Treatment of Preliminary Expenses

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CA Shraddha Bankar (Querist)
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21 April 2011 For FY 2008-09 company has incurred preliminary expenses for incorporation of company of Rs.75,843 which are deducted from loss incurred by co. & same are shown on Asset side side of B/s. How to deal with prel exp for preparing the balance Sheet for FY 2009-10.

ANCHIT

ANCHIT (Expert)
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22 April 2011 hello shradhha

preliminary expenses is dealt with in sec 35AD of the income tax act

according the expenses shall not be allowed over and above 5% of the capital employed or cost of project

Once you have identified the allowable deduction it can be claimed in 5 equal installments beginning form the year of commencement of business

so in your case you can write off preliminary expenses to the extent of 1/5 of RS.75483 in fy 2009-2010

CA Shraddha Bankar

CA Shraddha Bankar (Querist)
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22 April 2011 Sir thanks for the reply but I am still have a doubt because the whole of preliminary exp charged to year 2008-09 in which they are incurred can i still charge 1/5 in yr 2009-10.plz reply

Nayan Das

Nayan Das (Expert)
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09 May 2011 preliminary expenses the allowable deduction it can be claimed in 5 equal installments beginning form the year of commencement of business.