AS 5 - Prior Period Items

This query is : Resolved

Abhishek Agarwal (Querist)
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05 April 2009 In our company we didnt claimed cenvat on service tax of earlier, due to lack of knowledge on our part, Now we are taking the cenvat credit for last 3 years and it amounts to about Rs 5 Crs (our yearly turnover is Rs2500 crs, profit/loss is Rs 11 Crs, hence material).

My Query is how to show in P&L.
As a prior period item or as a exceptional item.
Also do we have to add a explanation for the same

CA. B.SRINIVASULU

CA. B.SRINIVASULU (Expert)
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05 April 2009 If earlier cenvat is debited to profit and loss account and now you want to reverse it. Then it becomes an prior period income. But if it authroities ask to revise the old return then whether you have cushion of advance tax and huge interest also will arise. Think over twice before making an entry. You have to visulasie the situation under all acts and not limited to service tax.

If you have kept in assets then there is no problem for you. Depreciation to be reworked and show it as prior period adjustments in profit and loss account and the give the same in notes on accounts the total details. Here also income tax problem may arise beacuse of the huge amount of 5 Crores.

Please discuss with your managment in detail then pass the necessary entries with caution and care.