ITAT Allows Appeal Filed by Harish Salve; Upholds Expense Incurred in Abroad Study to be Professional Expense

The Income Tax Appellate Tribunal (ITAT) New Delhi has accepted the claim of Senior Counsel Harish Salve for deduction of foreign scholarship give by him to two Indian students under the head of expenditure solely and exclusively for business or profession u/s 37(1) of Income Tax Act 1961.

u/s 37(1), expenses for purposes of profession and business can be deducted from income. Before the Tribunal, Salve claimed that money spent by him to fund foreign education to two students amounted to professional expenses as funding given to create global goodwill and develop contacts and increase his professional profile for international commercial practice in Singapore and London.

Salve claimed a deduction of Rupees 34,19,739 for the assessment year 2013-2014 and Rupees 84,40,301 for 2014-2015 under the head of Assistance to Law Students.

He further submitted that the assistance was paid to two Indian students to fund a prestigious Oxford University scholarship.

The Assessing Officer (AO) rejected the claim for deduction by stating that the said expenses were not related to Mr Salve’s profession and it cannot be put under the head of incurred exclusively for profession/business of the assessee”.

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In Appeal before ITAT, Mr Salve’s counsel argued that the money was spent developing contacts in the UK and supporting junior lawyers who study abroad and become proficient at handling complex taxation and international transactions.

The Appellate Tribunal allowed the, and placed reliance on a decision of coordinate Bench of ITAT wherein the Tribunal allowed the claim in a similar issue and had opined that professionals find innovative ways to increase their professional position and funding scholarship was one such way.

In conclusion, the Tribunal held that Salve could claim deductions under the head of “business expenses” u/s 37(1) of IT Act 1961.

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