Hi
If a company creates a provision for manufacturing defaults eg. Damaged finished goods during production, is it tax allowable?
Txs
Menu
Provisions as per IT acts
Replies (7)
Quick Summary
I can't understand the query...
Dr Damaged stock - income statement
Cr. Provision 3% - liability for this year
So is this expense a tax allowable expense ie, will we get a tax relief due to this?
It's very much allowable
Yes, It's allowable Expenditure...
No , provisions are disallowed by the department on the ground that , they are Contingent in nature and not actually incurd .you Can refer some Case laws .
where some time disallowed by the Honorable Supreme Court / High Court and some time allowed depends on nature of Case .
Disallowed in Case of
1) Calcutta Company Ltd Vs CIT
2) E. Minerals India Pvt Ltd vs JCIT
3) TRF Ltd vs CIT
Allowed in Case of
1)Luke India PVT LTD vs CIT
2) Indian transformer vs CIT
3) Bank of Bahrain & Kuwait vs DCIT
Naturally correct. Provision for future operating losses is not allowed as per the standard. But the damage occured during WIP. People can misunderstand this for an operating activity. Then waste in WIP is added back to finished stock.
Gomez can u please explain the above
Recent Topics :
- Export Compliance
- Sale of plots in open land
- Income tax query
- Best CA Inter coaching in laxmi nagar
- HOW TO SELL SHARES OF PRIVATE LIMITED COMPANY SOME
- Unregistered Association of Persons (AOP) Agreemen
- Intimation u/s 245 of income tax act
- Ewaybill query
- IDS Refund: GSTR-2B Invoice Not Validated in State
- Self assessment tax paid not reflected in ITR2 fil
Related Topics :
CAclubindia
