SALES TAX DEMAND - INCOME TAX
Querist : Anonymous
THE WHEATHER IT IS ALLOWABLE UNDER INCOME TAX ACT .
AND IN BOOKS I MEAN UNDER COMPANIES ACT FOR CALCULATING MAT.
Querist : Anonymous
### Can Sales Tax Demand Paid Be Allowed as Expense for Income Tax and MAT?
1. **Under Income Tax Act:**
* **Sales tax demand (like penalty, interest, or arrears)** paid by a company is generally considered a **business expense** and is allowed as a deduction in the year it is paid, as per Section 37(1) of the Income Tax Act, provided it is not a penalty or fine for violation of law.
* If the demand is a **penalty or fine**, it is **not deductible**.
* Since this is a demand for **earlier years (2006-07) but paid in 2009-10**, it can be claimed as an expense in 2009-10 (year of payment) if it is a tax demand and not penalty.
2. **Under Companies Act and MAT (Minimum Alternate Tax):**
* For **MAT calculation under Section 115JB**, the **book profit** is adjusted by adding back certain expenses and disallowances.
* **Sales tax demand paid is usually allowable as expense** unless it is specifically disallowed (e.g., penalty).
* So, the amount can be **deducted while calculating book profit** unless it's a penalty or fine.
---
### Summary:
| Aspect | Allowable or Not | Notes |
| --------------------- | ----------------- | ------------------------------------------ |
| Sales tax demand paid | **Allowable** | Deduct in year of payment, if not penalty. |
| Penalty/Fine | **Not Allowable** | Not deductible under IT or MAT. |
---
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