What is treatment for Preliminary expenses (company registration expenses) in new Schedule VI (Specifically for newly Formed PVT LTD Co ) ?
3 Replies
Deepak Gupta
(CA Student)
(15922 Points)
Replied 29 July 2013
In accordance with paragraph 56 of AS 26 such expenditures should be expensed by way of a charge to the profit and loss account in the period in which these are incurred. For this purpose, profit and loss account will have to be prepared by the company even before the commencement of commercial operations.
SANDIP
(ARTICLE ASSISTANT)
(213 Points)
Replied 29 July 2013
Thank you for reply
but how to adjust same with section 35 AD provisions of Income Tax Act, 1961
there is provision of same to amortise expenditure for 5 years
Deepak Gupta
(CA Student)
(15922 Points)
Replied 30 July 2013
As per AS-26 it is written off wholly in the first year but for tax purpose it is amortized over a longer period (i.e. in 5 years u/s 35D).
.
This results into ‘Timing Difference’ as per AS-22. Here, timing difference results in ‘Deferred Tax Asset’.
.
The deferred tax should form part of the tax expenses in the profit and loss account and it should be accounted as a deferred tax asset (DTA) in the balance sheet.
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