24 November 2007
I have a query which I shall be thankful if you reply. The query is as under:
VAT & Service tax is now treated as Current Liability account by the assessee following mercantile system of accounting. It is not Debited/Credited to the Profit & Loss account. Whether amount payable but not paid before due date of filing income tax return will be covered by the provision of section 43B? Section 43B speaks about deduction & disallowance which automatically implies having deduction / allowance under the P & L A/c. Please advise. [Geet Kanchan]
24 November 2007
These tax liabilities (VAT SERVICE TAX etc.) very much fall within the ambit of section 43B. Meaning, that any unpaid VAT etc., as on the due date of Return will be added back to the taxable income.
24 November 2007
43 B SAYS ANY SUM PAYABLE BY WAY OF TAX,DUTY,CESS... BY WHATEVER NAME CALLED UNDER ANY LAW .(SPIRIT OF THE LAW) IT ALSO TALKS ABOUT EXP. DEDUCTIBLE ONLY ON PAYMENT BASIS.( TECHNICALLY CORRECT). SO THE RIGHT SPIRIT OF THE LAW IS WE NEED TO CONSIDER THAT IT APPLIES TO ALL STATUTORY LIBILITIES-SOME OF WHICH ARE DEBITED TO P&L., OTHERS SIMPLY SHOWN AS LIABILITY. THE QUESTION ALSO COMES WHEN YOU TREAT TDS DEDUCTED BY A CUSTOMER AND TDS CERT. ISSUED BY HIM ,THIS MAY NOT MATCH IN ALL CASES WITH OUR ACCOUNTING TREATMENT IN OUR BOOKS AS IN SERVICE TAX MATTERS DEPENDING ON OUR ACCOUNTING TREATMENT. IN VAT CASES SOME COMPANIES DEBIT VAT AS EXP. AND CREDIT LIABILITY IF THERE IS A DEFERMENT OF SALES TAX OR NOT . BUT WHETHER AN ASSESSEE ADMITS OR NOT THE 3 CD REPORT OF AUDITOR HIGHLIGHTS STATUTORY PAYMENTS DELAYED WHICH IS ADDED TO INCOME BY ASSESSING OFFICER. SO MY VIEW IS LET US HONOUR THE SPIRIT OF THE LAW AND COMPLY WITH IT AND ADMIT DELAYS IN STTUTORY PAYMENTS IRRESPECTIVE OF ACCOUNTING TREATMENT. R.V.RAO
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