Claiming Rent Expenses Invoiced Late Due to Vendor Dispute – Guidance Needed

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Executive
70 Points Joined May 2025

Dear Experts,

Company A rented a premises starting January 2025. Due to disagreements with the (unregistered) vendor, rent invoices for February and March 2025 were not issued on time and were only raised in April 2025. No provision for these expenses was made in the books during FY 2024-25. As a result, the rent expense for Feb and Mar 2025 can't be claimed in the ITR for AY 2025-26, and if claimed in the next year, it may be disallowed as a prior period expense.

What options are available to legitimately claim these expenses? Is there a possible accounting or tax treatment that would allow for their deduction?

Regards,

S Ram

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On 05 May 2025 at 11:47 Report
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Master in Accounts & high court Advocate
9111 Points Joined December 2011

Options for Claiming Rent Expenses Given the situation, here are some possible options to consider: -

*Claim in the Year Incurred*: Since the invoices were raised in April 2025, the rent expenses for February and March 2025 can be claimed in the next financial year (FY 2025-26) and corresponding assessment year (AY 2026-27). -

*Provision for Expenses*: Although no provision was made in the books during FY 2024-25, it's essential to ensure that the expenses are accounted for in the correct financial year.

If the expenses are material, consider making a provision in the next financial year and claim the expenses accordingly. -

*Accounting Treatment*: Ensure that the accounting treatment for rent expenses is consistent with the company's accounting policies and relevant accounting standards.

Tax Treatment - *Section 37(1)*: The rent expenses can be claimed as a deduction under Section 37(1) of the Income-tax Act, 1961, if they are incurred wholly and exclusively for the purpose of business. -

*Prior Period Expenses*: If the expenses are claimed in the next year, it's essential to ensure that they are not disallowed as prior period expenses.

Consider consulting with a tax professional to determine the best approach. Recommendations -

*Consult a Tax Professional*: Consult with a tax professional to ensure that the rent expenses are claimed in accordance with the Income-tax Act, 1961, and relevant tax laws. - Maintain Proper Records

: Maintain proper records of the rent expenses, including invoices and payment details, to support the claim for deduction. -

 *Consistent Accounting Treatment*: Ensure that the accounting treatment for rent expenses is consistent with the company's accounting policies and relevant accounting standards.

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On 05 May 2025 at 17:58


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