Expenses on issue of preference shares
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
12 April 2013
expneses incurred on issue of preference shares is capital or revenue nature?
Whether it is allowed or disallowed and under which section?
Whether it is allowed or disallowed and under which section?
Mihir Doshi
(Expert)
12 April 2013
Tax treatment
It was held that share issue expenses are capital for income-tax purposes. As a result, it is not deductible from profits. The only exception can be inferred from a reading of S.35D of the Income Tax Act, dealing with amortising of preliminary expenses. If the issue is made to finance a project, share issue expenditure constitutes preliminary expenditure for the purposes of this section. Therefore, such expenditure, subject to the limits specified under this section, can be amortised over a period of five years commencing from the year in which the project starts generating income.
It was held that share issue expenses are capital for income-tax purposes. As a result, it is not deductible from profits. The only exception can be inferred from a reading of S.35D of the Income Tax Act, dealing with amortising of preliminary expenses. If the issue is made to finance a project, share issue expenditure constitutes preliminary expenditure for the purposes of this section. Therefore, such expenditure, subject to the limits specified under this section, can be amortised over a period of five years commencing from the year in which the project starts generating income.
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