01 March 2010
We a limited company provided in our accounts a liability in nature of contractor's nature of payment in last year.The said liability was provided at best estimate basis.The company paid due tax on such liability by adding back the said expenses as the tds part was not deducted since the dispute with the contractor's were not settled. In the year 2010-11, the said liability is finalised and it is now less by rs 5000 i.e say in 2009-10 it was 90000 and it is fixed in 2010-11 as 85000. Company had duely deducted tax on payment of Rs 85000. We want to know how we can get the benefit of tax part already paid in 2009-10 for the liability no longer required of Rs 5000.
In my opinion there is no provision in the Income Tax act by which you can carry forward or adjust it in some other head since when you have deposited the tax the bank had uploaded it in NSDL by giving code 94C and F.y. 2009-10.
01 March 2010
1. First of all; in current year's computation of income; you can deduct Rs.85,000/- from your income which was not allowed in last year and thus you will save tax to that extent in current year.
2. Rs.5,000/- is actually your gain so that will be credited in your books as income.
01 March 2010
Dear Mr. Rakhecha, first of all thanks for your reply.You are right in the year 2010-11 it will be credited as liability no longer required, but what about the deferred tax adjustment?we had already paid tax on this amount last year. can we deduct the liability no longer required while computing the tax profit from 2010-11? otherwise if it treated as permanent nature we will be paying double tax. Please advise the mode of adjustment.
CAclubindia
