Disallowance of expenditure under section 40

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Querist : Anonymous

Querist : Anonymous (Querist)

03 June 2014 One of my Assessee’s income tax cases for assessment year 2012-2013 is under consideration. There was two expenditure debited by him in income and expenditure account in accounting year 2011-2012, Service tax demand for financial year 2009-10 for Rs. 132520/- Interest on service tax for financial year 2010-11 for Rs. 55642/-AO raised oral information to us that as the accounting system of Assessee was mercantile system. So why payment for previous year from the period under consideration, should be disallow under section 40 of income tax act. Please guide me what is the provision of section 40 or this type of govt. statutory tax liabilities due to service tax or other revenue department audit or scrutiny proceeding.
Thanks
Mukesh Khandelwal
mukesh_khandel@yahoo.com
9828242065

Amol S Joglekar

Amol S Joglekar (Expert)

03 June 2014 if u r following mercantile system of accounting, the Assessing Officer's contention is right. You have to nod for the disallowance.

Querist : Anonymous

Querist : Anonymous (Querist)

04 June 2014 Thanks a lot amol sir, but as you know that it was not possible for Assessee to compute his service tax liabilities in the financial year 2009-2010. Tax liabilities raised by audit objection in accounting year 2011-2012. Assessee had deposited demand and entered in books in indirect expenses. Is any legal ground for argue.

Amol S Joglekar

Amol S Joglekar (Expert)

04 June 2014 No. At the most Assessing Officer may take approval to open the earlier year's cases

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