When Scholarships Become Business Expenditure: What Harish Salve’s Case Teaches About Modern Brand-Building Under Income Tax Law
Can paying Oxford University fees for two students ever become a tax-deductible business expense?
In the fascinating case of Harish Narinder Salve vs ACIT (ITAT Delhi), the Tribunal said yes-and in doing so, widened the contours of what “business expenditure” really means in today’s professional economy.
The case presents an interesting clash of perspectives: the Assessing Officer saw charity, the taxpayer saw brand-building, and the Tribunal saw the future of professional practice. Let’s break it down.
Facts of the Case Harish Salve, one of India’s leading senior advocates, sponsored two Indian students studying at Oxford University:
• ₹18,67,392 paid as scholarship fees for Deeksha Sharma
• ₹9,78,480 paid for Jasdeep Kaur Randhawa
Total scholarship paid: ₹28,45,872
Salve claimed the entire amount as a professional expenditure under Section 37(1) of the Income-tax Act.
Salve’s Stand: This Is Not Charity-It’s Strategy Salve argued that:
• The payment was not a gratuitous donation
• The scholarships were part of a strategic initiative
• It enhanced his global visibility and professional standing
• It strengthened long-term brand equity
• It helped attract future talent to his legal chambers
His contention: In a globalised profession, visibility is the currency. Supporting bright Indian students at world-class institutions creates reputational capital, helps build networks, and strengthens professional influence.
Tax Officer’s Stand: This Is a Gift, Not a Deduction The Assessing Officer rejected the claim on the following grounds:
• It was a gift/charity, having no nexus with legal practice
• It failed the test of “wholly and exclusively” for business
• It did not bring any direct revenue benefit
What CIT(A) Said CIT(A) went one step further:
• He held that such expenditure is capital in nature, not revenue
• A long-term reputation advantage is akin to creating a capital asset
• Hence, not allowable under Section 37(1)
Both authorities believed that scholarships fall outside the traditional scope of professional expenditure.
The Tribunal’s Stand: Welcome to the New Age of Professional Branding The ITAT saw the issue through the lens of the modern professional world:
• Today, lawyers, CAs, consultants, founders, and professionals use unconventional tools for brand-building
• Scholarships, awards, mentoring programs, hosting global seminars, or sponsoring summits are accepted professional activities
• They enhance reputation, goodwill, visibility, and networks
• Such expenditure is not personal charity but a professional investment
The Tribunal held that:
• The scholarship expenses were connected to Salve’s profession
• They were incurred to strengthen his professional ecosystem
• They qualify as revenue expenditure under Section 37(1)
• The fact that the mode was unconventional does not make it non-business
• Brand-building is a valid professional objective
Thus, the full deduction was allowed.
The Legal Foundation: Section 37(1) Section 37(1) is a residuary provision allowing any expenditure:
• Not covered under Sections 30 to 36
• Not capital in nature
• Not personal
• Incurred wholly and exclusively for business or profession
The Tribunal found that Salve’s expenditure satisfied all four conditions. Importantly, “wholly and exclusively” does not mean “direct earning of income”. It includes:
• Reputation management
• Public relations
• Networking activities
• Professional visibility
• Brand-building in domestic and international markets
The decision aligns with long-standing jurisprudence that business realities evolve and tax law must interpret “business purpose” with commercial prudence, not narrow rigidity.
Key Takeaways for Professionals • Brand-building is no longer restricted to advertisements.
Professionals use scholarships, lectures, global summits, and mentoring programs as tools for reputation enhancement.
• For lawyers, CAs, consultants and founders-reputation drives revenue.
Visibility converts into assignments, opportunities, and business credibility.
• Courts increasingly recognise new-age business models.
They acknowledge that today’s marketing is subtle, sophisticated, and sometimes philanthropic in form.
• This case expands the meaning of “wholly and exclusively”.
The boundary between marketing, visibility, and professional development is broader than before.
• If an expense enhances visibility, network or credibility-ITAT may view it as business-linked.
Why This Case Matters The Harish Salve ruling signals a clear message:
Professional branding has evolved-and so must tax interpretation.
Whether it’s sponsoring scholarships, hosting knowledge events, supporting research, or participating in global forums-if the intention is professional visibility and future positioning, the expenditure may fall under allowable revenue expenses.
It also emphasises that the tax law cannot be interpreted in isolation from commercial realities. As professions become global, competitive, and reputation-driven, courts increasingly recognise that expenditures which build influence and visibility have a direct nexus with business.
Final Word This judgment doesn’t open the floodgates for claiming every charitable act as a deduction. The key lies in:
• Intention
• Nexus with profession
• Evidence showing professional relevance
In Harish Narinder Salve vs ACIT (ITA No. 2285/Del./2016 & ITA No. 2392/Del./2016), the Tribunal found that link—and reinforced that in the modern economy, professional success is shaped not only by skill, but also by strategic reputation-building.
The copy of the order is as under:
