13 July 2011
DIS ALLOWANCE U/S 43(b) OF IT ACT 1961 SPEAKS THAT ANY GOVERNMENT LIABILITY UNPAID UP TO THE DATE OF FILING OF RETURNS SHALL BE DISALLOWED WHILE COMPUTING THE TAXABLE INCOME. MY QUESTION IS : WHAT IF THE TAX LIABILITY FOR SERVICE TAX OR VAT HAS NOT BEEN PAID UP TO SAID PERIOD AND WHICH HAS NOT BEEN ROOTED THROUGH P&L A/C. HOW DOES THE DIS ALLOWANCE WORKS,SINCE SUCH LIABILITY HAS NOT BEEN INCLUDED IN P&L AND DOES,T HAVE ANY IMPACT ON PROFIT. e.g : ENTRY FOR SALES: DEBTORS A/C ________Dr. 1,10,000 TO SALES A/C 1,00,000 TO VAT/SERVICE TAX A/C 10,000 (grouped as duties and taxes under current liabilities) ASSUMED THE PROFIT TO BE 1,00,000.00 WHAT SHALL BE DISALLOWED.
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