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43B DISALLOWANCE

CA VIJAYAKUMAR S (a) (107 Points)

13 August 2010

HI FRIENDS.

PLEASE GUIDE ME IN THIS QUERY

CAN SEC.43B DISALLOWANCE APPLICABLE FOR SALES TAX (SALES TAX ROUTED THROUGH PERSONAL ACCOUNT)

ALSO REPLY WHEN THE SAME IS NOT BILLED. (EG. DUE TO INCREASE IN PRICE)

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2 Replies

(Guest)

Hai..............
Good morning............
Welcome to this forum.....
It sounds to me like you want an answer to your question based upon Indian tax duty law. Section 43B must be a reference to an Indian law - is that correct? Because, as the IRC code now stands, there is no Section 43B. I don't know if you were referring to a treaty of some sort either, because I don't have access to the US/India treaty if there is one. I can't help you with a question that falls under the US/India treaty, or the tax and duty laws of India as that is beyond the scope of this forum in my opinion.

However, I have attached a brief synopsis of what I would think the answer to be for US tax purposes. As I indicated above, Section 43B does not currently exist in the IRC.

Under US GAAP as well general tax accounting principles in the US (not Indian tax principles), the amount would continue to be classified as a payable until paid most likely.

If you collected the amount from a customer for tax/duty, that wouldn't be considered your money or asset. You are collecting the tax on behalf of someone else, in this case the government.

So, when tax is withheld on behalf of someone, you must would remit to the government or return the money to the client. In any event, it would not appear to be income of Company XYZ. It would continue to be shown as a liability to a taxing authority, until one of the two alternatives above take place.

Have a nice day......
Thank you for sharing with us.....
regards ,
phe9oxis.
https://www.guidebuddha.com

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Manoj BG (Tax Professional and in Service) (1795 Points)
Replied 13 August 2010

DEAR VIJAY,

ONLY WHEN U CLAIMED SALES TAX AS U'R EXPENSES, PROVISION OF 43B APPLICABLE. THE THING U ROUTED YOUR SALES TAX LIABILITY AND PAYMENT THROUGH BALANCE SHEET, NO DISALLOWANCE IS POSSIBLE.

DISALLOWANCE OF EXPENSES IS POSSIBLE ONLY WHEN U CLAIMED A PARTICULAR EXPENSES IN PROFIT AND LOSS ACCOUNT AND AS PER INCOME TAX ACT PROVISIONS, SUCH EXPENSES WOULD NT BE ALLOWED. IN YOUR CASE, IT IS NOT SO.

REGARDS,

MANOJ

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