Harish N Salve, New Delhi V. ACIT, Circle- 61(1), New Delhi

ITA 1007/DEL/2018

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 2396 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-02-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Appeal Filed On: 08-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHAILESH KUMAR
• Assessee Lawyers: SACHIT JOLLY MS DISHA JHAM
• Keywords: Gift; Question of law; Revenue expenditure; Capital expenditure; Capital Gains
• Section: 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C NEW DLEHI BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND SHRI K. NARASIMHA CHARY, JUDICIAL MEMBER ITA NOS. 1007 & 1008/DEL/2018 ASSESSMENT YEAR: 2013-14 & 2014-15 HARISH N. SALVE, VS. ACIT, CIRCLE 61(1), 6E, WHITE HOUSE, NEW DELHI 10, BHAGWAN DASS ROAD, NEW DELHI. PAN : AHFPS7386B (APPELLANT) (RESPONDENT) APPELLANT BY : SH. SACHIT JOLLY, ADVOCATE MS. DISHA JHAM, ADVOCATE RESPONDENT BY: SH. SHAILESH KUMAR, SR. DR DATE OF HEARING: 24.02.2021 DATE OF ORDER : 24.02.2021 ORDER PER K. NARASIMHA CHARY, J.M. CHALLENGING THE ORDERS DATED 29.12.2017 PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-20, NEW DELHI (THE LD. CIT(A), FOR THE ASSESSMENT YEARS 2013-14 AND 2014-15, HARIS H N. SALVE(THE ASSESSEE), PREFERRED THESE APPEALS. 2. SINCE THE FACTS AND ISSUES INVOLVED IN BOTH THE MATTERS ARE IDENTICAL, WE DEEM IT JUST AND CONVENIENT TO DISPOS E THEM OF BY THIS COMMON ORDER. 2 3. BRIEF FACTS OF THE CASE ARE THE ASSESSEE IS AN A DVOCATE BY PROFESSION AND DERIVES INCOME FROM BUSINESS OR PROF ESSION, HOUSE PROPERTY, CAPITAL GAINS AND ALSO INCOME FROM OTHER SOURCES. DURING THE COURSE OF ASSESSMENTS FOR THE ASSESSMENT YEARS 2013 -14 AND 2014-15, THE ASSESSING OFFICER FOUND THAT THE ASSESSEE CLAIM ED RS.34,19,730/- FOR THE ASSESSMENT YEAR 2013-14 AND RS.84,40,301/- FOR ASSESSMENT YEAR 2014-15 UNDER THE HEAD ASSISTANCE TO LAW STUDENTS , AND WHEN ASKED, SUBMITTED THAT THE ASSISTANCE PAID TO LAW STUDENTS DIKSHA SHARMA AND KRISHNA PRASAD K. V. AT OXFORD IS THE JUSTIFICATION FOR SUCH CLAIM. IT WAS FURTHER STATED BY THE ASSESSING OFFICER THAT THE VE RY SAME PLEA WAS TAKEN BY ASSESSEE FOR THE ASSESSMENT YEAR 2014-15 ALSO. 4. WHILE DISALLOWING SUCH A CLAIM OF ASSESSEE, THE ASSESSING OFFICER OBSERVED THAT THE FACTS FOR THIS YEAR ARE SIMILAR T O THE ONES IN EARLIER ASSESSMENT YEARS AND THEREFORE, SIMILAR DISALLOWANC E HAD TO BE MADE ON THE GROUND THAT THE ASSISTANCE TO LAW STUDENTS, WHO ARE NOWHERE RELATED TO THE PROFESSION OF THE ASSESSEE, AND SUCH CLAIM A S A BUSINESS EXPENSE IS NOT ACCEPTABLE TO HAVE BEEN INCURRED WHOLLY AND EXC LUSIVELY FOR THE PURPOSE OF BUSINESS/PROFESSION OF THE ASSESSEE. 