Dear Experts,
I, Dheeraj Arya, would like to seek some advice from the Ld. experts of this community. Various companies were allotted coal blocks few years back and subsequently many of them were cancelled by the Hon'ble Supreme Court. These companies were involved in the development of coal block for mining & extraction purposes. Hence, they incurred expenditure amounting to crores of rupees. In my knowledge, many or most of the companies debit the 'Capital WIP Written-off' in their P&L A/c every year. My question is that they received funds for establishing the business in the form of share capital which is a capital receipt and invested the same in the development of the coal block which is a capital expenditure. Hence, why should these companies deduct these expenses on an annual basis as they are not revenue expenditure? No revenue has been earned as the business operations did not commence.
Kindly, shed some light on the scenario and culminate your reply by clearly proclaiming whether the 'Capital WIP Written-off' should be debitable in the P&L A/c or not. If yes, then kindly provide some case laws or something declared by the Govt. on this subject against this practice adopted by the companies. Thanking you,
Dheeraj Arya
CAclubindia
