Liquidated damage whether deductible under income tax act?
This query is : Resolved
Krishnamoorthy S
(Querist)
11 November 2011
The PO contains a LD clause of 5% if delivery schedule is not maintained. We have invoiced the full value (100%) of the purchase order value even though there was delay in delivery. 100% invoice value was booked as income in P&L A/c. In the next year, the customer settled only 95% after applying the LD Clause. Now can we claim this 5% as non-recoverable and write it off as bad debts in the year when 95% was received?
12 November 2011
Debit the expense account with the 5% as prior period exp and credit the party account to that extent.
By doing this your debtor account will be credited and your expense will be bookesd
By doing this your debtor account will be credited and your expense will be bookesd
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