(ii) After the commencement of his business in connection with the extension of his industrial undertaking or in connection with his setting up a new industrial unit, the assessee shall, in accordance with and subject to the provisions of this section, be allowed a deduction of an amount equal to one-tenth of such expenditure for each of the ten successive previous years beginning with the previous year in which the business commences or, as the case may be, the previous year in which the extension of the industrial undertaking is completed or the new industrial unit commences production or operation. (1) Where an assessee, being an Indian company or a person (other than a company) who is resident in India, incurs, after the 31st day of March, 1970, any expenditure specified in sub-section (2), - (i) Before the commencement of his business, or Kindly go through the same for accounting treatmentĪMORTISATION OF CERTAIN PRELIMINARY EXPENSES. The reproduction of section 35D is as follows. Hope this will give clear picture about preliminary and pre operative expenses (3) Where the aggregate amount of the expenditure referred to in sub-section (2) exceeds an amount calculated at two and one-half per cent - (a) Of the cost of the project, or (d) 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. (iv) In connection with the issue, for public subscription, of shares in or debentures of the company, being underwriting commission, brokerage and charges for drafting, typing, printing and advertisement of the prospectus (iii) By way of fees for registering the company under the provisions of the Companies Act, 1956 (1 of 1956) (ii) On printing of the Memorandum and Articles of Association (c) Where the assessee is a company, also expenditure - (i) By way of legal charges for drafting the Memorandum and Articles of Association of the company (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 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 referred 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 (iv) Engineering services relating to the business of the assessee : (iii) Conducting market survey or any other survey necessary for the business of the assessee rent paid in advance, that element of the expenditure will not qualify for relief under the pre-trading expenses rules.(a) Expenditure in connection with - (i) Preparation of feasibility report Similarly, to the extent that any other expenditure incurred in the pre-trading period will be deductible in computing taxable profits for a period after trading has commenced, e.g. The cost of an advance purchase of trading stock does not qualify for relief under S57 ITTOIA 2005 or S, since its cost will be deductible in arriving at profits when trading begins.

For the purposes of claiming capital allowances there are special provisions in S12 Capital Allowances Act 2001 to treat pre-trading capital expenditure as incurred on the date trading starts, for the purposes of capital allowances (see CA23020). Therefore, the ‘wholly and exclusively’ test (see BIM37000) still has to be satisfied for the purposes of the relief and no relief can be allowed for capital expenditure (see BIM35000). is not allowable as a deduction in computing the profits of the trade, profession or vocation but would have been so allowable if incurred after the trade had commenced.

is incurred within a period of seven years prior to the commencement of the trade, profession or vocation, and.The relief extends only to expenditure which: The above legislation provides relief in respect of certain expenditure of a revenue nature incurred for the purposes of a trade, profession or vocation before it is commenced. S57 Income Tax (Trading and Other Income) Act 2005 (ITTOIA 2005), S61 Corporation Tax Act 2009 (CTA 2009)

Pre incorporation expenses meaning