Harish N. Salve, New Delhi V. ACIT, New Delhi

ITA 2705/DEL/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 6551 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 9 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-02-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 02-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUSHMA SINGH
• Keywords: Gift; Revenue expenditure; Capital expenditure
• Section: 13; 37

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI C BENC H, NEW DELHI BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER, AND SHRI KULDIP SINGH, JUDICIAL MEM BER ITA NO. 2705/DEL/2017 [ASSESSMENT YEAR: 2012-13] HARISH N. SALVE VS. THE A.C.I.T, 6E, WHITE HOUSE CIRCLE 61(1), 10, BHAGWAN DASS ROAD, NEW DELHI 110 002 NEW DELHI -110 001 PAN: AHFPS 7386 B [APPELLANT] [RESPONDENT] DATE OF HEARING : 06.02.2020 DATE OF PRONOUNCEMENT : 06.02.2020 ASSESSEE BY : SHRI ROHIT GARG, ADV SHRI SACHIT JOLLY, ADV REVENUE BY : MS. SUSHMA SINGH, CIT-D.R. ORDER PER N.K. BILLAIYA, ACCOUNTANT MEMBER, THIS APPEAL BY THE ASSESSEE IS PREFERRED AGAINST TH E ORDER OF THE COMMISSIONER OF INCOME TAX [APPEALS] 20, NEW DELH I DATED 31.03.2017 PERTAINING TO ASSESSMENT YEAR 2012-13. 2 2. THE SOLITARY GRIEVANCE OF THE ASSESSEE IS THAT T HE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 19,53,500/- B Y TREATING THE SAME AS NOT INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURP OSE OF THE PROFESSION OF THE APPELLANT. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE IS AN ADVOCATE BY PROFESSION AND IS A DESIGNATED SENIOR A DVOCATE OF THE HON'BLE SUPREME COURT OF INDIA AND IS DERIVING INCO ME FROM BUSINESS OR PROFESSION, INCOME FROM HOUSE PROPERTY, INCOME FROM CAPITAL GAIN AND INCOME FROM OTHER SOURCES. 4. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEED INGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS CLA IMED RS. 19,53,500/- UNDER THE HEAD SCHOLARSHIP EXPENSES. THE ASSESSE E WAS ASKED TO EXPLAIN WHY THE SCHOLARSHIP DEBITED IN THE PROFIT A ND LOSS ACCOUNT SHOULD NOT BE ADDED BACK TO THE INCOME OF THE ASSES SEE. 5. IN HIS REPLY, THE ASSESSEE SUBMITTED COPY OF AGR EEMENT OF SCHOLARSHIP. 3 6. ON PERUSAL OF THE AGREEMENT, THE ASSESSING OFFIC ER WAS OF THE OPINION THAT THERE WAS NO SPECIFIC PROVISION ON ALL OWABILITY OF THIS EXPENSE UNDER ANY SECTION OF THE ACT. THEREAFTER, THE ASSESSING OFFICER PROCEEDED BY REFERRING TO SECTION 37 OF THE ACT AND CAME TO THE CONCLUSION THAT SCHOLARSHIP PAID BY THE ASSESSE E WAS NOT INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF HIS PROFE SSION. ACCORDINGLY, THE ASSESSING OFFICER DISALLOWED THE SAME. 7. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER BEFOR E THE LD. CIT(A) BUT WITHOUT ANY SUCCESS. 8. