Incorporation exp

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Nandesu Dora

Nandesu Dora (Querist)
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30 September 2013 hi all, can u please explain why incorporation exp are not allowed under invome tax..

Nikhil Kaushik

Nikhil Kaushik (Expert)
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30 September 2013 Dear Nandesu,

Incorporation expenses are allowed under 35D in five equal annual installments.

Ajay Mishra

Ajay Mishra (Expert)
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30 September 2013 Agreed with Expert......

Sec. 35 D : Amortization of Certain Preliminary Exp.
Where an assessee, being an Indian company who is resident in India, incurs, any Preliminary expenditure can claim deduction in 5 equal installment over a period of 5 years beginning with the previous year in which the business commence or the previous year in which the extension of the industrial undertaking is completed or the new industrial unit is commences production or operation. Do remember a foreign is not eligible for deduction u/s 35D even if resident.

The Preliminary Expenses means any Expenditure in connection with : -

(i) preparation of feasibility report;

(ii) preparation of project report;

(iii) conducting market survey or any other survey necessary for the business of the assessee;

(iv) engineering services relating to the business of the assessee:

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Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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30 September 2013 Perhaps due to the enduring benefit derived by virtue of the registration, the legislature has allowed to claim as business expenditure not in lumpsum but over a period of time as per section 35D of the Income tax act,1961.