Disallowance of expenses

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Yajuvendra Rawat (Querist)
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12 July 2011 Dear Sirs & Friends,

We are into business of trading in Diamonds, We pay brokerage to parties who bring business to us, the amount of brokerage is paid to the broker only after we receive export or sale proceeds from the party which belongs to a particular broker. Now the question comes of booking expenses, suppose if i book expenses according to the realisation from the party and do not book it in the beginning of the transaction is it ok, Since we actually are liable to the broker when we receive the realisation from the party.If i book it as per realisation will my expenses be disallowed as per Income Tax Act or will it be permissible expense during that particular period. Please help me. Does Prior Period expenses apply to the above. How exactly the transaction should be pictured. Please help me

CA. Anuj Gupta

CA. Anuj Gupta (Expert)
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13 July 2011 The commission transaction should be booked when you book the sale transaction . But if there is a clause between commission agent and your company that the commission shall become payable only on realization of export proceeds , then the accounting treatment shall be different.

Anuj
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