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO THE ORDER OF THE CO-ORDINATE BENCH IN THE CASE OF T HE ASSESSEE FOR ASSESSMENT YEAR 2011-12 AND POINTED OUT THAT A SIMI LAR DISALLOWANCE WAS DELETED BY THE TRIBUNAL IN ASSESSEES OWN CASE. 9. PER CONTRA, THE LD. DR COULD NOT BRING ANY DISTI NGUISHING DECISION IN FAVOUR OF THE REVENUE, THOUGH VEHEMENTLY STATED THAT THE FACTS ARE CLEARLY DISTINGUISHABLE. 4 10. WE HAVE GIVEN THOUGHTFUL CONSIDERATION TO THE O RDERS OF THE AUTHORITIES BELOW. WE HAVE GONE THROUGH THE ORDER OF THE CO-ORDINATE BENCH IN ITA NO.2285/DEL/2016 AND 2392/DEL2016 DATE D 13.08.2019. THE SCHOLARSHIP AGREEMENT REFERRED TO BY THE ASSESS ING OFFICER IS AS UNDER: E XETER COLLEGE THE UNIVERSITY OF OXFORD M EMORANDUM OF U NDERSTANDING HARISH SALVE SCHOLARSHIP 19 TH MARCH 2009 TO THE RECTOR AND SCHOLARS OF EXETER COLLEGE MR HARISH SALVE, A FRIEND OF EXETER COLLEGE, HAS EX PRESSED A DESIRE TO EXTABLISH AN ANNUAL SCHOLARSHIP, LINKED T O AN OXFORD UNIVERSITY CLARENDOR AWARD TENABLE AT EXETER COLLEG E, OXFORD. THE GIFT MR SALVE HAS COMMITTED TO PROVIDING ANNUAL FUNDING FOR A SCHOLARSHIP OF RUPEES XX LAKH (RS. XXXX/-) PER ANNU M, INCREASING EACH YEAR IN LINE WITH INFLATION ARID-WORTH THE FUL L RECOMMENDED LIVING ALLOWANCE FOR A GRADUATE STUDENT AT OXFORD U NIVERSITY. HIS ANNUAL GIFT WILL BE RECEIVED IN THE COLLEGES ACCOU NT ON OR BEFORE 1ST SEPTEMBER OF EACH YEAR, THE COLLEGES ACCOUNT DETAI LS ARE: BANK: BARCLAYS BANK PLC SWIFT CODE : BARC GB22 SORT CODE : 20-65-18 IBAN: GB95BARC2 0651890375799 ACCOUNT NUMBER : 90375799 ACCOUNT NAME: THE BURSAR, EXETER COLLEGE REF ERENCE: SALVE 5 THE SCHOLARSHIP THIS ANNUAL GIFT IS TO BE USED TO FUND THE HARISH S OLVE SCHOLARSHIP IN LOW FOR A TOP INDIAN STUDENT READING FOR THE BCL , MJUR OR HIGHER DEGREE IN LAW AT EXETER COLLEGE, OXFORD, IT IS MR SALVES WISH THAT THIS SCHOLARSHIP BE LINKED TO A UNIVERSIT Y OF OXFORD CLARENDON SCHOLARSHIP WHICH WILL COVER THE COST OF UNIVERSITY AND COLLEGE FEES, FT IS UNDERSTOOD THAT THIS SCHOLARSHI P WILL BE AWARDED ON AN ANNUAL BASIS AS PER THE TERMS AND CON DITIONS SET OUT BELOW, THIS AWARD WILL BE KNOWN AS THE HARISH SALVE SCHOLARSHIP (THE SCHOLARSHIP'), SELECTION CRITERIA EXETER COLLEGE WILL OFFER ONE HARISH SOLVE SCHOLARS HIP PER ANNUM (I.E. ONE SCHOLAR AT ANY TIME) AND PREFERENCE WILL, AT ALL TIMES, BE GIVEN TO THE CURRENT SCHOLAR IF HE/SHE REMAINS IN R ECEIPT OF THE ORIGINAL LINKED CLARENDON SCHOLARSHIP (WHICH IS AWA RDED FOR A MAXIMUM OF 3 YEARS). THE HARISH SALVE SCHOLARSHIP WILL, THEREFORE, BE LI NKED TO THE CLARENDON SCHOLARSHIP AND BE TENABLE TAR A MAXIMUM OF THREE YEARS, OPEN TO ANY INDIAN STUDENT WHO: A) IS AN INDIAN CITIZEN, RESIDENT IN INDIA, AND B) HAS UNDERTAKEN AN UNDERGRADUATE DEGREE AT AN INDIAN INSTITUTION OF HIGHER EDUCATION, AND C) WISHES TO READ FOR A GRADUATE DEGREE AT EXETER COLL EGE, OXFORD IN LAW TO INCLUDE THE BCL, MJOR, AND DPHIL AND D) HAS BEEN ACCEPTED INTO THE UNIVERSITY OF OXFORD ONT O SUCH A GRADUATE COURSE, AND 6 E) COMMITS TO REMAINING AT EXETER COLLEGE, OXFORD FOR THE DURATION OF HIS OR HER COURSE. SHOULD NO SUITABLE CANDIDATE BE PUT FORWARD IN ANY YEAR; THE SCHOLARSHIP WILL NOT BE AWARDED. 