Prior Period Items

[sathyanarayanan kasinathan]

The Auditor has classified a set of expenses as 'Prior Period Items' which accordingly goes to reduce the profit. What is the treatment of 'Prior Period Items' in Income Tax?

[CAGOPALJI AGRAWAL]

Prior period items are income or expenses which arise in the current period as a result of errors or omissions in the preparation of the financial statements of one or more prior periods.There is no such notion permitted in Income tax. If the amount is substantial, then the assessee may revise the return of earlier if within time limit. These are not allowable in the current year.

AI Summary

Prior period items not recognised under income tax; address them by revising prior returns where permitted, not by current-year deduction. Prior period items arise from errors or omissions in prior periods and are reflected in current financial statements. For income tax there is no recognition of a distinct 'prior period items' category; such amounts are not allowable in the current year and, if substantial and permitted, must be addressed by revising earlier year returns within the statutory time limits rather than deducted now.