Treatment of expenditure incurred for formationof 100% subs

[NITIN DESAI]

We haveestablised new 100% subsidiary company inUAE.for thispurposewe haveincurredexpensesin India and use Pl guide for accountingtreatment

[Rama Krishana]

It is onus on the assessee to prove that the expenditure incurred is for the purpose of its business. It is case of facts and circumstances. You may encounter two type of situations, 1 whether the expenditure are capital or revenue in nature 2. whether incurred for business purpose.

If you any input or details, please share on this platform to further elaborate and discuss

[NITIN DESAI]

Sir,

we acknowledge with thanks for receipt of your guidance, however as explain I would like to mention as under.

For establishing new 100% subsidiary in UAE, we have incurred expenses in India viz. Legalisation charges of various documents in rupee, legalisation charges in UAE, Licence fee, professional fees, visa fee in AED and also required share capital to be transferred in AED. Request to guide the treatment of all such expenses as to whether it should be treated as revenue expenses in our books of accounts or what should be treatment of all such expenses. if any case law or judgment are available in this regard please provide.

[NITIN DESAI]

SIR,

Further to our discussion, we have shared the information with a request to provide clarity for this issue.

[Guest]

As per Accounting Standard 26 "INTANGIBLE ASSETS " preliminary expenses incurred in establishment of legal entity such as legal and secretarial expenses has to be treated as revenue expense.

AI Summary

Debate on Classifying UAE Subsidiary Establishment Costs: Capital or Revenue? Insights from Accounting Standard 26. A discussion on the accounting treatment of expenses incurred for establishing a 100% subsidiary in the UAE, initiated by a user, received four replies. The primary concern is whether these expenses, including legalisation charges, licence fees, professional fees, visa fees, and share capital transfer, should be classified as capital or revenue expenses. One respondent advises that, according to Accounting Standard 26 on intangible assets, preliminary expenses for establishing a legal entity should be treated as revenue expenses. The discussion seeks further clarity and references to relevant case law or judgments.