Question ID : 36977

Input Tax

A dealer has some unutilized GST input tax in electronic credit ledger. From a particular date, the goods dealt by him becomes non taxable and hence writes off the balance of input tax in electronic ledger. Can this write off be disallowed u/s 43B , since relevant input taxes were incurred in earlier years or can be disallowed as “ Prior Period expenses”.

Section 43B of the Income Tax Act,1961 deals with the timing of payment of statutory dues and its allowance or dis-allowance while computing the taxable income. It has nothing doing with the write off of a tax asset standing in the books of accounts of the entity. Further, prior period expenses are errors or omissions of one or more periods discovered during the current financial year. However here the amount of credit standing in the books of accounts since previous years resulted into nonadjustable credit has been written off. Hence it is not a prior period expense. Therefore it will be allowed under Income Tax Act,1961 and it is also not a prior period expenditure.