ITAT allows deduction of Advance Rent forfeited as business Expense

The Income Tax Appellate Tribunal (ITAT) in the matter of Genesis Color Pvt. Ltd. Vs. DCIT rule out that deduction of Advance Rent forfeited as bussiness Expense allowed.

In this case advances were paid by the appellant company for opening of show rooms which was forfeited by the party, as the appellant company could not get necessary license for opening the show rooms at different place.

The Assessing Officer disallowed the advances of rent written off by the appellant which was sustained by the CIT (A), Aggrieved by which appellant decided to make an appeal with the Tribunal.

ITAT Order:

The expenditure was made in ordinary course of business and same is allowable u/s 28 of the Act as a trading loss even allowable u/s 37 of the Act as business loss. Ld. Counsel for the assessee submitted that in support of the contention that the amount was forfeited; the confirmation by the owners of the shop/showroom was also filed before the Assessing Officer. Even communication accessed through e-mail was also filed before the Assessing Officer. He submitted that the authorities below therefore, are not justified for making the disallowance and same deserves to be deleted. He submitted that expenditure was incurred during the course of business and solely for business expediency. Hence, it is allowable expenditure.

The Judgment was made by G.S.Pannu and Kul Bharat.

The Petitoner was respresented by Shri Ved Jain and Respondent was represented by Shri Umesh Takyar

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