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Prelimnary Expenses

work is worship (Service) (2728 Points)

13 June 2010

Prelimnary expenses is written off in how many years.

Thanks

Subra

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15 Replies

CA Shantanu Goyal (Practicing CA) (122 Points)
Replied 13 June 2010

preliminary expenses are written off in 5 Year

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Kalpesh Chauhan, (Tax Assistant (Accounting Technician CA FINAL CS PROF. PROG. B.Com)) (8311 Points)
Replied 13 June 2010

Agree with Mr.Shantanu.

SIVASIVA (FCA, Future CA) (4935 Points)
Replied 13 June 2010

As per sec.35D of Income Tax Act, a company is eligible to claim 1/5th of the prel exps.

so, it will automatically written off in the fifth year.

okay

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janak (post graduation) (1327 Points)
Replied 13 June 2010

Originally posted by : CA Shantanu Goyal
	hi preliminary expenses are written off in 5 Year

i agree with Mr.Shantanu........

Devendra (Chartered Accountant) (4775 Points)
Replied 14 June 2010

Written off in 5 Years...

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(Guest)

5 years

Sachin B. Gupta (Service) (45 Points)
Replied 14 June 2010

I believe as per companies act and AS it will depend on companies policy to w/off Preliminary expenses. As long future economic benefet from the expenses are expected to come it can be w/off within that period. or else it can w/off within one single year also. But idle time to w/off preliminary expensses is 5 years...

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Sharad Saini (Student) (286 Points)
Replied 14 June 2010

according to me writting off preliminary expenses is a matter of accounting policy they should be written off in no of years over which benefit from those exp are expected to be recd..... income tax deduction is different matter accounts as per co act and as per IT act are never same there are always some differences like depreciation, exp covered u/s 40a, 40A(2) etc

Ya deduction under it act will be allowable in 5 yrs but it is necessary that 100% exp will be allowed because restriction of capital employed etc are there....

It act can not be the decisive criteria they can only talk about allowance of disallowance of exp .....

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Shobhit (CA, CS) (100 Points)
Replied 14 June 2010

Hi,

Its a company policy to write off the preliminary exp.

Accounting Standards and Companies act does not specify any fixed period.

Also as per Section 78 of the Companies Act, Securities Premium Account can be utilised for writting off the preliminary expenses.

vineeta (Article of assistant) (37 Points)
Replied 14 June 2010

as per IT concern under sec 35D says one can hav deduction for preliminary expenses for 5 years in equal amount(WE can say 1/5)...bt its company policy whether to writ off preliminary expeses in a year or in many year,

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CA Kishore Tallam (Sr Manager - Corporate Account) (2716 Points)
Replied 14 June 2010

Hi All..

In respect of Accounts books, i.e. as per Companies Act, 1956 and as per AS 26, there cannot be any Accounting Policy for Preliminary expenses ("Expenses"). Those expenses have to be written off in the year of formation of the company and cannot be carried forward.

The Guidance note on preliminary and pre-operative expenditure is withdrawn once AS 26 has become mandatory. As per AS 26, preliminary expenses does not meet the recognition criteria of an Intangible asset. If they are not written off in the year in which they are incurred, the same shall be shown as Prior period expense in the year of written off as per AS 5.

PFA the EAC Opinion also on the same.

In relation to Income tax, it has been already discussed above. i.e it will be charged off over a period of 5 years as per Sec 35D.

Attached File : 38 eac opinion prel exp.pdf downloaded: 245 times

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