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

Auditor's Expense Classification as 'Prior Period Items' Clarified; Not Deductible in Current Year, Tax Returns May Be Revised. An auditor classified certain expenses as 'Prior Period Items,' reducing the current period's profit. In response, it was clarified that 'Prior Period Items' refer to income or expenses from the current period due to past errors or omissions in financial statements. In income tax, such items are not recognized, and if the amount is significant, the taxpayer may revise previous returns within the allowable time frame. These items are not deductible in the current year.