Question

An assessee claims a ₹25,000 expense deduction in FY 2025-26 as unpaid dues. In FY 2026-27, the assessee pays the vendor ₹25,000 in cash in a single day. What is the tax impact in FY 2026-27 under Section 36(5)? 

A ₹25,000 is allowed again as a cash expense
B ₹25,000 is added back to taxable business income in FY 2026-27
C ₹10,000 is allowed and ₹15,000 is added to business income
D No adjustment is needed in FY 2026-27
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