I am posting this query to get a clarification as to where Income Tax debited in profit and loss account is to be shown in the schedule “P&L” and schedule “BP” of ITR 4.
I am giving below a simple (hypothetical) Profit and loss account:-
Trading and Profit & Loss A/c for the year ending 31st March 2011
Particulars Amount Particulars Amount
To Opening Stock 1,00,000.00 By Sales 20,00,000.00
To Purchases 16,00,000.00 By Closing Stock 1,10,000.00
To Salaries and Wages 1,50,000.00
To Rent Paid 36,000.00
To Other Expenses 10,000.00
To Income Tax 5,047.00
To Net Profit 2,08,953.00
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Total 21,10,000.00 Total 21 ,10,000.00
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According to my understanding, profit before tax (Rs.214000) should be shown under column A1 of schedule BP. In PART A- P&L, Sl. No. 43 will show Profit before Tax (Rs. 214000) and the amount of income tax will be shown against Sl. No. 44 and Sl. No. 46 will show Profit after Tax. Income tax debited should neither be shown under Sl.No.16 of Schedule BP nor under Sl. No 8 Ac of PART A- OI. As per the guide for common errors published by the Income Tax department, Profit before Tax should be shown in Sl. No. No. A1 of schedule BP.
According to one of the leading Income Tax return preparation Software, Net profit as shown in the P&L a/c (Profit after tax) (ie Rs. 208953) should be shown in Sl. No. A1 of schedule BP and Income Tax debited to the P&L a/c (Rs.5047) should be shown under Sl.No.16 of that schedule (amount debited to profit & loss account to the extent disallowable under section 40). Similarly income tax debited should also be shown under 8 Ac of schedule OI. According to the Software, in PART A- P&L of ITR4, Income Tax debited to the profit & loss account should be Shown under Sl. No.34 (f) (“any other rates, tax duly or cess”) and Sl. No.43 will show profit after tax. There will not be any figures in Sl. No. 44.
When I suggested that the method followed by them is not correct they argued that the software prepares Income Tax Return (ITR 4) as per the Schema provided by the Income Tax Department.
Kindly inform which of the treatments mentioned above are correct.
CAclubindia
