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allowability of deduction

PRATIMA SHARMA (STUDENT) (90 Points)

05 February 2010

In case of a public company who has incurred initials expense like project report etc for installation of project for power generation( to reduce the electricity expense) but the project has not been completed, Now can the company claim such expenditure as business expenditure and if not so , then what is exact treatment in income tax act

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2 Replies

CA. ANKUR (ASST. MANAGER ACCOUNTS) (54 Points)
Replied 05 February 2010

The project has not been completed means the project is left & now will not be statred again or during the fy the project is not completed.

Answer:

1. In case project is an ongoing one then any expenditure incurred furing an ongoing project will be capitalized as CWIP (Capital Work In Progress). & has to be capitalized.

2. If the project is dropped then it can be treated as an revenue expenditure u/s 37 of IT act. bcos if the project was successfull then it will be a capital expenditure but in case it is not sucessfull then it has to be charged off to the P&L a/c as an revenue.