I am going through an audit of a MNC n the Accounts Manager is saying that he has paid Rs. 5.0 Lacs as bribe to some Govt. Officer. He wants this entry to come on books n claim the expense. Is this expense allowed by Income Tax and Accounting Standards?
Experts, please provide ur expert opinion in this regard.
03 July 2009
Illegal expenses i.e. any expenses in voilation of any act, not allowed in the income tax act therefore bribe paid will not be allowed in the income tax. So also it is difficult to prove as no supporting documents can be produced before the assessing authority. Accounting Standards also not recognise the accounting entry of such type.
If accepting bribe is crime, the paying the same is also an equal crime, You can not bring this expenditure to books. My sinceare advice would be not to put such queries in public domain. I agree with karthik and ratan on the allowability of such expenditure.
03 July 2009
In my opinion, if paying of bribe is the normal course of business and commercially expedient, it would be allowable expenditure.
In the case of United Developers v/s CIT, the assessee has paid "Extortion money" to a "Gangster".
The AO, CIT(A), High Court disallowed and upheld the decision of revenue.
However, the honourable Supreme Court held that paying of extortion money is regular activity in the course of "Construction Business" and hence allowable.
So, if you can provide further details regarding for what bribe is paid, a suitable opinion can be framed.
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