Business expenditure Scholarship expenditure Assessee filed return of income During assessment proceeding, AO noted that assessee had paid a scholarship to Ms D and Ms J in terms of scholarship agreement entered into by assessee with Oxford University According to agreement, there was a selection criteria also provided and it was linked to Clarendon Scholarship for maximum 3 years Assessee gave a justification for claiming such expenditure as deductible expenditure u/s 37(1) However, AO was of view that it was an act of compassion with philanthropic attitude AO held that two individuals to whom scholarship were given were no way related to assessee’s profession and therefore it could not be said that it was expended for training/skill development of employees/retainers of assessee who would have held him in his profession Further, giving scholarships to students could not be a factor, which would lead to building overall persona of assessee contributing to professional stature of assessee No relief was granted by CIT(A) Held, assessee was a noted international lawyer who set up a scholarship for creating his visibility in international arena and his social standing AO’s opinion that attending conferences et cetera would have added more weightage to professional profile of assessee was devoid of any merit To judge allowability of an expenditure, AO should put himself into assessee’s shoes and then decide that whether expenditure incurred by assessee was necessary or not for business of assessee Thus, allowability of expenditure should always be judged from mindset of assessee—AO could not put his thinking to say that expenditure incurred by assessee was not wholly and exclusively incurred for his profession, unless, he brings his level of thinking to the level of the professional, like assessee Requirement of incurring expenditure by a professional/businessman changes by changes in dynamics of business, its complexities and its uniqueness In present case there was a nexus between expenditure incurred by assessee and professional services rendered by assessee In professional field there were innovative ways visualized by professional to make themselves visible in professional circle and to build their own professional profile for generating higher and value- added business It may be, sponsoring a seminar, becoming knowledge partners, setting up prizes and awards, creating competitive award ceremonies, hosting vibrant summits of various states Therefore, it was apparent that at least in case of professionals, way they promote themselves, was changing very fast and benefits of such expenditure were huge and wide Therefore, impugned expenditure incurred by assessee was a revenue expenditure allowable u/s 37(1) Assessee’s ground allowed.

HARISH NARINDER SALVE & ANR. vs. ASSISTANT COMMISSIONER OF INCOME TAX & ANR.

(2019) 56 CCH 0400 DelTrib