Advance Salary available in Balance sheet

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A private limited company paid an employee Rs. 6 lac in salary during FY 2018-19, with Rs. 4 lac booked as salary expense and Rs. 2 lac as advance salary. The employee declared the full Rs. 6 lac as income in FY 2018-19. The company is asking if they can now book the Rs. 2 lac advance salary as an expense in FY 2020-21 to reduce profit. The advice given is that this advance payment can indeed be expensed.

DIVYESH JAIN

DIVYESH JAIN (Querist)
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26 December 2021 Dear Sir,

From a Pvt Ltd company I have made a Salary payment of around Rs. 6 lac in parts to a single employee after deducting T.D.S in F.Y. 2018-19 from which Rs. 4 lacs was shown as a Salary expense and Rs. 2 lacs was shown as Advance Salary given in that year in the company's Books of accounts.

Can I book this Advance Salary as company's salary expense in F.Y. 2020-21 to reduce Profit.

The counter party has already shown this entire salary amount of Rs. 6 lac as income received in his books of accounts in F.Y. 2018-19 while filing his Income tax return.

Please advise me on this matter.

Regards,
Divyesh Jain