Can it be business expense

This query is : Resolved

vinay (Querist)
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10 March 2015 can anyone,vat paid on sales which in turn is not collected from customers can be allowed deduction as business expenses for such assessment year from income tax perspective under which section???

Deepti Asawa

Deepti Asawa (Expert)
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10 March 2015 yes, you can claim vat as a business expenditure

CS,CA F,Numrologi TusharSampat

CS,CA F,Numrologi TusharSampat (Expert)
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11 March 2015 it is allowed under sec 37(1)

CA Nimesh Maheshwari

CA Nimesh Maheshwari (Expert)
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27 March 2015 At the time of Sale, following entry would have been passed:

Party A/c Dr. 1050
To Sales 1000
To VAT payable 50

At the time of payment of VAT, following entry would have been passed:

VAT Payable A/c Dr. 50
To Bank 50

At the time of receipt of money from customer:

Bank A/c Dr. 1000
To Party A/c 1000.

Thus, we should understand that the amount which has not been collected pertains to the uncollected debtors. The liability for VAT is yours to pay and not that of the customer.

You may write your debtors off and the same will be allowed as an general expenditure (as rightly said by Tushar Ji). However, while going through the assessment, instances have occurred that the assessing officer tends to disallow the bad debts written off.

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