Liquidated damage whether deductible under income tax act?

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Krishnamoorthy S (Querist)
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11 November 2011 The PO contains a LD clause of 5% if delivery schedule is not maintained. We have invoiced the full value (100%) of the purchase order value even though there was delay in delivery. 100% invoice value was booked as income in P&L A/c. In the next year, the customer settled only 95% after applying the LD Clause. Now can we claim this 5% as non-recoverable and write it off as bad debts in the year when 95% was received?

mithun

mithun (Expert)
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12 November 2011 Debit the expense account with the 5% as prior period exp and credit the party account to that extent.

By doing this your debtor account will be credited and your expense will be bookesd