Allowance of expenditure adjusted with opening provison

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

24 April 2013 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?

CA Krunal

CA Krunal (Expert)
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24 April 2013 First of all as per income tax act there is no provision that does not allow expenditure for provisions. You can definitely create provision for expense and such expenditure is allowed.

Now if you have added back such provision in statement of income, then definitely expenditure booked against that is allowable expense. This expenditure is allowable U/s.37(1) as this is residual section under which all business expense are allowed.