Inclusion of Monetary assistance rendered by Harish Salve to students to pursue law degree abroad as expenditure incurred allowed.

In the present case of Harish Salve v. ACIT New Delhi, Salve contended that Rs. 34 lakh and Rs. 84.4 lakh was the assistance which was paid to two law students to study at Oxford. He claimed that this amount for the A.Y. 2013-14 and Rs. 84.4 lakh for assessment year 2014-15 would come under the head “assistance to law students”. The Assessing officer disallowed this claim stating that the assistance to law students is no where related to the profession of the assessee. Therefore, it cannot be claimed as a business expense incurred wholly or exclusively for the purpose of the business and profession of the assessee.

The appeal to the Commissioner of Income Tax against this decision was made by Salve which further rejected. Further, Salve approached the Income Tax Appellate Tribunal. He stated that he has been taking matters in London and Singapore to create his name and develop contacts abroad, he started focusing on his international practice. He further submitted that his juniors, who have been helping him in preparing the cases involving international matter, are his juniors and he wanted to help them to study in Oxford.

Therefore, the decision to fund the students was a business decision to support the assessee in his profession as a lawyer. The ITAT, on hearing the arguments, allowed the expenses as expenditure wholly and exclusively for the purposes of the business and disallowed the claim of the department that the expenditure was in the nature of capital expenditure under  Section 37(1) of the IT Act, 1961.