11. IT IS AN UNDISPUTED FACT THAT THE APPELLANT IS A WE LL KNOWN SUPREME COURT LAWYER. THE AGREEMENT WITH EXETER CO LLEGE, THE UNIVERSITY OF OXFORD, EXHIBITED HEREINABOVE, IS SEL F-EXPLANATORY. WE FIND THAT ON IDENTICAL CIRCUMSTANCES, THE CO-ORDINA TE BENCH IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2011-12 [SU PRA], HAD THE OCCASION TO CONSIDER A SIMILAR DISALLOWANCE AND CAM E TO THE CONCLUSION THAT SUCH DISALLOWANCE CANNOT BE SUSTAIN ED AND DIRECTED THE ASSESSING OFFICER TO DELETE THE SAME. THE RELE VANT FINDINGS OF THE CO-ORDINATE BENCH READ AS UNDER: 13. W E HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTION AN D 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. ALLOWABI LITY 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 C ASE THAT IN CASE OF ONE ASSESSEE, PARTICULAR EXPENDITURE IS W HOLLY AND 7 EXCLUSIVELY INCURRED FOR THE PURPOSES OF BUSINESS AND IN ANOTHER CASE IT MAY NOT BE SO. UNDOUBTEDLY, ASSESSEE IS A N OTED INTERNATIONAL LAWYER WHO HAS SET UP A SCHOLARSHIP F OR CREATING HIS VISIBILITY IN INTERNATIONAL ARENA AND HIS SOCIAL ST ANDING. THE ASSESSEE HAS SPECIFICALLY SUBMITTED THAT IT HAS INC REASED LOT OF VALUE OF THE CV OF THE ASSESSEE AND THE GOVERNMENT OF SINGAPORE HAS APPOINTED HIM ON CERTAIN COMMITTEES OF REPUTE. EVEN OTHERWISE, IT IS NOT OPEN TO THE REVENUE TO ADOPT A SUBJECTIVE STANDARD OF REASONABLE AS AND DECIDE WHETHER THE TY PE OF THE EXPENDITURE OF THE ASSESSEE SHOULD INCUR AND IN WHA T CIRCUMSTANCES. THE OPINION OF THE LEARNED ASSESSING OFFICER THAT ATTENDING THE CONFERENCES ET CETERA WOULD HAVE ADDE D MORE WEIGHTAGE TO THE PROFESSIONAL PROFILE OF THE ASSESS EE IS DEVOID OF ANY MERIT. IT IS NOT THE AO BUT THE ASSESSEE IS CAR RYING ON THE PROFESSION. HE KNOWS BETTER THAT WHAT KIND OF EXPEN DITURE HE SHOULD INCUR FOR FURTHERANCE OF HIS BUSINESS. TO JU DGE ALLOWABILITY OF AN EXPENDITURE, THE LEARNED ASSESSING OFFICER SH OULD PUT HIMSELF INTO THE SHOES OF THE ASSESSEE AND THEN DEC IDE THAT WHETHER THE EXPENDITURE INCURRED BY THE ASSESSEE IS NECESSARY OR NOT FOR THE BUSINESS OF THE ASSESSEE. THUS, ALLO WABILITY OF EXPENDITURE SHOULD ALWAYS BE JUDGED FROM THE MINDSE T OF THE ASSESSEE. THE AO CANNOT PUT HIS THINKING TO SAY THA T THE EXPENDITURE INCURRED BY THE ASSESSEE IS NOT WHOLLY AND EXCLUSIVELY INCURRED FOR HIS PROFESSION, UNLESS, HE BRINGS HIS LEVEL OF THINKING TO THE LEVEL OF THE PROFESSIONAL, LIKE ASSESSEE. THE REQUIREMENT OF INCURRING THE EXPENDITURE BY A PROFESSIONAL/BUSINESSMAN CHANGES BY THE CHANGES IN THE DYNAMICS 8 OF THE BUSINESS, ITS COMPLEXITIES AND ITS UNIQUENES S. THE LEVEL AT WHICH THE ASSESSEE IS CARRYING ON THE PROFESSION, P ERHAPS, HE MIGHT NOT HAVE THOUGHT IT PROPER TO INCREASES VISIB ILITY BY ATTENDING THE CONFERENCES, SEMINARS ET CETERA. HE H AS DIFFERENT VISION OF CARRYING HIMSELF IN THE PROFESSIONAL FIEL D TO