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Pre-operative expenses - tax implications

S A D (Chartered Accountant) (42 Points)

12 March 2015

Hi Everyone

Whether Pre-operative Expenses can be claimed as expense under IT Act ' 1961.

And what if the above Expenses are of Capital Nature

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4 Replies

budha bhargav (Student) (52 Points)
Replied 12 March 2015

As per the provisions of section 35D of ITA ACt , amount of pre- operative or pre liminary expenses can be claimed in 5 consecutive years, starting from the year in which expenditure was incurred. I.e 1/5th every year For 5 consecutive years.

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budha bhargav (Student) (52 Points)
Replied 12 March 2015

Pre operative expenses of capital nature, need to be capitalised.

Vishal Goel (Chartered Accountant) (1688 Points)
Replied 13 March 2015

Originally posted by : budha bhargav
	As per the provisions of section 35D of ITA ACt , amount of pre- operative or pre liminary expenses can be claimed in 5 consecutive years, starting from the year in which expenditure was incurred. I.e 1/5th every year For 5 consecutive years.

Vishal Goel (Chartered Accountant) (1688 Points)
Replied 13 March 2015

Following expenditure consider u/s35D

(A)expenditure in connection with-

(i) preparation of feasibility report;

(ii) preparation of project report;

(iii) conducting market survey or any other survey necessary for the business of the assessee;

(iv) engineering services relating to the business of the assessee: Provided that the work in connection with the preparation of the feasibility report or the project report or the conducting of market survey or of any other survey or the engineering services refer- red to in this clause is carried out by the assessee himself or by a concern which is for the time being approved in this behalf by the Board;

(b) legal charges for drafting any agreement between the assessee and any other person for any purpose relating to the setting up or conduct of the business of the assessee;

(i) by way of legal charges for drafting the Memorandum and Articles of Association of the company;

(ii) on printing of the Memorandum and Articles of Association;

(iii) by way of fees for registering the company

(iv) in connection with the issue, for public subscripttion, of shares in or debentures of the company, being underwriting commission, brokerage and charges for drafting, typing, printing and advertisement of the prospectus;

(d) such other items of expenditure as may be prescribed.