Exhibition Expenses can be allowed in the year in which It was Incurred: ITAT [Read Order]

Exhibition Expenses - Taxscan

The Income Tax Appellate Tribunal ( ITAT ), Delhi bench has observed that advance payment made for participating in the exhibition must be allowed as business expenditure in the year in which assessee made the payment.

The assessee-company is engaged in the business of manufacturing of automobile parts. The assessee had made a payment of sum of Rs.5,75,860/- for participation in exhibition to M/s. Messee Franfurt Trade Fairs India (P) Ltd. for a stall in the international trade fair for the automobile industry. The Assessing Officer disallowed Rs.7,75,861/- being exhibition expenses incurred on the ground that these did not pertain to impugned Assessment Year and it cannot be allowed under section 37 of the Income Tax Act.

The assessee submitted that the payment of Rs.5,75,861/- has been made during the year for booking a space for exhibition to be held next year and such an amount paid for participation in the exhibition was non-refundable even if the assessee cancels it on at the later stage.

The Tribunal bench noted that the payment made by the assessee is not in dispute which is evident from the letter written by M/s. Messee Frankfurt Trade Fairs (P) Ltd.

“When the payment of participation for exhibition purpose has been made in this year then ostensibly such a payment is revenue in nature incurred for the purpose of business, then the same has to be allowed in the year in which it has been incurred, because for participating in the exhibition it was essential that payment has to be made in advance even if such an exhibition of international trade fair was to be held in the next Assessment Year. Hence, the expenditure incurred cannot be disallowed on this ground. Accordingly, we agree with the contention of the learned counsel that the exhibition expenses paid by the assessee in this year has to be allowed as business expenditure and thus, the ground raised by the assessee on this score is allowed.”

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