISA)

Amol Gopal Kabra (CA,CS,DISA) (Expert)

16 July 2011 The expenses for increase in Authorised Capital cant be capitalised to machinery. It is in contravention of Accounting Standards. The company has two options-
- Charge it off to Profit and Loss Account in the year of incurrence; or
- show it under the head miscellaneous expenses to be written off or adjusted, and amortise it over 5 years.

In either case, the expenditure wont be allowable as Section 35D allows only pre-incorporation expenses to be amortised over 5 years.

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