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Sundry creditors written off (Income Tax)

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This query is : Resolved


( Author )
28 December 2011

Dear sir,


How will affect the sundry creditors written off to the total tax liability?
IF I HAVE TO WRITE OFF RS.800000/- THEN HOW CAN I DO THAT


Siddhartha Bhardwaj

( Expert )
28 December 2011

Sundry creditors written off results in income.

If sundry creditors are in respect of expenditure, i.e., purchases, such a treatement shall result in business income and shall be taxable in the hands of the assessee under Section 41(1) of the Income Tax Act.

If however, advance received from a party is written off, then the same is not taxable.


SHYAMLAL KAYYARUVATH

( Author )
28 December 2011

IF I HAVE TO WRITE OFF RS 800000/-(SUNDRY CREDITORS)HOW CAN I DO THAT?


CA Pramod Jain

( Expert )
28 December 2011

sundry bal w/off debit 800000
sundry creditor credit 800000


Siddhartha Bhardwaj

( Expert )
28 December 2011

Dear CA Pramod Jain, the entry that you have suggested is incorrect.

Sundry creditors is already a credit balance. It will be debited for writing off the balance.

The correct entry will be as under:

Sundry Creditors A/c Dr. Rs. 8,00,000
To Balance Written Off Rs. 8,00,000

Balance written off will be treated as income and will be credited to Profit & Loss A/c.


CA Pramod Jain

( Expert )
29 December 2011

yes my mistake mr.siddartha is right.


SHYAMLAL KAYYARUVATH

( Author )
02 June 2014

If such a huge amount is written off it will be suspect able.It might be happen when the company make payment with black money the balance of the creditors remains stable thats why the company had to write off such a huge amount.How will the income tax authority think about this writing off?


Siddhartha Bhardwaj

( Expert )
10 July 2014

You are declaring the same as income. There should not be any problem.


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