TaxTMI 
TaxTMI 
Since Prior Period Item is not an allowable expenditure under Income tax, Can the prev year returns be revised to give effect for the same.
Prior Period Items
08 Oct 2010 
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Prior period expenses: revised returns under section 139(5) and payment-year allowability govern tax treatment and scrutiny risk.
Deductibility of prior period items turns on whether expenses were incurred in the relevant previous year and can be substantiated on accrual, while certain liabilities are allowable only in the year of payment. Revision of a prior-year return to claim such items is available only under the statutory revision provision when the original return was timely filed and limitation has not expired; the taxpayer must show the omission was bona fide and accept the potential for extended scrutiny when choosing revision versus current-year claim. (AI Summary)
Deductibility of prior period items turns on whether expenses were incurred in the relevant previous year and can be substantiated on accrual, while certain liabilities are allowable only in the year of payment. Revision of a prior-year return to claim such items is available only under the statutory revision provision when the original return was timely filed and limitation has not expired; the taxpayer must show the omission was bona fide and accept the potential for extended scrutiny when choosing revision versus current-year claim. (AI Summary)