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Allowability of advertisement expenditure.

This query is : Resolved

Teja K (Querist)
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27 February 2013 XYZ Pvt Ltd Co. has incurred Rs 100 on advertisement and business promotion and charged to P&L, payment was made to ABC P Ltd. ABC P Ltd has not taken it as income, but kept it as advance, as work of advertisement has not started. Question: Can our claim of expenditure be disallowed because ABC Has not taken it as income ?

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Nikhil Kaushik

Nikhil Kaushik (Expert)
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27 February 2013 well the expenditure in your books (XYZ) should be disallowed not because ABC has not taken it as income but for the reason that it is nature of prepaid expenditure which should not be routed through Profit and Loss account. Since you are a company, (and I am sure you have been maintaining your tax books on accrual basis), this payment doesn't constitute an expense in your books in the relevant year.

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