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ravi (ASSISTENT )     24 April 2013

Allowance of expenditure set off against provision

If in Previous Year 2012-13 RT ltd. has created provision of Rs. 1,00,000 in its books. It was provision hence disallowed in computation of Income Tax for Assessment Year 2013-14. During the previous year 2013-14 company has received invoice of Rs. 75,000 which relates to previous year 2012-13 and company set off the expenditure with the provision and balance provision credited to profit and loss. Now my question is that whether in computation of Income Tax of Assessment Year 2014-15 such expenditure is allowable? If yes, then in which section of Income Tax Act 1961?



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 2 Replies

Rama chary Rachakonda (Secunderabad/Highcourt practice watsapp no.9989324294 )     24 April 2013

No. Once expenditure is deducted from the provision, again it cannot be deductable in next year P &L a/c It will be disallowed.

R RAJAGOPALAN (ADVOCATE)     25 April 2013

As the 'provision' had been disallowed earlier,the actual expenditure incurred later is admissible for that subsequent Assessment Year, under section 37.

The excess provision (Rs 25,000) credited back to the P&L Account for the Previous year 2013-14 is also not taxable,asit is out of a 'provision for an expenditure' which has already suffered tax.


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