Disallowance u/s 43b

Tax queries 9244 views 22 replies

 

X pvt limited has not deposited the vat liability till 30th sept (due date of filing return) amounting to Rs. 50 lacs.
 
while charging vat on invoices , the amount is directly credited to the vat collected account which is shown in balance sheet as DUTIES AND TAXES PAYABLE
 
now , since PL a/c.  is not in anyway has affected by the vat amount i.e. the vat is not shown under Expenses in Pl A/c. i.e. deduction is not claimed.
Therefore my question is "Can VAT amount be disallowed u/s. 43b for non payment within the due date of filing return"
 
Regards
Nitesh Gupta
Replies (22)

AS per case law (chemicals and plastics india ltdv.s CIT(2003) SEC 43B IS AN INDEPENDENT PROVISION AUTHORISING DEDUCTION OF TAXES ON ACTUAL PAYMENT BASIS .HENCE THE FACT THAT ASSESSEE HAD NOT DEBITED SUCH AMOUNT IN THE ACCOUNTS IS NO BAR FOR DEDUCTION 

ALSO SEE CASE LAWS REGARDING CITV.S ASSOCIATED PIGMENTS

REGARDS

SRIPAL JAIN

THEREFORE SECTION 43B  IS ADMISSABLE EVEN IF NOT CHARGED TO P&L ACCOUNT 

THEREFORE IF YOU HAVE NOT DEBITED THE P&L ACCOUNT THERE IS NO QUESTION OF DISALLOWANCE

Yes same is disallowed in view of section 43b read with 145a. Vat should be routed through p&l account even if assessee chose any accounting treatment 43b will operate otherwise it will defeate basic provision of this act. Let the example of employees contribution towards pf should be routed through p&l account as per section 2(24) and same shall be allowed if paid before due date irrespective of fact that assessee did whatever treatment .also 3cd require report on above facts. . . . Regards CS CA(FINAL) SURENDRA AGARWAL

Dear Sir Surendra Agarwal,

Thanks for your valuable reply. But plz clarify me for this. If a co is registered as a vat dealer , and not under composition scheme, then it will collect vat on sales and pay vat on purchases. Then it will pay diff. tax (i.e. Outvat - Input VAt) to the credit of central govt. Then why it would rout it through P&L A/c. Instead of this it would treat it as liablility. Then what about disallowance u/s 43B. Plz clarify. 

Section 145A requires an adjustement in the values of Opening Stock, Closing Stock,  Purchases and Sales.  Presently you are showing all these items net of VAT. 

If you add VAT in all the above 4 items then, it is natural that your Trading Account will show higher GP.

(As sales and Cl Stock will enhance more powerfully than the Purchases and Opening stock as you have a Vat liability )

This Higher GP will result into Higher NP unless you debit P& L A?c by VAT TAX to get the same Net Profit figure. 

If you debit VAT TAX Expense A/c to P&L , duty to pay this tax U/s 43B emerges. If Tax has been already paid , you will be allowed Expense, otherwise Section 43B will come into Action.

 

 

it is the requirement of section 145A to include the VAT amount into purchase and sale value. And it overrides the section 145

Very beautifully explained by Paras sir

100% agreed with paras bafna. And mr nitish gupta even if a dealer chose composition scheme it should debited its p&l account with composition tax with as expenses now 43b independently apply n same will be allowed on payament basis. Dear plz focous on intent of provison stood at income tax act. Regards
However charterd in practice usually not disallow vat liability if not routed through p& l account for taking it with assising officer at the time of assessement .

Dear Nitesh / Sripal/ Surendra,

The said amount will be added back to the income and will be allowed as deduction when the payment will be made next year.

 

There is no landmark judgement in the given case.

Regards

Amti Mehta

i think your wrong this time AMIT,coz when you have not at all debited to p&l account how can u add back ,tel me which section says tht it shal be disallowed and ya the provision ur telling is its about employess contribution to PF,so i agree with paras sir,

regards

SRIPAL JAIN

@ PARAS SIR,AT PRESENT IN INCOME TAX ACT ONE CAN FOLLOW BOTH INCLUSIVE AND EXCLUSIVE METHOD....THEREFORE CAN U PLZZ CLARIFY ON THIS ASPECT

The assessee has an option in maintaining the books of account.

However, for determining the income under the head PGBP he has to follow Section 145A.

For example, in the books you may provide depreciation at the rates prescribed by the Companies Act, but in IT you have to take rates as per IT Act, likewise here also you have to recompute your profits in line with Section 145A. 

 


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