Treatment of Share Issue Expenses in realtion to increased Authroised Capital

[SANJAY BAHETI]

One of my client being a Pvt Ltd Co ( a closely held company) has increased the Authorized Share Capital for the purposes of further issue of shares at premium during the year under audit. in this connection the co has incurred share issue expenses i.e. Additional Stamp duty for increased Authorized capital during year under audit of ₹ 94500/-

Now query is how the said expenses can be treated in Books and in taxation both from accounting as well as taxation point of view as per Companies Act or I.T.Act.

That is the following options are there as under:-

i) whether the same can be charged as expenses in the year of incurred.

ii) or the same can be deferred for 5 years and write off every year 20 % of such expenditure

iii) whether the same can be adjusted or set off from share premium account as per section 78 of Companies Act

Whichever option is more correct from both angle i.e. Accounting and Taxation point of view. Please reply at the earliest.

[Guest]

As far as treatment in taxation the expenditure will be treated as capital expenditure and will not be allowed. As regards accounting treatment this shall be charged to profit and loss account kin the year in which the said expenditure is incyrred. Please revert if there is some other opinion of other capable members on caaniltiwari1988@gmail.com

AI Summary

Share issue expenses treated as capital expenditure for tax and charged to profit and loss for accounting. The respondent advises that expenditure incurred for increasing authorised share capital (additional stamp duty) is treated for taxation as capital expenditure and thus not allowable, while for accounting purposes it should be charged to the profit and loss account in the year in which it is incurred.