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Treatment of expenditures on issue of shares

Arun Kumar Aggarwal (Service) (65 Points)

19 February 2008

Dear all,

Please advice about the following:

Expenditures incurred by a listed,existing ,profit making company on issue( increase) of Shares capital :

1.Whether can be amortised and if yes over how many years ( in books of accounts)

2. How and under which section allowed in income tax and in which year.

CA. Arun K. Aggarwal

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2 Replies

CA Junaid (CA) (47 Points)
Replied 19 February 2008

Dear Arun K. Aggarwal, Issue expenses of shares is in the nature of capital expenditure and generally it is disallowed for tax purpose except when expended at the time of inception of company subject to limit U/s 35 D of Act. Subsequent issue expenditure for accounting purpose can be charged in the year of issue itself. For Tax purpose the same will be generally disallowed as per the cases decided by SC. Only exception is bonus issue expenses which are allowed for tax purpose also.

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Ashish Ranpara (TAX CONSULTANT) (369 Points)
Replied 20 February 2008

Dear Arunji, Issue expenses of shares is in the nature of capital expenditure and generally it is disallowed for tax purpose except when expended at the time of inception of company subject to limit U/s 35 D of Act. Subsequent issue expenditure for accounting purpose can be charged in the year of issue itself. For Tax purpose the same will be generally disallowed as per the cases decided by SC. Only exception is bonus issue expenses which are allowed for tax purpose also.