INCOME TAX ACT, 1961

Section 37(1)

Business expenditure - Allowability - Expenditure towards maintenance/upkeep of inventories -

Assessee-firm paid professional charges towards services, such as verification of originality of paintings/artworks, providing estimates, investigating authenticity of painting/artworks, etc. It submitted that the said payment had a direct connection with trading activities qua paintings. However, AO opined that in absence of purchase or sale of any paintings during the year, no such services could be received by the assessee and therefore, the claim regarding payment of the professional charges by the assessee was a fictitious/sham claim. Held: It was undisputed position that the paintings had been held as inventories and the same formed part of assessee's stock-in-trade. Further, the fact that those paintings constituted inventories for the assessee had not been doubted even by lower authorities. Thus, any expenditure incurred in connection with trading operations would broadly constitute revenue expenditure for the assessee. Further, the payment regarding professional charges was duly supported by debit note. Therefore, as professional charges had been paid by the assessee towards maintenance/upkeep of inventories, the same being part of trading operations would constitute allowable revenue expenditure.

REFERRED :

FAVOUR : In assessee's favour

A.Y. : 2011-12

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