5. ASSESSEE PREFERRED APPEALS AND THE LD. CIT(A) DI D NOT ACCEPT THE PLEA TAKEN BY THE ASSESSEE AND DISMISSED THE SAME. HENCE, ASSESSEE PREFERRED THESE TWO APPEALS. 6. IT IS THE SUBMISSION OF THE LD. AR THAT THE ASSE SSEE WHO IS AN ESTABLISHED SR. COUNSEL IN INDIA, WAS FOCUSING ON I NTERNATIONAL PRACTICE AND SPENT CONSIDERABLE AMOUNT OF TIME, TAKING ON IN TERNATIONAL ARBITRATION WORK IN LONDON AND OTHER INTERNATIONAL CENTERS SUCH AS 3 SINGAPORE; THAT IN THIS PROCESS, SINCE THIS WHOLE P ROFESSION IS BASED ON DEVELOPING CONTACTS AND UK BEING A CENTER WHEREIN T HE ACADEMICIANS ARE AN ACTIVE PART OF LEGAL FRATERNITY, THE ASSESSEE DE CIDED TO PROVIDE FUNDING FOR EDUCATION OF INDIAN STUDENTS IN THE OXFORD UNIV ERSITY; THAT THE SUPPORT WAS TO BE PROVIDED TO TOP INDIAN STUDENTS I NTERESTED IN PURSUING LAW DEGREE IN UK; THAT THIS MOVE WAS NOT ONLY TO SU PPORT THE ASSESSEE IN CREATING GOODWILL AMONGST ACADEMIA IN UK AND IN TUR N CREATING A NAME/DEVELOP CONTACTS IN LEGAL FRATERNITY BUT ALSO TO SUPPORT THE JUNIORS IN CHAMBERS WHO MAY GO ABROAD BECOME TECHNICAL SOUN D AND HELP IN PREPARING THE CASES INVOLVING COMPLEX ISSUE OF INTE RNATIONAL TAXATION AND COMMERCIAL LAWS; AND THAT ACCORDINGLY, IN ALL CIRCU MSTANCES, THE DECISION TO FUND THE STUDENTS WAS A BUSINESS DECISION TO SUP PORT THE ASSESSEE IN HIS PROFESSION AS A LAWYER AND THEREFORE, EXPENSE O F RS.34,19,730/- AND RS. 84,40,301/-INCURRED FOR THIS PURPOSE WAS CLAIME D AS AN EXPENDITURE FOR BOTH THE ASSESSMENT YEARS RESPECTIVELY. 7. HE FURTHER SUBMITTED THAT WHEN A SIMILAR DISALLO WANCE WAS MADE IN THE ASSESSMENT YEAR 2011-12, A COORDINATE BENCH OF THIS TRIBUNAL DELETED THE DISALLOWANCE AND THE FACTS AND QUESTION OF LAW REMAINED THE SAME AND SUCH ORDER HAS BEEN FOLLOWED BY OTHER COOR DINATE BENCH IN ITA NO. 2705/DEL/2017 FOR ASSESSMENT YEAR 2012-13. 8. LEARNED DR PLACED RELIANCE ON THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE ORDERS OF THE TRIBUNAL ARE N OT AVAILABLE WITH HIM AND HE CANNOT OFFER ANY COMMENTS ON THE ORDERS OF T HE EARLIER ASSESSMENT YEARS. 4 9. WE HAVE GONE THROUGH THE RECORDS IN THE LIGHT OF SUBMISSIONS MADE ON EITHER SIDE. ON PERUSAL OF THE ORDERS, WE A RE SATISFIED THAT THE FACTS AND QUESTIONS OF LAW INVOLVED IN THESE TWO AS SESSMENT YEARS ON HAND ARE IDENTICAL TO THE ONES INVOLVED FOR EARLIER ASSESSMENT YEARS AND BY ORDER DATED 13.08.2019 IN ITA NOS. 2285 AND 2392 /DEL/2016 FOR ASSESSMENT YEAR 2011-12, A COORDINATE BENCH OBSERVE D AS FOLLOWS : 13. