Allowability of expenses incurred before generating revernue

hey guys,

I think he the expenses are incurred not before commencement of busniess but its prior to generation of income .........when he is saying he incurred  electricity , rent , salary etc it means it is after formation of company but before commencement of activities...............he can  claim it as revenue expenditure as per normal provisons..........and carry forward the loss.........will be set off when co start genearting income......

Correct if i m wrong..........

Dear Radhika,

Lets understand with example-

A Ltd. a manufacturing company incorporated on 01.04.2009

A Ltd. incurred few expenses till 30.06.2009 (like salary, rent, etc - REVENUE NATURE)

A ltd. started production on 01.07.2009

Now the expenses incurred by A Ltd. upto 30.06.2009 CANNOT BE CLAIMED AS REVENUE EXPENSES, IT HAS TO BE CAPITALISED.

Well aamir, I  think...

 its Revenue Expenditure.........you can claim it as deferred revenue expenditure ....and write off over period of time .... ...and as per your eg. he can claim it in that year  as business started in july .............How it will be capitalised explain........

These expenses should not be capitalised and we can claim it either as deferred revenue expenditure or can be claimed as revenue expenses in one go also, please correct me whereever I was wrong

amir is right.................

Please reply if any body knows about Treatment of preoperative expenses done by real estate builders and developers ......

How they can show there expenses in the books before recognition of income........

if they are not earning profit ,they can show there expenses as loss in the ITR

or just capitalize them as preoperative expense and write off at the time of revenue recognition as per AS 9. 

can any one tell me expenditure like rent, other normal business expense done before incorporation of company allowed under companies act or not, and how will it b treated under accounts,  plzz reply

The company was incorporated on 31st October 2008 and principal activity was to provide consultancy services for higher education and vocational training with international standards.  The company has yet to start commercial operation (AY 2012-13) and derived on interest income whereas the company had claimed expenses of Rs. 4.50 crore in the P&L accounts towards employees salary and other miscellaneous expenses. Since the commercial operation had not started up to PY relevant to assessment year , whether the expenditure claimed are required to be allowed/disallowed/capitalised ......