Treatment of expenditures on issue of shares

Dear Arun K. Aggarwal, Issue expenses of shares is in the nature of capital expenditure and generally it is disallowed for tax purpose except when expended at the time of inception of company subject to limit U/s 35 D of Act. Subsequent issue expenditure for accounting purpose can be charged in the year of issue itself. For Tax purpose the same will be generally disallowed as per the cases decided by SC. Only exception is bonus issue expenses which are allowed for tax purpose also.

Dear Arunji, Issue expenses of shares is in the nature of capital expenditure and generally it is disallowed for tax purpose except when expended at the time of inception of company subject to limit U/s 35 D of Act. Subsequent issue expenditure for accounting purpose can be charged in the year of issue itself. For Tax purpose the same will be generally disallowed as per the cases decided by SC. Only exception is bonus issue expenses which are allowed for tax purpose also.