Friends/Seniors
PQR Ltd, a foreign company raised an invoice on ABC Ltd , an Indian entity sometime in 2009 after PQR exported some articles to ABC in India. The foreign booked the debt in their books in 2009. Due to some reasons, the Indian entity did not book the transaction in its books in 2009 ( may be due to the fact that the invoice was sent by email to the director's email id and there were some issues like if there would be withholding tax or output service tax liability on reverse charge mechanism) and forgot/ignored the invoice.
This was never followed up by the foreign entity. Now in 2011 they are chasing up the indian entity for payment. My question is if we take into accounts in 10/2011 an invoice dated 2009 what could be the consequences from auidt, taxation and other angles
The Indian entity will debit Fixed Asset and not expenses in its financials.
Regards,
CAclubindia
