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Prior period expense

Eldhose MV (Associate) (63 Points)

15 August 2020

want to know whether prior period expenses are tax deductible? Scenario- A company has received the bill dated march 31st on may 1st, by the time accounts was closed. So these expense has accounted in next fy. Please tell me whether these expense can be claimed in the fy in which it is accounted?

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5 Replies

prasad Nilugal (3914 Points)
Replied 15 August 2020

In Income Tax you may not get deduction as perior period expense or you can not claim as a deduction in current year .

Sagar Patel (Tax and Business Consultant) (11611 Points)
Replied 16 August 2020

Expenditure is relating to ..Goods or service..?

Eldhose MV (Associate) (63 Points)
Replied 16 August 2020

Want to know treatment of both goods and service

Sagar Patel (Tax and Business Consultant) (11611 Points)
Replied 16 August 2020

Prior period expenses are not allowed in current year untill and unless the expenses have crystalised during the year.

The prior period expense partaining to earlier years has been a matter of litigation whether such expense could be allowed as deduction during the current year .

if specific to your case, Bill is of 31st March, 2020 but received in May, 2020
if it's service, than if service is rendered in F.Y 2019-20 and invoice is also issued in that year, than that is prior period expenses and disallowed.
But if it's relating to Goods, invoice of last year, but goods received in current year than it's considered as current year expenses.