DEFERRED TAX CALCULATION-PRELIMINARY EXP

This query is : Resolved

PROFESSIONAL ADEPT (Querist)
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22 September 2023 Sir,
One of our client is writing of preliminary exp in the first year itself.It has deferred tax implications right?
preliminary exp -18000 as on 31.03.2023
Share capital-100000 as on 31.03.2023
Borrowings-112000 as on 31.03.2023
Fixed Asset-8500 as on 31.03.2023.
what is the disallowed amount under 35 D and deferred tax amount ?Pls help.The company is in the initial year of operation

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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22 September 2023 The maximum deductible under Section 35D cannot be over 5% of the cost of the project. In the case of a company, the maximum deduction cannot exceed 5% of the cost of the project or the capital employed in the business of the company. The amount qualifying as deduction as per the limit will be allowed as a deduction in 5 equal annual instalments beginning with the previous year of commencement of business or the previous year in which the extension of an industrial undertaking is completed or the new industrial unit commences production or operation.

Here 10,600 will be allowed as deduction under section 35D over a period of 5 years.
Under deferred tax permanent difference is 7, 400.
Provide deferred tax asset for 8,480.

PROFESSIONAL ADEPT

PROFESSIONAL ADEPT (Querist)
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22 September 2023 deferred tax asset of 8480 can u clarify.

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CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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22 September 2023 Sorry you have to calculate applicable company tax on it which is deferred tax asset.
It's 4/5 th of 10,600.