The promoters of a builder company incurred some expenses (both Revenue & Capital) before the incorporation of the company. Such expenses relate to the construction contract which was acquired by the company after its incorporation.
What would be the likely treatment for such Preincorporation expenses ???
Could the company Adopt such expenses legally ?
would they be allowed as expense for Tax Purposes ? If Yes then Treatment would be like regular Revenue Expense or like Preliminary Expense (whereby we write off the expense over five year period) ?
Please guide as per Income Tax Act 1961 (Tax Treatment)
as well as per Companies Act 1956 (Accounting Treatment)
Please Note : The expenses incurred are not for the incorporation of the company. i.e. these are not PRELIMINIARY EXPENSES.
CAclubindia
