ADVERTISMENT EXPENDITURE INCURRED BY A PRIVATE LIMITED COMPA

Tax queries 761 views 3 replies

CA Manish

Practice

87 Points Joined August 2010

A private Limited Company is in the business of rendering services such as annual maintenance

of cars. The Company business is totally dependant on the advertisement.

The company incurs lot of expenses for advertisement. The company incorporation date is Dec 2009.

It has incurred advertisment expenditure to the extent of Rs. 1 lac.

What should be the treatment for advertisement expenditure as per the Compnaies Act as well as Income Tax

Whether the advertisment expenditure incurred should be deferred and amortised over a period of five years.

AGain what is the allowability of the advertisement expenditure as per the Income Tax Act.

I request anyone who has knowledge about it,kindly help me its urgent.

Replies (3)

Sir, as per my knowledge, we can treat the total advertisement expenditure (including TDS paid on the advertisement) as Pre-operative expenditure. These are shown in the head of Miscelleneous expenditure not written off in the Balance sheet.

J.K.Shahi

Service

44 Points Joined July 2008

I presume that the co. must have commenced business after dec 2009 and if the adv expenses is incurred after commencement of business it can be charged to P/L in both cases refer Sec 37 and AS 26

Senthilraja

Chartered Accountant

57 Points Joined June 2008

Dear Manish, The preoperative expenses is Limited to precribed expenses only. I think advertisement expenditure doesn't cover in those. So Income Tax Act allows the full expenditure but As far as companies act is concerned u can treat is as deferred revenue and u can Account it considering AS rules 2006.