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENT ION AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES. ISSUE INVOLVED IN THIS APPEAL IS WHETHER THE EXPENDITURE INCURRED BY THE ASSESSEE IS ALLOWAB LE 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 ACCORDAN CE 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 W HOLLY AND EXCLUSIVELY INCURRED FOR THE PURPOSES OF BUSINESS AND IN ANOTHE R CASE IT MAY NOT BE SO. UNDOUBTEDLY, ASSESSEE IS A NOTED INTERNATIONAL LAWYER WHO HAS SET UP A SCHOLARSHIP FOR CREATING HIS VISIBILITY IN INTERN ATIONAL ARENA AND HIS SOCIAL STANDING. THE ASSESSEE HAS SPECIFICALLY SUBM ITTED THAT IT HAS INCREASED LOT OF VALUE OF THE CV OF THE ASSESSEE AN D THE GOVERNMENT OF SINGAPORE HAS APPOINTED HIM ON CERTAIN COMMITTEES O F REPUTE. EVEN OTHERWISE, IT IS NOT OPEN TO THE REVENUE TO ADOPT A SUBJECTIVE STANDARD OF REASONABLE AS AND DECIDE WHETHER THE TYPE OF THE EX PENDITURE OF THE ASSESSEE SHOULD INCUR AND IN WHAT CIRCUMSTANCES. TH E OPINION OF THE LEARNED ASSESSING OFFICER THAT ATTENDING THE CONFER ENCES ET CETERA WOULD HAVE ADDED MORE WEIGHTAGE TO THE PROFESSIONAL PROFI LE OF THE ASSESSEE IS DEVOID OF ANY MERIT. IT IS NOT THE AO BUT THE ASSES SEE IS CARRYING ON THE PROFESSION. HE KNOWS BETTER THAT WHAT KIND OF EXPEN DITURE HE SHOULD INCUR FOR FURTHERANCE OF HIS BUSINESS. TO JUDGE ALL OWABILITY OF AN EXPENDITURE, THE LEARNED ASSESSING OFFICER SHOULD P UT HIMSELF INTO THE SHOES OF THE ASSESSEE AND THEN DECIDE THAT WHETHER THE EXPENDITURE INCURRED BY THE ASSESSEE IS NECESSARY OR NOT FOR TH E BUSINESS OF THE ASSESSEE. THUS, ALLOWABILITY OF EXPENDITURE SHOULD ALWAYS BE JUDGED FROM THE MINDSET OF THE ASSESSEE. THE AO CANNOT PUT HIS THINKING TO SAY THAT THE EXPENDITURE INCURRED BY THE ASSESSEE IS NO T WHOLLY AND EXCLUSIVELY INCURRED FOR HIS PROFESSION, UNLESS, HE BRINGS HIS LEVEL OF THINKING TO THE LEVEL OF THE PROFESSIONAL, LIKE ASS ESSEE. THE REQUIREMENT 5 OF INCURRING THE EXPENDITURE BY A PROFESSIONAL/BUSI NESSMAN CHANGES BY THE CHANGES IN THE DYNAMICS OF THE BUSINESS, ITS CO MPLEXITIES AND ITS UNIQUENESS. THE LEVEL AT WHICH THE ASSESSEE IS CARR YING ON THE PROFESSION, PERHAPS, HE MIGHT NOT HAVE THOUGHT IT PROPER TO INC REASES VISIBILITY BY ATTENDING THE CONFERENCES, SEMINARS ET CETERA. HE H AS DIFFERENT VISION OF CARRYING HIMSELF IN THE PROFESSIONAL FIELD TO INCRE ASES VISIBILITY AND SOCIAL STATUS. HE THOUGHT FIT TO SET UP A SCHOLARSHIP TO I NDIAN STUDENTS IN OXFORD UNIVERSITY. THUS, IN THE PRESENT CASE DEFINITELY TH ERE IS A NEXUS BETWEEN THE EXPENDITURE INCURRED BY THE ASSESSEE AND THE PR OFESSIONAL SERVICES RENDERED BY THE ASSESSEE. HE HAS ALSO SHOWN THAT TH E STUDENT TO MOVING THE SCHOLARSHIP HAS BEEN GRANTED HAS HELPED HIM IN FAMOUS CASE OF VODAFONE REPRESENTED BY HIM. THEREFORE, WE ARE OF T HE OPINION THAT THE ASSESSEE HAS INCURRED THE ABOVE EXPENDITURE WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF THE BUSINESS. IN THE PROFESSIONAL F IELD THERE ARE INNOVATIVE WAYS