Write off of Long standing Drs and Crs

This query is : Resolved

maheshkulkarni (Querist)
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24 May 2008 I want to know as a Statutory auditor of P Ltd CO what step we are to take to write off huge around 40lakhs drs and 30 lakhs crs.
Is board resolution with full details of write off is enough.
What will be the tax implication in each case ?
Is there any relevant point to be considered as regards to Company Law.

Please advice by mailing me to maheshkulkarni29@gmail.com and thanks in advance.

Jitender

Jitender (Expert)
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24 May 2008 IF THE EXPENSES WERE ALREADY provided in earlier years then it writing off of crs will be chargeable to tax,otherwise not.
writing off of drs should be as per the policy & period of limitation act& same is allowed as bad debts.

R.V.RAO

R.V.RAO (Expert)
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24 May 2008 DRS:
PROVISION FOR BAD DEBTS WILL OT BE ALLOWED. BUT ACTUAL BAD DEBTS WRITTEN OFF IS ALLOWED .BUT WE NEED TO CONVINCE ASSESSING OFFICER ON EFFORTS MADE TO RECOVER THE DUES LIKE CORRESPONDECNCE MADE ,LEGAL NOTICE ISSUED ETC...
BOARD RESOLUTION IS REQUIRED FOR WRITE OFF IN BOOKS OF ACCTS.
CRS:
IN THE PREVIOUS YEARS THIS EXP. WAS OBVIOUSLY DEBITED AS EXP.AND DEDUCTION CLAIMED.
THEREFORE WE NEED TO OFFER THE SAME NOW AS INCOME .
R.V.RAO

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S.Srinivasaraghavan

S.Srinivasaraghavan (Expert)
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25 May 2008 Write off of Debtors:

Tax assessment:

The onus of proving a debt as bad is on the claimant. If it is proved bad, the same is allowed as a deduction in tax assessment.

Accounts:

The Board of directors have accountability to the shareholders to demonstrate why the
debts have become bad. The resolution approving should also be detailed enough.

Write Back of Creditors:

The write back of creditors may induce the tax authorities to probe that the expenditure were wrongly claimed, unless it is proved to their satisfaction that the liability existed at the time of creation and now it is no more there.