Certain expense not booked

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

28 November 2014 certain expenses were not booked, provisions not made on accrual basis last year, can this be claimed this yr on payment basis? What are tds implications?

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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28 November 2014 Yes this can be claimed this year. Deduct TDS while making payment no interest is payable as you have not created any liability last year.

CA Kumar Mukesh

CA Kumar Mukesh (Expert)
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28 November 2014
As per Income Tax Prior Period expenses are not allowed as deduction unless provisions have made.

As per Companies Act Prior period expenses need to separately disclosed in Profit And loss A/c. You can also make reference with Accounting Standard 5 issued by ICAI

Querist : Anonymous

Querist : Anonymous (Querist)

28 November 2014 seetharaman sir, query of other experts is different, what to do?

Querist : Anonymous

Querist : Anonymous (Querist)

28 November 2014 seetharaman sir, query of other experts is different, what to do?

SANYAM ARORA

SANYAM ARORA (Expert)
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28 November 2014 Agree with Mr Muskesh

CA Kumar Mukesh

CA Kumar Mukesh (Expert)
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28 November 2014 For those transaction which have TDS implications are also required to be first included into Profit and loss Account then after disallowed under section 40(a)(i) or 40(a)ia)

You have to understand that expenses need to be first included in profit and loss a/c in any case whether or not TDS deducted.

Expenses which are not included into profit and loss in are not allowed at all in subsequent period even if TDS has been deducted in subsequent periods

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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28 November 2014 If the the expenses are not material can be booked in current year.

CA Kumar Mukesh

CA Kumar Mukesh (Expert)
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28 November 2014 Follow the rule and laws only

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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28 November 2014 In the ruling, the Delhi high court had an occasion to deal with the tax treatment of prior period expenditure. The court held that the question as to the year in which a deduction is allowable may be material when the rate of tax chargeable is different in different years. The court opined that where tax is levied at a uniform rate, it is immaterial whether the deduction is allowed in one assessment year or another. The tax department is not at loss in any event. The high court also observed that the tax department should restrain itself from raising points which do not affect the taxability of the assessee or the tax that the Department is likely to collect from the assessee in one year or other.

In case of CIT vs. Vishnu Industrial Gases (Delhi High Court)Where the department had not disputed that the expenditure was deductible in principle but was only disputing the year in which the deduction could be allowed HELD, castigating the department, that as the tax rates were the same in both years, the department should not fritter away its energies in raising questions as to the year of deductibility/taxability. So Prior period expenditure is allowed.