Expenses cannot be disallowed merely on the ground that bills were of earlier Assessment Year: ITAT

Expenses cannot be disallowed merely on the ground that bills were of earlier Assessment Year: ITAT In this case assessee has incurred expenditure of business promotion activities like marketing expenses for promoting various schemes of HSBC mutual fund amounting to Rs.2,23,24,218/- during the year under consideration. Out of this, a sum of Rs.10,51,176/- was disallowed in Income Tax by the ld. AO on the ground that they are prior period expenses. The assessee submitted that out of aforesaid disallowance of Rs.10,51,176/-, invoices were received by the assessee during the F.Y.2006-07 relevant to A.Y.2007-08 for Rs.10,00,972/- and payments were also made thereon during the A.Y. 2007-08.

ITAT Order:

From the evidences, it is evident that the said expenses have been crystallized during the year under consideration. It is not a case of the Revenue that these expenses were indeed claimed as deduction by the assessee in A.Y. 2006-07 itself. The genuinety of the expenditure together with its business purpose is not doubted by the Revenue. Hence, the same cannot be subject matter of disallowance merely on the ground that bills were dated prior to 31/03/2006 in respect of services rendered prior to 31/03/2006. Admittedly these invoices were received only during A.Y.2007-08 and the expenditure has been crystallized during the year. In these circumstances, the said expenditure cannot be disallowed. Accordingly, we direct the ld. AO to grant deduction for Rs 10,00,972/-. To Read Judgement Download PDF Given Below: