Prelimnary Expenses

hi

preliminary expenses are written off in 5 Year

Agree with Mr.Shantanu.

As per sec.35D of Income Tax Act, a company is eligible to claim 1/5th of the prel exps.

so, it will automatically written off in the fifth year.

okay

Originally posted by : CA Shantanu Goyal
	hi preliminary expenses are written off in 5 Year

i agree with Mr.Shantanu........

Written off in 5 Years...

5 years

I believe as per companies act and AS it will depend on companies policy to w/off Preliminary expenses. As long future economic benefet from the expenses are expected to come it can be w/off within that period. or else it can w/off within one single year also. But idle time to w/off preliminary expensses is 5 years...

hi 

according to me writting off preliminary expenses is a matter of accounting policy they should be written off in no of years over which benefit from those exp are expected to be recd..... income tax deduction is different matter accounts as per co act and as per IT act are never same there are always some differences like depreciation, exp covered u/s 40a, 40A(2) etc

Ya deduction under it act will be allowable in 5 yrs but it is necessary that 100% exp will be allowed because restriction of capital employed etc are there....

It act can not be the decisive criteria they can only talk about allowance of disallowance of exp .....  

Hi,

Its a company policy to write off the preliminary exp.

Accounting Standards and Companies act does not specify any fixed period.

Also as per Section 78 of the Companies Act, Securities Premium Account can be utilised for writting off the preliminary expenses.

as per IT concern under sec  35D says one can hav deduction for preliminary expenses for 5 years in equal amount(WE can say 1/5)...bt its company policy whether to writ off preliminary expeses in a year or in many year, 

Hi All..

In respect of Accounts books, i.e. as per Companies Act, 1956 and as per AS 26, there cannot be any Accounting Policy for Preliminary expenses ("Expenses"). Those expenses have to be written off in the year of formation of the company and cannot be carried forward.

The Guidance note on preliminary and pre-operative expenditure is withdrawn once AS 26 has become mandatory. As per AS 26, preliminary expenses does not meet the recognition criteria of an Intangible asset. If they are not written off in the year in which they are incurred, the same shall be shown as Prior period expense in the year of written off as per AS 5.

PFA the EAC Opinion also on the same.

In relation to Income tax, it has been already discussed above. i.e it will be charged off over a period of 5 years as per Sec 35D.

Please tell me about WCT ( Detailed)

Yes, as per IT act, a company is eligible to claim 1/5th of the Total preliminary expenses for  a  Year

so it cane be written off not less than 5 years

Frankly,

its the companies dicretion to write it off in as many years. usually 3 to 5years.

If you are claiming preliminary expeses as deduction, Income tax Act, 1962

Allows you to claim 1/5th of it every year(Pl refer Section 35D)

Thanks