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Disallowance of Expenses

senthil (consultant) (139 Points)

15 November 2010

One of my client (Firm) has been disallowed for their expenses incurred during the year A.Y 2007-08 for non - deduction of taxes.Subsequently TDS has been paid on the immediate next year i.e 31.03.2010.As per act, it says the expenses will be allowed the year in which the payment is paid u/s 43B.

1.Current Year return not yet filed.

2.Can i carryforward those expenses which are disallowed earlier to next assessment year 2011-12 ( Because the assessee is not having the intention to claim the expenses in the current assessment year.2010-11)

3.Is there any compulsion to claim those expenses in the year in which it is Paid?

4. It is not a tax audit case.

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3 Replies

CA. VIKAS GUPTA (PROPRIETOR) (305 Points)
Replied 17 November 2010

Hi,

i think, u can not carry forward the expense to the next assessment year since u have paid to expense in a.y. 10-11 only hence u will have to claim expense in a.y. 10-11 only.

thanks

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Rahul Agarwal (Future CA) (217 Points)
Replied 18 November 2010

In computation of income under the head Profits and gains of business or profession (PGBP), some of the expenses are allowed under Income Tax Act 1961 and can be claimed by the assessee only in the year in which the payment is actually made.

As per Section 43B

Notwithstanding anything contained in any other provision of this Act*, a deduction Sudame otherwise allowable under this Act in respect of—

a) any sum payable by the assessee by way of tax, duty, cess or fee, (by whatever name called, under any law for the time being in force);

b) any sum payable by the assessee as an employer by way of contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of employees;

c) any sum payable as bonus or commission to employee for services rendered;

d) any sum payable by the assessee as interest on any loan or borrowing from any public financial institution or a State financial corporation or a State industrial investment corporation, in accordance with the terms and conditions of the agreement governing such loan or borrowing;

e) any sum payable by the assessee as interest on any loan or advances from a scheduled bank in accordance with the terms and conditions of the agreement governing such loan or advances;

f) any sum payable by the assessee as an employer in lieu of any leave at the credit of his employee.

shall be allowed as deduction only in the previous year in which such sum is actually paid. This is irrespective of the previous year in which the liability to pay such sum was incurred by the assessee.

Conclusion

So, It will be allowed only in the PY in which the payment has actually been made.

Therefore it cannot be carry forward

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virender kumar (ASSISTANT MANAGER-ACCOUNTS & FINANCE) (45 Points)
Replied 19 November 2010

WHY DON'T YOU CLAIM THE EXPENSES IN THE RELEVANT YEAR OF PAYMENT AND CARRY FORWARD THE NET LOSS AS PER ITR AFTER CONSIDERING SUCH EXPENSES UNDER THE ALLOWABLE EXPENSES...

REGARDS