prior period inceom

Dear Harsh!

If the provision is made out of the P&L Appropriation account than it will only have a positive effect on the P&L Account Balance. However if the provision is above the line item than certainly that Income be treated as Income of the previous year written back. and pay tax accordingly .

Please see also deemed income section!

welll, it is not treated as prior period income, but it is deemed income in current year..... so have to pay tax in the current year.....

dear 

since provisions are appropriation of income and tax is chargable on income and not on profits remains after appropriation 

hence when a sum is not deducted while computing taxable income its subsequent recovery/credit to p&l 

will not attract tax liability.

but when a provision aloowed as deduction its subsequent recovery or remission or sucession will attract tax liability as given u/s 41(1) and 36(1)(viia)

Rightly said!