Sales Tax assessed

[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

Dispute Over Deductibility of Assessed Sales Tax: Prior Period Expense or Current Year Adjustment? A query was raised regarding the deductibility of assessed sales tax in a tax audit. The assessment for the year 2009-10 was finalized in August 2014, with payment made in September 2014. The question was whether the additional liability should be deducted in the 2009-10 or 2013-14 financial year. The auditor rejected the deduction, citing it as a prior period expense. The response suggested that if a provisional liability was created in 2009-10, the payment could be adjusted accordingly. Without such a provision, the expense might be adjusted against the current year's profit and loss account.