VISUALIZED BY THE PROFESSIONAL TO M AKE THEMSELVES VISIBLE IN THE PROFESSIONAL CIRCLE AND TO BUILD THE IR OWN PROFESSIONAL PROFILE FOR GENERATING HIGHER AND VALUE ADDED BUSIN ESS. IT MAY BE, SPONSORING A SEMINAR, BECOMING KNOWLEDGE PARTNERS, SETTING UP THE PRIZES AND AWARDS, CREATING THE COMPETITIVE AWARD C EREMONIES, HOSTING VIBRANT SUMMITS OF VARIOUS STATES. THEREFORE, IT IS APPARENT THAT AT LEAST IN THE CASE OF THE PROFESSIONALS, THE WAY THEY PROM OTE THEMSELVES, IS CHANGING VERY FAST AND THE BENEFITS OF SUCH EXPENDI TURE ARE HUGE AND WIDE. THEREFORE ACCORDING TO US THE IMPUGNED EXPEND ITURE 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 LEA RNED CIT A THESE EXPENDITURE IS CAPITAL IN NATURE. THE EXPENDITURE I NCURRED BY THE ASSESSEE IS THE ROUTINE DAY-TO-DAY EXPENDITURE INCU RRED BY THE ASSESSEE FOR PROMOTING HIS PROFESSIONAL PROFILE. THESE EXPEN DITURE CANNOT BE HELD TO BE CAPITAL EXPENDITURE IN NATURE AS NO FRESH NEW FIXED ASSETS IS CREATED BY PAYING THE SCHOLARSHIP SUM. FURTHER MERE LY 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 EXPENDIT URE INCURRED BY THE ASSESSEE IN FURTHERANCE OF HIS BUSINESS. WHILE ISSU E AROSE BEFORE COORDINATE BENCH IN CASE OF ANOTHER PROFESSIONAL FI RM IN ITA NUMBER 1382/DEL/2012 FOR ASSESSMENT YEAR 2009 10 WHEREIN SUBSTANTIAL CONTRIBUTION WAS MADE FOR A BUILDING OF AN ASSOCIAT ION WHICH PROMOTES THE STUDY OF TAXATION. THE COORDINATE BENCH HELD TH AT SUCH EXPENDITURE 6 INCURRED BY THE ASSESSEE IS WHOLLY AND EXCLUSIVELY INCURRED BY THE ASSESSEE FOR THE PURPOSE OF ITS PROFESSION. REVENUE CARRIED THE MATTER BEFORE THE HONOURABLE DELHI HIGH COURT, WHICH UPHEL D THE ORDER OF THE ITAT IN ITA NUMBER 50/2014 DATED 11/8/2015. THE FAC TS OF THE PRESENT CASE ARE ON THE FAR BETTER FOOTING. HENCE, WE REVER SE THE ORDER OF THE LOWER AUTHORITIES, AND DIRECT THE LEARNED ASSESSING OFFICER TO DELETE THE ABOVE DISALLOWANCE. IN VIEW OF THIS, WE ALLOW GROUN D NUMBER 1 OF THE APPEAL OF THE ASSESSEE AND DISMISS GROUND NUMBER 1 OF THE APPEAL OF THE LEARNED ASSESSING OFFICER. 10. FOR THE ASSESSMENT YEAR 2012-13 ALSO IN ITA NO. 2505/DEL/2017, SUCH A VIEW WAS FOLLOWED BY TRIBUNAL. ON THE PARITY OF FACTS OF THE CASES ON HAND WITH THE FACTS OF EARLIER YEARS, WE ARE OF THE CONSIDERED OPINION THAT THE CONSISTENT VIEW TAKEN BY THE TRIBUNAL FOR EARLIER ASSESSMENT YEARS CANNOT BE DISTURBED. WHILE RESPECTFULLY FOLLO WING THE SAME, WE DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION . 11. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT IMMEDIATELY ON C ONCLUSION OF HEARING IN VIRTUAL MODE ON THIS 24 TH DAY OF FEBRUARY, 2021. SD/- SD/- (R.K. PANDA) (K. NARASIMHA CHARY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 24/02/2021