1984 (6) TMI 118 - AT - Income Tax

Advocate's Foreign Conference Expenses Deemed Legitimate Business Expenditure

BK. Seshu. Versus Income-Tax Officer.

BK. Seshu. Versus Income-Tax Officer. - ITD 010, 365, Issues Involved:1. Whether the foreign tour expenditure incurred by the assessee was wholly and exclusively for carrying on his profession and hence an admissible deduction under section 37(1) of the Income-tax Act, 1961.Issue-wise Detailed Analysis:1. Whether the foreign tour expenditure incurred by the assessee was wholly and exclusively for carrying on his profession and hence an admissible deduction under section 37(1) of the Income-tax Act, 1961:The primary question for determination was whether the foreign tour expenditure of Rs. 31,400 incurred by the assessee, an advocate, for attending international legal conferences was wholly and exclusively for carrying on his profession and thus deductible under section 37(1) of the Income-tax Act, 1961.The assessee, practicing since 1951 in Labour Courts and High Courts, claimed that the foreign tour, sponsored by the Bar Council of India, to attend the 59th Conference of the International Law Association in Belgrade and the 18th Conference of the International Bar Association in Berlin, was beneficial and educative for his profession. He argued that the tour helped him gain insights into modern and sophisticated legal practices.The Income Tax Officer (ITO) rejected the claim, stating that the assessee failed to demonstrate how the foreign tour directly benefited his day-to-day professional activities in India. The ITO opined that the legal trends in East European countries discussed in the conferences were not relevant to the Indian legal system, which follows the Westminster system. Consequently, the ITO concluded that the expenditure was not wholly and exclusively for professional purposes and was partly personal in nature.The Appellate Assistant Commissioner (AAC) upheld the ITO's decision, distinguishing the case from CIT v. S. Krishna Rao, where the knowledge gained was directly related to the business activity in India. The AAC acknowledged the educative value of the tour but held that it did not have a direct or indirect connection with the assessee's professional activities in India.Upon further appeal, the Tribunal examined the broader perspective of what constitutes expenditure for the purpose of profession. Citing various Supreme Court judgments, the Tribunal emphasized that the term 'for the purpose of profession' is wider than 'for the purpose of earning income from profession.' It noted that the expenditure need not immediately yield results or increase income but should be incidental to the profession and justified by commercial expediency.The Tribunal found that the subjects discussed at the conferences, such as International Monetary Law, International Commercial Arbitration, and environmental issues, were of international concern and relevant to the assessee's practice areas, including company law, labour law, and civil laws. The Tribunal highlighted the importance of comparative law and the practical utility of knowledge gained from international legal trends for a practicing attorney.The Tribunal also referred to the opinions of eminent jurists and judges, emphasizing that a lawyer's education should include knowledge of international law, sociology, history, and psychology to be well-equipped for the profession. The Tribunal disagreed with the lower authorities' view that the knowledge gained from the conferences was irrelevant to the assessee's professional activities in India.The Tribunal concluded that the primary purpose of the assessee's foreign tour was to gain more knowledge and education in the fields of law he practiced, thereby enhancing his professional efficiency. It held that the expenditure was legitimate business expenditure under section 37(1) of the Income-tax Act, 1961, except for the personal expenses of Rs. 2,975 admitted by the assessee.Judgment:The appeal was allowed to the extent that Rs. 28,425 (Rs. 31,400 minus Rs. 2,975) was deemed allowable as legitimate business expenditure under section 37(1) of the Income-tax Act, 1961.