40(A)(3)

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Mohan (Querist)
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11 June 2011 A private limited company was provided service in F.Y. 2009-2010. The company did not account it as the bill was not raised by the creditor. Bill is raised in F.Y. 2010-2011 in current year date; whether it should be treated as prior period expenditure and disallowed U/s.40(A)(3) or not?

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CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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11 June 2011 Section 40A(3) is related with cash payments and it is not related to the disallowance of Prior Period Expenditure.

A provision in respect to services taken was required to be created in the accounts of the financial year in which services were taken. This is an item which is reported in the tax audit report in Form 3CD, also. As such it is not allowable in the year of payment according to the Mercantile System of Accounting is regularly followed by the company.

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