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Whether Trial run sales to be considered for tax audit

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(Querist)
07 August 2010 Our client being a company is in development stage. It has not started commerical operation till 31st Mar,10. During the year 2009-10 company has done one trial run sale more than Rs. 40 L.

they are capitalising all the expenses under the head " Expenditure during development phase". the above trial run sale will be deducted from the exp. during development phase, because it not a commerical sale. Hence it will be not shown in profit & loss account.

My querry is whether this sale will be considered as Sale.Turnover or Gross receipt as per section 44 AB of income tax act for tax audit purpose.

In other words will tax audit be applicable to our company.
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srinath

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srinath (Expert)
07 August 2010 income from trial run should be reduced from the cost of the machinery or plant and should not be offered as income
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