Deduction of sales tax

[manoj gupta]

A compnay paid Rs. 1000000/- as input tax on material purchased. It adjusted Rs. 800000/- against output tax payable and claimed balance of Rs. 200000/- as refund from sales tax in the year 2007-08. The sales tax assessment was completed in the year 2008-09 and the department refunded only Rs. 150000/-. It claimed Rs. 50000/- as expenditure in the year 2008-09. Will it be allowed as deduction. if yes, under which section of income tax act. pls. clarify along with relevant case laws if any.

Thanks in advance.

 

[ranganath shenoy]

in my opinion the reduction of refund may be equated to demand of tax.Any tax paid/adjusted is allowed in the year of payment under Section 43B read with Sec 37 whatever be the method of accounting

[DEV KUMAR KOTHARI]

The expenses of Rs.5000/- crystlised on completion of assessment. therefore, adjustment of Rs.5000/- out of amount shown as claim for rdfund will be in nature of expenditure on account of goods purchased.

You had deducted Rs.100000/- from goods purchsed/ consumed  in earleir year. Now out of this Rs.5000/- is not made availabel by the ST department and it assumed nature of cost of goods. The accrual is at the time of completion of assessment and lower refund.

AI Summary

Company Seeks Rs. 50,000 Tax Deduction as Expense Under Section 43B After Reduced Refund for 2007-08 A company paid Rs. 1,000,000 as input tax on purchased materials, adjusted Rs. 800,000 against output tax, and claimed a refund of Rs. 200,000 for the 2007-08 year. In 2008-09, the tax department refunded only Rs. 150,000, leaving Rs. 50,000 unrefunded, which the company claimed as an expenditure. A forum participant suggested this could be allowed as a deduction under Section 43B of the Income Tax Act. Another participant noted that the Rs. 50,000 should be treated as an expense related to the cost of goods, crystallized upon assessment completion and reduced refund.