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prior period expense

CA Mayank Gupta (Chartered Accountant) (95 Points)

19 August 2008

can anyone tell what's the way by which we can allow PRIOR PERIOD EXPENSES legally in case co. has maintained insufficent provision for them

can it be allowed under provisions of income tax act

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11 Replies

S.Srinivasaraghavan (Chief Financial Officer and Co) (11318 Points)
Replied 20 August 2008

The only way is to demonstrate that due to justifiable reasons the provision could not be made.

CA RAMESH KUMAR AHUJA (CA, DISA, LLB) (5452 Points)
Replied 20 August 2008

Mr. Srinivasaraghavan is right. It can further be elaborated that the expenses were not quantifiable with certainty as on the date of Balance Sheet date and the same could only be ascertained thereafter.

CA Ankit Pratap Singh (Chartered Accountant) (93 Points)
Replied 20 August 2008

yes,as per accounting standard -5, you can allow prior period expenses in subsequent periods, but proper disclosure by way of notes to accounts is manadatory.

C.A Tarun Shah (practice) (271 Points)
Replied 20 August 2008

mr.srinivas is right ,as prior period expenses arise due to omission of items at the time of preparion of Finanacial Stmt.sd it has to be disclosed as per As-5 ,under the line of P& L A/c

Satyendra sahu (service) (216 Points)
Replied 21 August 2008

Hi all,

I understand , you all saying logically and correctly. But we should not forget that we have to demonstrat it in front of Income tax officer. It depends on his mind and view.

In normal cases, Income tax officers are disallowing prior period expenses.

CA Mayank Gupta (Chartered Accountant) (95 Points)
Replied 21 August 2008

Originally posted by :Satyendra sahu
"	Hi all, I understand , you all saying logically and correctly. But we should not forget that we have to demonstrat it in front of Income tax officer. It depends on his mind and view. In normal cases, Income tax officers are disallowing prior period expenses. ya u r geting my point is there Any solution to it for allwing under tax provisions	"

CA Nitin Wadhwani (Chartered Accountant) (4469 Points)
Replied 03 September 2008

No.

They Are Disallowed As The General Conditon Of Sec.37(1) Is Violated

"Expenditure Should Relate To Previous Year".

Anji Reddy (Internal Auditor) (22 Points)
Replied 26 November 2009

Hai Friends,

Colud anyone say the tax implications regarding Prior Period Expenses. Regarding the following.

1. Whether Prior Period Expenses will be allod as deduction as per Income Tax Act. If yes tell me the % that will be alloed as deduction.

2. Tell me under which section it will be mentioned or is there any judgement by any court.

Ameet (L) (1678 Points)
Replied 01 December 2009

The prior period items will not allowed in normal case. It is also to be important that when you availed the service or received the goods, as the case may be