Sponsorship as expense

This query is : Open

Querist : Anonymous

Querist : Anonymous (Querist)

25 April 2011 hey all, i have a quite confusing situation, plz help me on this...
if a manufacturing concern sponsors 20 students of some NGO then the amount so spend on providing sponsorship like bags, note books, pens etc. would be allowed as expense in its P&L A/c or it will be treated as Donation????

Nayan Das

Nayan Das (Expert)
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26 April 2011 THEN GIVE A DONATION CERTIFICATE THEN YOU WILL BOOKTHR EXPENSES AS DONATION OTHERWISE IT WILL TREATED NORMAL EXPENSES IN P/L A/C

CMA. Subhash Kumar Jha

CMA. Subhash Kumar Jha (Expert)
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26 April 2011 If such action happens to and is in concurrence to your normal business activity. Like.. these activity are part of your business promotional efforts, then it is a normal business exp.

But if no such relation can be made out & its a pure for Philanthropic purpose, then it is a donation, just make sure to get a donation certificate from the NGO.

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Querist : Anonymous

Querist : Anonymous (Querist)

26 April 2011 actually i am confused as if the amount so spend is treated as expense in P&L then it'l b 100% provided but if it is treated as donation then it'l b 50% provided along with some qualifying limit... and also, is it necessary that there should be some link between the company profile and way of advertising? as in this case the co. deals in iron blades manufacturing and sponsorship is provided by way of cash and stationery material....
and also, if there is some social welfare reserve A/c in the company's accounts then what should be done with that?

Ravi Bagaria

Ravi Bagaria (Expert)
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29 October 2011 How will the NGO treat the money received? Will it be treated as income of the trust or can the trust show it as donation received if as per the agreement between the NGO and the corporate there is no service promised in return to the corporate. Such as Advertisement, brand promotion etc., which is the case for sponsorship.