ITAT Allows Salve's Claim For Granting Deduction of Foreign Scholarship

ITAT Allows Salve's Claim For Granting Deduction of Foreign Scholarship

The Income Tax Appellate Tribunal (ITAT), New Delhi, accepted the claim of Senior Advocate Harish Salve (Assessee) for deduction of the foreign scholarship given by him to two Indian students as 'expenditure solely and exclusively for business or profession' under Section 37(1) of the Income Tax Act, 1961 (IT Act).

The ITAT bench comprising of K Narasimha Chary (Judicial Member) and R K Panda (Accountant Member) allowed Salve's claim for a deduction for 2013-14 and 2014-15 also.

Section 37(1) of the IT Act deals with the expenses for the purposes of business and profession that is allowed to be deducted from income.

The senior advocate claimed that the money spent by him to fund the foreign education of two students amounted to professional expenses as the funding was given to create global goodwill, develop contact, and increase his professional profile for the purpose of his international commercial practice in London and Singapore.

Salve sought for deduction of Rs 34,19,730 for the assessment year 2013-14 and Rs 84,40,301 for the assessment year 2014-15 under the head 'Assistance to Law Students'. It was further submitted by him that the said amounts were assistance paid to two Indian students to fund their scholarship at Oxford University.

The Assessing Officer (AO) rejected the claim for deduction saying that the scholarship expenses were not related to the senior advocate's profession and that the same cannot be regarded as "incurred wholly and exclusively for the purpose of business/profession of the assessee".

An appeal was filed before the Commissioner of Income Tax (CIT) wherein it confirmed the assessment and upheld the order passed by the AO.

An appeal was filed before the ITAT, he claimed that the foreign scholarship was a 'business decision' as it was a move "not only to support the Assessee (Salve) in creating goodwill amongst academia in the UK and in turn creating a name/develop contacts in a legal fraternity but also to support the juniors in chambers who may go abroad become technically sound and help in preparing the cases involving the complex issue of international taxation and commercial law".

It was further submitted that the senior advocate had been focusing on international practice and spent a considerable amount of time, taking up international arbitration work in London and other international centers such as in Singapore.