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Urgent - Query regarding tax liability of firm

Shamita (Learner) (410 Points)

26 September 2010

Please solve my following query at the earliest:-

1. Income of the partnership firm for F.Y. 2008-09 - Rs. 33650.00

2. Tax liablity on above income - Rs. 10398.00

3. TDS deducted by the parties - Rs. 12251.00

Therefore refund in the return of A.Y. 2009-10 - Rs. 1850 but the assets side of the balance sheet (31-3-2009) of the firm shows TDS - Rs. 12251.00.

Now accounts of the firm for F.Y. 2009-10 are being audited for the first time. Tax liability of the firm for F.Y. 2009-10 is Rs. 25000 and the TDS deducted by the parties is Rs. 28000.
How the accounting entries be made for the above in the books. Whether the tax liability of the firm to be adjusted against the TDS deducted be allowed as deduction in profit and loss.

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2 Replies

Gokul Viswanath Shenoy (Company Secretary & Finance Manager) (430 Points)
Replied 27 September 2010

The TDS deducted is to be deducted from the Tax liability of the firm for the relevant AY to ascertain Refund/ Tax liability of the AY...here, for FY 08-09, the refund due, Rs 1850 only will be shown as the refund due in the asset side of the balance sheet as it gets adjusted with the tax liability of the firm for the year...in the FY 09-10, the excess of Tax liability over TDS, i.e, Rs 3000 is the tax payable for the year which is to be paid before the due date of filing the return of the FY 09-10..no adjustment of refund due of the previous year is to be made with the tax liability of the current year, FY 09-10.

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Vaibhav (Article) (46 Points)
Replied 27 September 2010

rs 1850 will be refund due for th FY 2008-2009 and moreover this financial year 2009-2010 will also bear a refund of rs 3000. both will be shown in the current assets...

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