Whether Pre-operative expenditure be allowed as deduction or should be added back while calculating business income?
Please let me know.
Thanks in advance.
4 Replies
kamal kishor sen
(STUDENT Rajasthan)
(2156 Points)
Replied 03 August 2011
pre - operative expenditure shall be allowed only for sec 35 (Expenditure on scientific research) only however sec 35 D dealt with Amortisation of preliminary expenses . i.e. for setting up any undertaking or business and in connection with extension of an undertaking or in connection with setting up a new unit.
wait for experts comments
Amit
(Chartered Accountant B.Com(H))
(453 Points)
Replied 03 August 2011
Preliminary Exps. - Exps. connected with the formation of Company
Pre-operative Expenses - Exps. incurred after company formation but before commencement of business.
Sec. 35D(2)(d) postulates "such other items of expenditure (not being expenditure eligible for any allowance or deduction under any other provision of this Act) as may be prescribed". Shall we claim pre-operative exps. under this sub-clause?
a)Preliminary expenses will be dealt with as in Section 35D; Pre-operative which can be allocated to fixed assets will be capitalised with fixed assets created.
b)Other than the expenditure which can be apportioned to the acquisition of fixed assets the rest of the expenditure can be grouped for the purposes of section 35D.
Radha Sarda
(-)
(30 Points)
Replied 03 August 2011
I am talking about the pre operative expenditure for e.g marketing cost and opeating supplies..I have apportioned the same in 10 year and written off 1/10th every year to P/L..can it be claimed u/s 37(1)?
kamal kishor sen
(STUDENT Rajasthan)
(2156 Points)
Replied 03 August 2011
| Originally posted by : Radha Sarda | ||
 |
I am talking about the pre operative expenditure for e.g marketing cost and opeating supplies..I have apportioned the same in 10 year and written off 1/10th every year to P/L..can it be claimed u/s 37(1)? |
 |
NO it cannot be claimed u/s 37(1) because u already claimed and double deduction not allowed .
u/s 37(1) contains some condition i.e. :-
1. The expenditure should not be of the nature described under section 30 to 36.
2. It should not be in the nature of capital expenditure.
3. It should not be personal expenditure of the assessee.
4. It should have been incured in the previous year.
5. It should be in respect of business carried on by the assessee.
6. It shuld have been expended wholly and exclusively for the purpose of such business.
7. It should not have been incured for any purpose which is an offence or is prohibited by any law.
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