Dear All,
I have a company initiating a project of 4500 crore in 2016. Now the company has started incurring expenses towards salary, travelling etc of employees as well as other expenses like courier, stationary, rent of office premises, etc. Now the company officials say that we will capitalise all these expenses incurred till 2016 in the project. Now they have some idle funds kept in Fixed Deposit with bank. Company's P&L account shows profit of 80 lacs as the expenses incurred are transferred to Capital Work In Progress Account. The company has also paid advance tax of 18 lacs for PY 2013-14.
Now my query is if the company capitalises all expenses in Capital WIP account in 2016, Will all expenses be alloed as deduction in 2016 as per income tax act? I asked the company to charge off all the admin exp to P&L account of current year. If company will do so it will have net loss so that they should not pay the advance tax.
Whether my suggestion is ok or they should capitalise all the exp in 2016?
Please Advise urgently.
CAclubindia
