2020 (4) TMI 529 - AT - Income Tax

Expenditure allowable u/s 37 (1) - disallowance Scholarship Expenses treating the same as not incurred wholly and exclusively for the purpose of the profession of the appellant - assessee is an advocate by profession and is a designated Senior Advocate of the Hon'ble Supreme Court of India and is deriving income from business or profession, income from house property, income from capital gain and income from other sources - HELD THAT - It is an undisputed fact that the appellant is a well known Supreme Court Lawyer. The agreement with Exeter College, the University of Oxford, exhibited hereinabove, is self-explanatory. We find that on identical circumstances, the co-ordinate bench in assessee s own case for Assessment Year 2011-12 2019 (8) TMI 731 - ITAT DELHI had the occasion to consider a similar disallowance and came to the conclusion that such disallowance cannot be sustained and directed the Assessing Officer to delete the same. - Decided in favour of assessee.

Summary

Issues:
Disallowance of Scholarship Expenses under section 37 of the Income Tax Act.

Analysis:
The appellant, a Senior Advocate, claimed a scholarship expense of ?19,53,500 in the profit and loss account. The Assessing Officer disallowed the expense under section 37, stating it was not wholly and exclusively for the appellant's profession. The appellant's reply included a copy of the Scholarship Agreement with Exeter College, University of Oxford. The Tribunal noted that a similar disallowance in the appellant's case for the previous year was deleted by a co-ordinate bench. The Tribunal analyzed the nature of the expenditure and its relevance to the appellant's profession. The Tribunal emphasized that the expenditure was incurred to enhance the appellant's professional profile and visibility internationally. It was observed that the expenditure was necessary for the appellant's business and was not capital in nature. The Tribunal highlighted that the Assessing Officer should consider the expenditure from the perspective of the appellant's profession. The Tribunal concluded that the scholarship expense was allowable under section 37(1) of the Income Tax Act.

In summary, the Tribunal allowed the appeal, directing the Assessing Officer to delete the disallowance of the scholarship expense. The Tribunal emphasized the nexus between the expenditure and the appellant's professional services, noting the importance of promoting one's professional profile in innovative ways. The Tribunal's decision was based on the nature and necessity of the expenditure for the appellant's business, emphasizing that it was revenue expenditure and not capital in nature.