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Penalties

mastan vali (articles assistents) (42 Points)

19 June 2014

can penalties paid be debited to general expenses account

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Senu Reddy (ca final) (291 Points)
Replied 19 June 2014

it should be shown separately in p&l

expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law shall not be deemed to have been incurred for the purpose of business or profession and no deduction or allowance shall be made in respect of such expenditure. Therefore , the following expenditures are disallowable as deduction :

1. Expenses incurred in defending the assessee in any proceeding for breach of any law relating to Sales Tax, Income Tax etc. (However, penalty or damages paid for breach of contract is allowed as deduction)

2. Penalty paid for non-payment of Sales Tax, Excise, Custom etc. within prescribed time. (However, damage or penalty paid for infringement of law is not allowed as deduction).