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What is the treatment for PRELIMINARY EXPENSES?
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Answer Posted / syed mujtaba
Preliminary Expenses are of two Types
a) Cost of capital:Expenese on the building or purchasing
of Plant and machinery, land, Legal expenses, etc
b) Cost of capital employed:L:like issue of shares of any
kind like, bonus shares, equity shares, debentures or bonds
Allowed as Deduction
a) 5% of cost of capital or
b) 5% of capital employed whichever is more
and the qualifying amount is deductible in 5 equal
installemnts starting from the date the project is
completed or shares are issued
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