Save Rs 499 on a 2-Year Ad-Free CAclubindia Pro Membership. Subscribe Now!

Income tax liability when arises?

218 views

Save Share

Join Us Follow Us Add as Source

Srinivas V

Self

45 Points Posted on 16 May 2021

Income tax query:Please let me have your views.

Income tax assessment of A Ltd. Is completed by assessing officer determining tax liability of Rs. 100 crores. The additions made are challenged before Commissioner (APpeal). As this is disputed liability, amount of Rs. 100 crores is shown as CONTINGENT liability.

Commissioner (Appeals) rejects company’s appeal. The company files appeal with Tribunal. The Tribunal finds some latches in assessment and hence, remands the matter back to Assessing officer for de novo assessment.

Now the question is: Tax liability of Rs. 100 crores is a contingent liability or not? Whether the company or auditor has to make any disclosure in the accounts?

Replies (5)

Quick Summary

This discussion explores when income tax liability is definitively established, particularly in cases of disputed assessments. It clarifies that accounting for tax liabilities, including contingent liabilities, follows accounting standards and involves professional judgment, irrespective of assessment or appellate orders. The consensus suggests that until a final demand is raised, it can be treated as a contingent liability, with auditors potentially noting it in their reports.

veerendar singh

tax consultant

3306 Points Posted on 16 May 2021

Accounting, reporting and disclosures have nothing to do with assessment/appellate orders. contingent liability will be detwrmined as per standards on accounting and reporting.

SUSHANT BIDAYE

721 Points Posted on 16 May 2021

The matter of disclosure of contingent liability is a matter of judgement.

as of now there is no demand.

you may choose not to show anything as contingent liability or may recognise 30 %/50 % or so depending on your judgement