Whether the expenses incurred on increase in authorised capital of company be debited to P & L A/C in the year of incurring the expenses or the same should be defrred & written off over a period of 5 years?
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Accounting of expenses on increase in authorised capital
Replies (7)
YOU CAN DEBIT TO P&L ACCOUNT IF AMOUNT IS NEGLIGIBLE COMPARED TO OTHER EXPENDITURES.....
For accounting purpose u can differ it by amortizing it. But for IT u can't as it is capital expenses.
these are deferred expenditure,,shown under Misc expr..
As per IT Act, the amount cant be amortized as this expr is not allowed
So what is the tax treatment for such expenses and when it would be allowed?
i can substantiate it :
CAse Law: Punjab state industral developement corporation ltd(supreme court) 1997
the fee paid to ROC for expansion of authourized capital of the company is directly related to the capital expenditure incurred by the company and although incidentally that would certainly help in the business of the company and also in profit making,but still it retans the nature of capital expenditure since the expr was directly related to the expansion of the capital base of the company
hence the aount paid to ROC as filing fee for enhancement of capital,is not a revenue expr and is not deductible.
it has no tax treatment at all.its a dead loss
Whether it can be directly set off from the reserves or should it be amortised in 5 installment as per Account, though it may be disallowed in IT ?
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