Hello,
We have received the advance from our Parent company. Now parent company is no more in existance and will like to close the office. We have received advance from them and shown as liablities. Now what will happen to this liablities. Will it possible to remove from our balance sheet and will it attract any tax.
Best Regards
Anil Pagar
If not payable credit it to profit and loss as it is no longer required and being an income pay tax accordingly computed for whole of the profit computed
| Originally posted by : sivaram | ||
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If not payable credit it to profit and loss as it is no longer required and being an income pay tax accordingly computed for whole of the profit computed |
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Agreed with sir,tax implications will be as per section 41(1) of the income tax act..
now it has to be credit in the P&L a/c, as it seems that ur co. is defaulting the parent co. and not wishes to pay the amt. back to the co. in future
There will be no tax on it as it was never allowed as deduction as per sec 41(1) . It is capital receipt.
| Originally posted by : ankit | ||
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There will be no tax on it as it was never allowed as deduction as per sec 41(1) . It is capital receipt. |
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If the advance was given in the normal course of business it is a revenue receipt and if given for purchase of asset it would be capital in nature
This is the case of capital receipt and hence will not be liable to tax, either u/s 28 or u/s 41(1). There have been rulings on this in the case of T.V.Sundaram Iyengar and Sons, Das & Co and Mahindra & Mahindra. All of which echo with the view that capital receipts cannot be subject to tax. There cannot be a second view on this.
However in case there is any writeback of interest payable on this loan, it will be fall u/s41(1) and will be taxable.
CAclubindia