INCREASES VISIBILITY AND SOCIAL STATUS. HE THOUGHT FIT TO SET UP A SCHOLARSHIP TO INDIAN STUDENTS IN OXFORD UNIVERSITY. THUS, IN T HE PRESENT CASE DEFINITELY THERE IS A NEXUS BETWEEN THE EXPEND ITURE INCURRED BY THE ASSESSEE AND THE PROFESSIONAL SERVI CES RENDERED BY THE ASSESSEE. HE HAS ALSO SHOWN THAT THE STUDENT TO MOVING THE SCHOLARSHIP HAS BEEN GRANTED HAS HELPED HIM IN FAMOUS CASE OF VODAFONE REPRESENTED BY HIM. THEREFORE, WE ARE O F THE OPINION THAT THE ASSESSEE HAS INCURRED THE ABOVE EX PENDITURE WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF THE BUSI NESS. IN THE PROFESSIONAL FIELD THERE ARE INNOVATIVE WAYS VISUAL IZED BY THE PROFESSIONAL TO MAKE THEMSELVES VISIBLE IN THE PROF ESSIONAL CIRCLE AND TO BUILD THEIR OWN PROFESSIONAL PROFILE FOR GEN ERATING HIGHER AND VALUEADDED BUSINESS. IT MAY BE, SPONSORING A SE MINAR, BECOMING KNOWLEDGE PARTNERS, SETTING UP THE PRIZES AND AWARDS, CREATING THE COMPETITIVE AWARD CEREMONIES, HOSTING VIBRANT SUMMITS OF VARIOUS STATES. THEREFORE, IT IS APPAREN T THAT AT LEAST IN THE CASE OF THE PROFESSIONALS, THE WAY THEY PROM OTE 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 9 IS CAPITAL IN NATURE. THE EXPENDITURE INCURRED BY T HE ASSESSEE IS THE ROUTINE DAY-TO-DAY EXPENDITURE INCURRED BY THE ASSESSEE FOR PROMOTING HIS PROFESSIONAL PROFILE. THESE EXPENDITU RE CANNOT BE HELD TO BE CAPITAL EXPENDITURE IN NATURE AS NO FRES H NEW FIXED ASSETS IS CREATED BY PAYING THE SCHOLARSHIP SUM. FU RTHER MERELY BECAUSE IN THE AGREEMENT IT IS MENTIONED AS AN ANNU AL 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. WHILE ISSUE AROSE BEFORE COORDINATE BENCH IN CASE OF ANOTHER PROFESSIONAL FIRM IN ITA NUMBER 1382/DEL/20 12 FOR ASSESSMENT YEAR 2009 10 WHEREIN SUBSTANTIAL CONTR IBUTION WAS MADE FOR A BUILDING OF AN ASSOCIATION WHICH PROMOTE S THE STUDY OF TAXATION. THE COORDINATE BENCH HELD THAT SUCH EXPEN DITURE 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, WHIC H UPHELD THE ORDER OF THE ITAT IN ITA NUMBER 50/2014 DATED 11/8/ 2015. THE FACTS OF THE PRESENT CASE ARE ON THE FAR BETTER FOO TING. HENCE, WE REVERSE THE ORDER OF THE LOWER AUTHORITIES, AND DIRECT THE LEARNED ASSESSING OFFICER TO DELETE THE ABOVE DISAL LOWANCE. 12. ON FINDING PARITY OF FACTS WITH THE FACTS OF TH E CASE IN HAND, RESPECTFULLY FOLLOWING THE FINDINGS OF THE CO-ORDIN ATE BENCH [SUPRA] WE DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION . 10 13 IN THE RESULT, THE APPEAL OF THE ASSESSEE IN ITA NO. 2705/DEL/2017 IS ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 06.02. 2020. SD/- SD/- [KULDIP SINGH ] [N.K. BILLAIYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 06 TH FEBRUARY , 2020. VL/ COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT ASST. REGISTRAR 4. CIT(A) ITAT, NEW DELHI 5. DR 11 DATE OF DICTATION DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.PS/PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER