Deduction of sales tax , Income 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.

 

Posts / Replies

[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.