Sales Tax assessed

[Asked by Guest]

Dear Sir,

Kindly let us know the allowablity of deduction of assessed tax under sales tax assessment in Tax audit. for example, our assessment of 2009-10 has decided on 13th Aug 2014 and we paid the on 12 Sep'14. in which year deduction of additional liability will be allowed whether it should be allowed in 09-10 or in 13-14. our auditor is denying to accept the deduction because he is claiming that it is the exp of prior period.

Kindly suggest.

[DR.MARIAPPAN GOVINDARAJAN]

You might have created provisional liability for the tax in the year 2009-10 itself. If so, you can adjust the payment against that provision. In the absence of making provision, in my view the prior period expenses may be adjusted against the current year profit and loss account.

AI Summary

Deductibility of assessed sales tax: adjust against an earlier provision or treat as a prior-period expense in current accounts.
If a provisional liability for the assessed sales tax was created in the relevant earlier year, payment is adjusted against that provision and the deduction is attributable to that earlier year; if no provision was made, the assessed tax is treated as a prior-period expense and charged to the profit and loss account of the year in which it is paid.