Pre-operative expenses

[CHITRA RAGURAM]

Whether the company can account the EB charges spent on testing as pre-operative expenses and w.off in subsequent 5 years.

AI Summary

Debate on accounting EB charges as pre-operative expenses under Section 35D: Capitalize or write off over five years? A discussion was initiated regarding whether a company can account for electricity board (EB) charges spent on testing as pre-operative expenses and write them off over five years. One participant clarified that under Section 35D of the Income Tax Act, preliminary expenses can be written off over five years, but pre-operative expenses should be capitalized to the related assets, allowing for depreciation claims. Another participant noted that preliminary expenses are fictitious assets incurred before incorporation, written off annually from profits. The original poster clarified that the EB expenses were incurred during a production trial run.