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.

AI Summary

Company Seeks Guidance on Accounting and Tax Treatment of Share Issue Expenses Under Companies Act and Income Tax Act A private limited company increased its authorized share capital to issue shares at a premium, incurring share issue expenses of 94,500 for additional stamp duty. The query seeks advice on accounting and tax treatment of these expenses under the Companies Act and Income Tax Act. Options include expensing in the incurred year, deferring over five years, or adjusting against the share premium account. The response suggests treating the expenditure as capital for tax purposes, thus not deductible, and charging it to the profit and loss account in the incurred year for accounting purposes. Further opinions are invited.