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Preliminary expenses

CA. Mala Rohara (Partner) (145 Points)

01 August 2018

A pvt ltd is incorporated in F.Y. 2017-18 and commencement of production is in F.Y. 2018-19.

Co. incurred pre incorporation expenses viz consultation fees, printing of MOA, ROC stamp duty etc. and after incorporation but before commencement of production viz audit fees, bank charges, directors interest nd salary.

What will be accounting and tax treatment?

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7 Replies

RAJA P M ("Do the Right Thing...!!!") (127179 Points)
Replied 01 August 2018

It will be capitalize in Current Asset head as "Pre-incorporate" expenses...

(Guest)

You can claim it 5 financial year

prasad Nilugal (3914 Points)
Replied 01 August 2018

Refer section 35D of the income tax act 1961

1 Like

Prakash Gehani (Consultant & Teacher(Whatsapp 8718057907)) (1306 Points)
Replied 02 August 2018

Accounting Treatement: As per AS-26(Para 56) preliminary expense should be recognised as expense when incurred.
Tax Treatement: It will be written off in 5 years.

chandan singh (Senior Finance Associates) (49 Points)
Replied 02 August 2018

Before incorporated of business all expenses like consultation fees,printing of MOA, ROC stamp duty etc. under head preliminary exp.and you can utilised in 1/5 th year.

Before commencement of production all expenses goes to indirect exp. in P/L account.

brijesh kumar (student) (61 Points)
Replied 04 August 2018

It can be written off in 5 acoounting year equally through profit and loss a/c or we can also write off in single accounting year but consider 1/5th amount as according to 35 d income tax act 1961