Treatment of preliminary and pre-operative expense

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Agrawal Praveen (Querist)
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08 September 2014 Please Explain the treatment of Preliminary and Pre-Operative Expenses as Per
Companies act
Income tax Act and
AS-29
Is DTA/DTL is created?
And if in 1st only 1/5 is written off in books as per Income Tax and forgot to claim 100% as per Companies Act and no DTA/DTL created than what treatment has to be done in subsquent period

CA Parul Saxena

CA Parul Saxena (Expert)
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08 September 2014 Practically companies write off the 1/5th of the expenditure in the books also.So no DTA/DTL

Agrawal Praveen

Agrawal Praveen (Querist)
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08 September 2014 But as per companiest Act 100% write off in first year. In Subsequent years preliminary Expenses disallowed by Income Tax Authorities

CA Parul Saxena

CA Parul Saxena (Expert)
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08 September 2014 not mandatory to write off 100% you may follow as per income tax rules.

Agrawal Praveen

Agrawal Praveen (Querist)
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08 September 2014 But Practicaly I face the problem that in Intimation U/d Section 143(1) disallow the same and Annual reports are submitted as per Companies Act and not as per Income tax Act and only differents between two's are done in Computation of Income Tax return

CA Parul Saxena

CA Parul Saxena (Expert)
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08 September 2014 How could they disallow if you also have write off 1/5th

Agrawal Praveen

Agrawal Praveen (Querist)
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08 September 2014 If we write off only 1/5 as per Income Tax than Books of Company are Malafide as it is not as per Companies Act

CA Parul Saxena

CA Parul Saxena (Expert)
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08 September 2014 please explain what you have exactly done in the books and what is written in the notice?

Agrawal Praveen

Agrawal Praveen (Querist)
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08 September 2014 What I want to know is that, as per Companies Act what is the treatment done for Preliminary Expenses because the Companies Act says we have to write off 100% in 1st year and Income Tax Act 1/5. Is the treatment of it is as same as Depreciation(DTA/DTL)

CA Parul Saxena

CA Parul Saxena (Expert)
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08 September 2014 you just write off full expense in 1st year income tax department will allow only 1/5th every year. So calculate DTA accordingly.

Agrawal Praveen

Agrawal Praveen (Querist)
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08 September 2014 Thanks for your Suggestion Mam. I have one more query about this is that what treatment I have to do if I forgot to calculate DTA in first year due to non Claim of 100% expenses in Company's Books

CA Parul Saxena

CA Parul Saxena (Expert)
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08 September 2014 dont worry calculate in current year.

Agrawal Praveen

Agrawal Praveen (Querist)
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08 September 2014 Ok. Thank for your Valuable suggesions

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