Accounting treatment in income tax

[vijayasathya raman]

Dear Friends,My client is lawyer deling in Registration & Documentaion of the real estate transactions for various campanies.In this connections he left with no option but to pay ( Tips !! & others!!)to the Govt Officials.How to account in the books of accounts.Is it Admissible under the Income Tax Act.Kindly Clarify

[DEV KUMAR KOTHARI]

The government would do well to officially permit such payments and allow weighted deduction for the same and curtail salary of governemtn employees. Many would work even without pay. But as per law such payements are against public policy, illegal, and not allowable. If some one claim such expenses, he may be caught but he officer to whom tips, speed money, or gifts or in blunt terms bribe will not be affected for want of evidence. Off course if one want to clean system, he can try to keep evidence to establish demand from officers and payment to him and then perhaps a strong case can be made out for allowability of expenses as a loss incidental to business or profession.

AI Summary

Payments to public officials are illegal and generally non-deductible; evidentiary proof may be needed to treat them as business loss. Payments to government officials described as tips, speed money, gifts or bribes are illegal and generally not allowable as deductions for income tax purposes. If payments were made under demonstrable compulsion, contemporaneous evidence of demand and payment may be offered to contend the outlay was a loss incidental to business or profession, but public policy and the unlawful nature of such payments make allowability legally precarious and fact-sensitive.