overinvoicing refund

[Devdas Kamath]

A capital goods item, is by ommission quoted high.The financial institution is funding the project.The seller receives the amount billed as per the high quotation both from the purchaser ( margin money ) anf the financier committment amount.The deal is concluded.

Now the purchaser points out the lacunae of high pricing and demands the refund be made to him .

question of law:

1) as per banking norms, since the financiers are involved, is it not inding on the seller to reimburse to the financier the amount so excess billed.If so kindly quote the relevant rule.

2) The excess amount so refunded to the purchaser, if in contravention of the banking rules, and made by credit/debit note,  would be deductable expense in the hands of the seller. quote relevant sectionapplicable.

3)The Sales tax (VAT) on the refunded amount , be it to the purchaser or the financier would be adjustable , if the same is done within the six month period.

Kindly enlighten

thks n rgds.

Devdas Kamath

[Surender Gupta]

What is the real issue? Is it mere a claim or initiation of recovery proceedings through legal remedy. What is the justification for excess billing? A detailed and careful analysis of the facts and circumstances would help to decide whether deduction is allowable u/s 37 of the Income Tax or not.

AI Summary

Overinvoicing refund: whether financiers or sellers bear repayment obligations and tax deductibility implications under income tax rules. A supplier invoiced capital goods at an inflated price financed by a financial institution; the purchaser sought refund of the excess. The legal questions are whether banking norms obligate the seller to reimburse the financier, whether refunds recorded by credit/debit note are deductible business expenses for the seller, and whether sales tax/VAT on refunded amounts is adjustable if corrected within six months. The advisor responded that resolution depends on whether a formal recovery action exists and on detailed facts to determine deductibility under tax law.