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Allowable or not?

Somaas Kandan (CA Final) (385 Points)

24 August 2011

Sales Tax paid for earlier years on demand notice from sales tax dept is allowble or not?

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Devendra (Chartered Accountant) (4775 Points)
Replied 24 August 2011

The payment of Sales Tax / VAT / Service Tax is covered u/s 43B. Hence the payment of Sales Tax on demand notice is not treated as a Prior Period expense and is an allowable expenditure.

Regards,

Devendra K

Sunshine (Helping All) (10575 Points)
Replied 24 August 2011

As per sec 43B, if the payment is made..it would be allowed..

neeraj tyagi (CA) (33 Points)
Replied 24 August 2011

it is allowable as buisness expenditure if the liability to pay the sales tax accure arise in the year under consideration.

Sanket (!..Live to Give..!) (16427 Points)
Replied 24 August 2011

It is Allowable Expenditure.......

D VARA PRASADA RAO (Student (Articles Completed)) (173 Points)
Replied 24 August 2011

It is Allowed Expenditure............

Pavan (stundent) (26 Points)
Replied 25 August 2011

Section 43B only stipulates a condition on which a deduction otherwise allowable under the Act can be allowed. It is not an enabling section unlike sections 30 to 36 - i.e. it does not prescribe the expenditure that can be allowed. [Section 43B - Notwithstanding anything contained in any other provision of the Act, a deduction otherwise allowable under this Act, in respect of a) any tax, duty, cess or fee .... shall be allowed only in computing income under section 28 in PY in which such sum is actually paid]

As the sales tax is paid under a demand order, it would not have been brought into the books in the previous year - irrespective of method of accounting adopted. In the C.Y the entry would be passed as pior period expense. Prior period expenses are not 'otherwise allowable' under the Act. I believe that this would not be allowed.

What do you guys feel?

PS: This is my first post in CCI :)

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