ITAT allows Deduction to Harish Salve on Foreign Scholarship to Indian Students [Read Order]

The Delhi bench of the Income Tax Appellate Tribunal (ITAT), has accepted the claim of Senior Advocate Harish Salve for deduction of the foreign scholarship given by him to two Indian students as “expenditure solely and exclusively for the purposes of business”.

While allowing the deduction to the lawyer who recently represented India before the International Court of Justice in the Kulbhushan Jadhav case, the Tribunal held that the scholarship expenses were “incurred by the assessee for promoting his professional profile.

Salve claimed the deduction in the returns of Rs.50,52,50,407 filed for the assessment year 2011-12. The Senior Advocate, who recently represented India before the International Court of Justice in the Kulbhushan Jadhav case, argued that the foreign scholarship increased his international visibility and enabled him to develop contacts with academia in UK.

The Tribunal observed that the allowability of an expenditure incurred by the assessee u/s 37 (1) of the act is required to be tested in accordance with nature and scale of the business/ profession of the assessee. It may be a case that in case of one assessee, particular expenditure is “ wholly and exclusively “ incurred for the purposes of business and in another case it may not be so. Undoubtedly, assessee is a noted international lawyer who has set up a scholarship for creating his visibility in international arena and his social standing.

Granting deduction to Salve, the Tribunal held that “We do not subscribe to the view of the learned CIT – A these expenditure is capital in nature. The expenditure incurred by the assessee is the routine day-to-day expenditure incurred by the assessee for promoting his professional profile. These expenditure cannot be held to be capital expenditure in nature as no fresh new fixed assets is created by paying the scholarship sum. Further merely because in the agreement it is mentioned as an annual gift in the form of scholarship, it does not become a gift. In fact, it is the expenditure incurred by the assessee in furtherance of his business.”