11 May 2010
I am working in the retail company. My company havn't started it's operation. But the management had decided not to capitalised the expenses (pre operative expenses) & charged all the pre operative expenses to P & L account. My question is that since the company had not started the operations, can we carried forward the loss & take the benefit in next year as per IT?
11 May 2010
This is a litigative matter, however I will try to answer your query in short. Deductibility of the expenditure is not dependent on the start of business, For allowability of expenditure, before start of business, one need to test whether the business has set up or not. By business set up means that the assessee was ready to do the business, however there was not customer / client. For example assessee opens the shop with all set up, but is not able to get revenue as there is no customer during the FY. In Your case if you are in a position to demonstrate that the business was set up, you can claim the expenditure as deductible in your ITR and carry it forward too to next year. As abundant caution, this position is highly litigative and aggressive and depends how you are able to prove your facts of the case. You can take help from the Delhi High Court decision in the case of LG Electronics India Limited 282 ITR 545.
CAclubindia
