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suresh s. tejwani (proprietor) (145 Points)

25 October 2021  

A Client has received the certificate of incorporation of PVT LTD CO. Due to onging construction , the company has not made any sale during the year . Only construction activity is going on during the year . Whether the office related expenses will be allowable as priliminary expenses ? 

 4 Replies

Rama chary Rachakonda (Master in Accounts & Lawyer email ID:ramachary64@gmail.com voice no:9989324294)   (2913 Points)
Replied 25 October 2021

Preliminary expenses are expenses which the promoters of a company incur at the time of incorporating the company. Generally, preliminary expenses are disallowable on the ground that they are of a capital nature or incurred prior to the setting up of a business.

suresh s. tejwani (proprietor) (145 Points)
Replied 25 October 2021

But sir only construction activity is going on and no sale is made during the year .. Whether we can book office related expenses as priliminary expenses ?

yasaswi gomes (My grammar is 💯 good I)   (6646 Points)
Replied 29 October 2021

You don't have to book them as preliminary if the office expenses are related directly to construction of building. You can include them into the cost of building.

CA Amrita Chattopadhyay (Audit & Assurance) (10312 Points)
Replied 05 November 2021

Preliminary expenses would be considered only when it is incurred prior to the commencement of business. In the stated case, it is not clear whether it is the company has started its business or not. The office expenses can however be included in the building cost if it is possible to state that the office expenses were incurred primarily for the construction activity.

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