TaxTMI 
TaxTMI 
TaxTMI 
2019 (8) TMI 731
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....nditure. ii. That on the facts and circumstances of the case and in law, the learned CIT (A) erred in not appreciating that expenditure incurred by the appellant was for the furtherance of profession incurred wholly and exclusively for the purpose of business and ought to be allowed under section 37 of the income tax act, 1961. 3. In ITA number 2392/del/2016 the learned assessing officer has effectively raised following 2 grounds of appeal:- i. In the facts and circumstances of the case, the learned CIT (A) has erred in treating the sum of rupees to 845872/- as capital expenditure instead of disallowance of the same as gift (scholarship) expenses not wholly and exclusively act that in related to the profession. ii. In the facts and circumstances of the case, the learned CIT - A has erred in deleting the addition of INR 1 371818/- made by the assessing officer on account of foreign exchange loss. 4. The brief facts of the case shows that assessee is a leading advocate , derived income from business or profession, income from house property, capital gain and other sources. He filed his return of income on 30/9/2011 declaring income of INR 50,52,50,407/-. The return was subseq....
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....s. 978480/- to Ms Jasdeep Kaur Randhawa in terms of scholarship agreement entered into by the assessee with The Exeter College, the University of Oxford dated 19/03/2009. According to that, the assessee has committed to providing annual funding for scholarship of graduate student at Oxford University for top Indian student on annual basis. According to the agreement, there is a selection criteria also provided and it is linked to Clarendon Scholarship for maximum 3 years. Assessee has given a justification for claiming the above expenditure as deductible expenditure u/s 37 (1) of The Income Tax Act. Such justification is as under:- 1) Since 2003, I have focused on increasing my international practice and for which purpose I spent considerable amount of time, taking on international arbitration work in London and other international centers such as Singapore. 2) Is not well known in the United Kingdom, in order to become known to the legal fraternity, Indian senior counsel generally attend international conferences, and for which the expenses incurred are claimed as a deduction from the taxable income. 3) I have however not found this a suitable way of developing international....
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....l, there are number of tangible and intangible factors that contribute to building the overall persona. The success of a senior counsel in the Supreme Court does not depend only upon the knowledge of law skills in advocacy, senior lawyers in the present times become public figures, and their activities in all fields directly contribute to their professional stature. The kind of fees that senior counsel command has a direct Nexus with the stature that such counsel has not just in the profession but in society. Thus, all such expenses that are legitimately incurred for building up the overall personnel of a professional (in the professional field) are legitimate business expenses. 11) There is complete transparency in the process, the students were given the assistance are selected by the college, and are deserving students who but for such assistance would not be able to afford education in Oxford University." Therefore, he submitted that these expenditure are wholly and exclusively incurred for the profession of the assessee and hence is allowable under section 37 (1) of the act. 8. The learned AO held that assessee has paid scholarship to some students for studying in the Exet....
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....is issue. 10. The learned authorised representative submitted that assessee is noted lawyer of highest professional standing nationally as well as internationally. He further referred the recent incident of "Kuldeep Jadhav Case" where India was represented before International Court Of Justice by the assessee. He referred this for the simple reason that how the professional recognition of the lawyer of such a stature enhances in the eye of society. He further stated that the profession of lawyers is a regulated profession where the solicitation of clients and advertisement is prohibited, the professional recognitions is earned by a professional by speaking and attending seminars, conferences and workshops. Contributing to journals and periodicals. Looking to the stature of the assessee, who is recognized internationally, he found a way of enhancing his professional image by setting up a scholarship in an internationally renowned university by helping the Indian students to get them educated, so that in future they may join him. According to him, it has happened and one of the student to whom this scholarship is awarded has helped him in a famous Vodafone case, he therefore submit....
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....under the provisions of the income tax act and specifically u/s 37 (1) of the act. He therefore submitted that it is not wholly and exclusively incurred for the purposes of the business but merely is a scholarship, which is one of the philanthropic actions of the assessee. He further submitted that the learned CIT - A has altogether born on different tangent in considering the above expenditure as capital expenditure which is totally erroneous on the facts of the case as the payment is merely a gratitude is payment by the assessee for scholarship of 2 students. 13. We have carefully considered the rival contention and perused the orders of the lower authorities. Issue involved in this appeal is whether the expenditure incurred by the assessee is allowable u/s 37 (1) of the act or not. 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 internati....
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....n the professional field there are innovative ways visualized by the professional to make themselves visible in the professional circle and to build their own professional profile for generating higher and valueadded business. It may be, sponsoring a seminar, becoming knowledge partners, setting up the prizes and awards, creating the competitive award ceremonies, hosting vibrant summits of various states. Therefore, it is apparent that at least in the case of the professionals, the way they promote themselves, is changing very fast and the benefits of such expenditure are huge and wide. Therefore according to us the impugned expenditure incurred by the assessee is a revenue expenditure allowable u/s 37 (1) of the income tax act. 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 f....
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....ees would be recorded at the higher amount of lower amount and subsequently as soon as the moneys received, it would be adjusted on the credit side of profit and loss account as exchange gain or on the debit side of profit and loss account as exchange loss. The assessee and stated that he is doing this only for maintaining control over those invoices. Admittedly, during the year the assessee has incurred foreign exchange loss. The learned assessing officer has disallowed it for the simple reason that when assessee is maintaining its books of accounts on cash basis, the assessee should have recorded the net realization only when the fees are received. Therefore, he disallowed it. The learned CIT - A understood practice adopted by the assessee and allows the same. According to him, there is no addition is required to be made even in cash system of accounting. Aggrieved, the AO is in appeal before us. 16. The learned departmental representative vehemently supported the order of the learned assessing officer and submitted that when the assessee is maintaining the books of accounts on cash basis, the fees is required to be recorded only at the time of realization of the invoices and th....