Tax implication of time barred debt

This query is : Resolved

Nagarajan (Querist)
Follow

02 December 2011 Respected sir,
Shall if the particular debt is barred by law, i am heard that it can be deemed as income and consequently income tax can be claimed in that regard. Whether the above contend is true and if it is means under what provisions of income tax act it is taxed.
under the section 68 of Income tax act,unexplained credit is taxed whether the provision would apply in respect of unpaid creditors.

Aijaz Shaikh

Aijaz Shaikh (Expert)
Follow

02 December 2011 If the debt is time barred, you will tranfer it in profit & loss account by following entry

Creditors A/c Dr
To Profit & Loss A/c

It will be taxed u/s 41 i.e deemed income

Message likes : 1 times