29 November 2009
Company has incurred preliminary exp & also have the balance in securities premium a/c. If preliminary exp are written off from balance in Securities Premium A/c, then what would be the scenario from Income Tax point of view, as preliminary exp are not debited to P&L A/c. Are they still allowed to be written off as 1/5 in income tax act. (In my opinion, it should be... please clarify, what experts think of ?)
Again what would be the scenario from AS 22 point of view as this will be treated as permanent of temporary difference. (In my opinion, it should be permanent diff & no deffered tax should be recognized... please clarify, what experts think of ?)
29 November 2009
In the year inwhich you have debited to securities premimu account, in that year it will be fullly disallowed and deduction shall be claim @ 1/5 every year.
30 November 2009
Hi Rishabh, its a nice Q. As far as I think, income tax Act has nothing to do with the way you adjust an item in accounts. it is nowhere mentioned in sec 35D that if u adjust preliminary exp against sec premium A/c then deduction will be withdrawn. Further, timing difference is the difference between A/c income and Tax income which is capable of reversal in one or more subsequent period/s. In the given case there is no question of reversal as the exp is dr. to sec. premium a/c . Hence we can say that the difference is not capable of reversal and therefore a permanent difference. I agree with ur view Rishabh. Regards, CA Shakuntala Chhangani
01 December 2009
hiiii i agree with u that there is no question of timing difference. on other hand 1/5 of preliminary exp can be write off from sec premium after compliance of co act.
02 December 2009
Hi Barkha, why should we write off 1/5 of preliminary exp from sec. premium A/c again when we have already written it off ? It is now no more there in the books of A/cs. Accounting has nothing to do with income tax allowance or disallowance.and this 1/5 deduction is given under income tax and not in A/c. Regards, CA Shakuntala Chhangani
18 December 2009
Hi again Rishabh, now since everybody has expressed his/her opinion, let us come to the point. if we go to AS 26, the items which do not meet the recognition criteria before AS 26 became mandatory were treated as deferred revenue expenditure and normally spread over a period of 3 to 5 years. but any such expenditure incurred after AS 26 became mandatory (1.4.2003/1.4.2004) which do not meet the definition of an asset is required to be expensed in the year in which the expenditure is incurred. it means that if u follow AS 26, the expenditure will go to P/L A/c only. And , there will be timing difference as the expenditure is 100% allowed in A/c but only 20% in IT. therefore, there will be DTA in the first year which will get adjusted in the subsequent 4 years. i m not aware of whether the corresponding change has been made to sec. 78 of companies Act or not. Regards, CA Shakuntala Chhangani
CAclubindia
