Invoice of 2009 , can it be accounted now

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Dipjyoti Majumdar

CA in service & CS. dipmaj@

3505 Points Posted on 17 October 2011

Friends/Seniors

PQR Ltd, a foreign company raised an invoice on ABC Ltd , an Indian entity sometime in 2009 after PQR exported some articles to ABC in India. The foreign booked the debt in their books in 2009. Due to some reasons, the Indian entity did not book the transaction in its books in 2009 ( may be due to the fact that the invoice was sent by email to the director's email id and there were some issues like if there would be withholding tax or output service tax liability on reverse charge mechanism) and forgot/ignored the invoice.

This was never followed up by the foreign entity. Now in 2011 they are chasing up the indian entity for payment. My question is if we take into accounts in 10/2011 an invoice dated 2009 what could be the consequences from auidt, taxation and other angles

The Indian entity will debit Fixed Asset and not expenses in its financials.

Regards,

Replies (3)

Preety Parik

chartered accountant

762 Points Posted on 17 October 2011

1) The deliemma is when the company had received the material in 2009, how did it forget to account it? Though Invoice was not received, it could have been booked on Purchase Order basis.

2) Now that in 2011, u can account for it in books but it shall be treated as prior period expenses and expenditure shall be denied for income tax purpose.

shubhani jain

102 Points Posted on 17 October 2011

@ preety parik. Can you please tell me exact definition of prior period items as per income tax act which we have to report in 3cd and the reason for disallowing the same..??