20 March 2010
new company having authorised capital of Rs.500000/- has been formed and preliminary expense in this is Rs.39000/- company has issued Rs.100000/- and it has a capital employed of Rs.100000/- only on 31.03.09. so please suggest how much should i write off as per income tax. should it be 5% of Rs.100000/- .i.e Rs.5000/- and than amortising rs.5000 in next 5 years.i.e Rs.1000/- per year or Rs. 5000/- per year.
21 March 2010
Hi Mohit, as per sec. 35D the aggregate expenditure cannot exceed 5% of the cost of project or 5% of capital employed whichever is more (Qualifying amount). cost of project means actual cost of fixed assets which are shown in the books of the assessee as on the last day of the previous year in which the business of the assessee commences. It has nothing to do with authorised capital. The amount of deduction will be 1/5 of the qualifying amount in each of the successive five years beginning with the year in which the business commences or, as the case may be, extends. Regards, CA Shakuntala Chhangani
CAclubindia
