Security Transaction Tax related query

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Ankur Goyal (Querist)

06 October 2010 an assessee is having a balance of STT shown in his Balance Sheet on asset side which he did not claimed as Expenditure as well as did not set off with income tax prior to the yr 2008.
So now what can i do to remove that balance form balance sheet.

As the assessee is in the business of purchasing and selling shares.

CA Navin Jain

CA Navin Jain (Expert)

06 October 2010 you can transfer to profit and loos a/c but would be disallowed as per income tax act

Ankur Goyal

Ankur Goyal (Querist)

06 October 2010 Sir, i just wanted to know the reason, why it will be disallowed.
Earlier incometax allowed to deduct STT from income tax, now it is allowed as expenditure. so if a person didnot claimed any expense as expenditure and shows it as deffered revenue in balace sheet then it should be allowed to be written off an parts from P/L A/c.

Aashok Kumar Sharma

Aashok Kumar Sharma

(Expert)

23 July 2025 You're raising a good point regarding the **Security Transaction Tax (STT)** and its treatment in the books of accounts and income tax returns. Here's a clear breakdown of your situation and the appropriate treatment:

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### 🔎 **Scenario Recap**

* The assessee is in the **business of trading in shares** (i.e., speculative or non-speculative business income).
* STT paid **prior to F.Y. 2008** is **lying in the balance sheet** on the **asset side**.
* It was **not claimed as a deduction** nor **adjusted against income tax**.
* You now wish to **write off** or **remove** that balance.

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### ✅ **Correct Treatment**

#### 📌 Under Income Tax Act:

* **Prior to A.Y. 2009-10**, STT was **not allowed as business expenditure**.
* From **A.Y. 2009-10** onwards (Finance Act, 2008), **STT paid by traders** (whose income is treated as business income) is **allowed as deduction u/s 36(1)(xv)**.

#### 💡 **However**:

Since your STT is from **pre-2008**, and was **never claimed as deduction**, you **cannot now claim it as an expense** in the current year—it would be **disallowed** if routed through **Profit & Loss A/c**, because:

* It does **not pertain to the current year**.
* The **deduction window** has passed.
* Income tax law follows **"year of accrual/payment"** basis for most deductions unless specifically allowed otherwise.

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### 📘 **Accounting Treatment Suggestion**

You can **write off the STT balance** in the books as **prior period expense** or **expense not allowable under Income Tax**, and provide a note in your audit report or tax computation:

#### 📌 Journal Entry:

```text
Profit & Loss A/c Dr.
To STT Asset A/c
(Being unclaimed STT written off as non-allowable expense)
```

Then, **add it back** in your **Income Tax computation** under **disallowable expenses**, ensuring it doesn’t impact taxable income.

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### 🛑 Important Notes

* **Don't try to claim deduction now**, even partially.
* Ensure there is **sufficient disclosure** in financial statements or audit notes.
* If your case goes into scrutiny, be ready to justify the treatment with documentation (showing it wasn't claimed earlier).

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If you'd like, I can help you draft the proper **notes to accounts** or **tax computation disclosure**.

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