Save Rs 499 on a 2-Year Ad-Free CAclubindia Pro Membership. Subscribe Now!

Allowed or dis allowed

Tax queries 688 views 7 replies

TRILOCHAN

SENIOR ACCOUNTANT

698 Points Posted on 27 August 2011

Dear all,

Please inform me.

Suppose" Mr.X" Purchase goods of Rs. 100000/- from "Mr.Y" and "Mr.X" sold goods of Rs. 110000/- to "Mr.Z" and mentioned on the sales bill issued to "Mr Z" ''Please Pay Rs. 100000/- to "Mr Y" on behalf of me and make the balance Payment to Me (i.e :"Mr X").

Please confirm that whether this type of payments are allowed under Income Tax Act. (Please don't forgot to provide the Sections)

Regards

TRILOCHAN

Replies (7)

Ankit

Final Student

101 Points Posted on 28 August 2011

I am not sure about this one but then I am thinking that if these kind of transactions are allowed then what audit trail will we have to prove the transactions as real.

Guest

OFCOURSE THEY ARE ALLOWED. BUT MAKE SURE THAT THE DEBTOR AND CREDITOR HAVE BEEN GIVEN EFFECT TO IN CASE OF MERCANTILE SYSTEM. I N CASE OF CASH SYSTEM A RECEIPT OF 10000 WILL B SHOWN AS BUSINESS PROFIT

CA PRAVEEN SINGH

MANAGER ACCOUNTS

2277 Points Posted on 28 August 2011

Yes allowed it will business profit in the hand of x of Rs 10000.

CA PRAVEEN SINGH

MANAGER ACCOUNTS

2277 Points Posted on 28 August 2011

Yes allowed it will business profit in the hand of x of Rs 10000.

Dhiraj

Article

33 Points Posted on 28 August 2011

Agreed with Pravin.

AFAIK IT act doesnt have ny section limiting the flow of payments/receipts in course of business transction.

MAHESH

Tax Consultant

114 Points Posted on 28 August 2011

Allowed, there is no relevent section which deals with proceeds from sales. But people in loop have suffiecient correspedence with them authonicated by each other. To avoid futuer litigations.

Shah Tarun

Student

800 Points Posted on 28 August 2011

I think it's possible but it depends upon book entry. .All the parties to the transaction should record purchase/sales in normal way and should credit/debit full amount in respective accounts.After that parties should pass JV for transfering amount to corresponding accounts. .