Tratment of vat amount paid

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

08 June 2012 Mr. A has to collect VAT of Rs.250000. He has not collected the amount as it was not clear whether VAT is applicable or not on the product. The court gave verdict in favour of Revenue. He has to make the payment. He has made the payment and showed it as VAT (Under protest) on the asset side.Since the Revenue has won on the first appeal there is no chanse for winning in the second appeal.If the party fails to win ,how he has to account for the VAT paid from his pocket. Whether the present tratment of VAT (under Protest ) is correct.Is it a Current asset.What is the appropriate treatment?

It seems the question is not properly understood. As per my understanding if we fail to collect VAT from customers we have to bare it from our pocket. Therefore what ever we have paid as VAT is a loss for us as we have not collected it. Even IF VAT is not applicable the Court may not order for refund of the amount which is collected from the public and remitted. It mat say that hereafter the party need not collect. In such a situation what is the position of VAT amount shown as current asset? Is it better to write off the same as loss. For example there are two business persons A and B. A has collected VAT Rs 250000 and B did not collect. Since the revenue has won in the first appeal both have paid the amount.A paid the collected amount and B paid out of his pocket since he has failed to collect it from the public. Whether B can claim it as current asset. He is only an agent for VAT collection. How can he claim it as his current asset. I hope the situation is now more clear. Please explain what should be the treatment for the amount paid as it is the amount to be collected and remitted and it is not an amount due from the party.