Payable outstanding for years disallowance

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This discussion addresses the possibility of disallowing remuneration that has remained outstanding for several years when calculating income tax, particularly when a company is experiencing high losses and lacks the funds to make the payment. It also touches upon the implications under Ind AS 109 regarding the derecognition of financial liabilities when such payables are written off.

PROFESSIONAL ADEPT

PROFESSIONAL ADEPT (Querist)

13 November 2024 Sir,

remuneration payable is outstanding for years. Can we disallow the same in income tax as the losses are high while making the computation. Also there is no sufficient funds for the remuneration to be paid. Pls guide

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)

14 November 2024 Tax authorities may scrutinize outstanding remuneration, especially if it is significant or if there are delays in payment. They may question the genuineness of the expense and may disallow when written off.

PROFESSIONAL ADEPT

PROFESSIONAL ADEPT (Querist)

14 November 2024 Can we disallow this year in computation under which section?

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)

14 November 2024 Ind AS 109 – Financial Instruments: If accounts payable are recognized under financial instruments and the liability is derecognized, any adjustment should be made according to the rules for derecognition of financial liabilities in Ind AS 109. This would be applicable when the settlement or write-off of accounts payable leads to an extinguishment of the liability.
When writing off accounts payable, the expense or loss on the settlement should be recognized in the profit and loss account in the period in which the obligation is extinguished. For example, if a payable is written off due to a legal dispute resolution or because the liability is no longer valid, the company should recognize the reduction in accounts payable and a corresponding gain or reduction in expense.

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