TMI Blog2019 (8) TMI 731X X X X Extracts X X X X X X X X Extracts X X X X ..... the changes in the dynamics of the business, its complexities and its uniqueness. The level at which the assessee is carrying on the profession, perhaps, he might not have thought it proper to increases visibility by attending the conferences, seminars et cetera. He has different vision of carrying himself in the professional field to increases visibility and social status. He thought fit to set up a scholarship to Indian students in Oxford University. Thus, in the present case definitely there is a nexus between the expenditure incurred by the assessee and the professional services rendered by the assessee. We are of the opinion that the assessee has incurred the above expenditure wholly and exclusively for the purposes of the business. In the professional field there are innovative ways visualized by the professional to make themselves visible in the 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 the prizes and awards, creating the competitive award ceremonies, hosting vibrant summits of various states. Therefore, it is apparent that at leas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 019 - Shri Amit Shukla, Judicial Member And Shri Prashant Maharishi, Accountant Member For the Assessee : Shri Sachit Jolly , Adv For the Revenue : Shri Surdendra Pal Sr. DR ORDER PER PRASHANT MAHARISHI, A. M. 1. These are the cross appeals filed by the assessee, Shri Harish Narinder Salve and the Asst Commissioner of Income Tax, circle 61 (1), New Delhi (the AO) against the order of The Commissioner of Income Tax (Appeals) 20, New Delhi dated 23/2/2016 for assessment year 2011 12. 2. The assessee has raised the following 2 grounds of appeal in ITA number 2285/del/2016:- i. That on the facts and circumstances of the case and in law, the learned CIT A grossly erred in holding that the expenditure on scholarship amounting to ₹ 2845372/ was incurred to bring into existence and advantage for the enduring benefit of the profession, thus treating the same as capital expenditure. ii. That on the facts and circumstances of the case and in law, the learned CIT (A) erred in not appreciating that expenditure incurred by the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccount of foreign exchange loss, being the difference in exchange at the time of raising of the bill and at the time of realization of billed amount. Though assessee is following cash system of accounting, however bills raised to foreign clients are prepared on the basis of foreign exchange rates prevailing on the date of the billing, when amount is realized at the time of actual receipt, there is bound to be difference in exchange, which is written off or back to the profit and loss account. Thus, assessee is recording the cash received only as income. The AO disallowed the same holding that in cash system, it is not allowable. The learned CIT A allowed the claim as during the year, the transactions have settled after recording of billing and its receipt. Therefore, learned AO is in appeal before us. 6. Now we come to the first ground of appeal of the assessee and the learned assessing officer. The brief facts of the issue revolve around the claim of the assessee of ₹ 2845872/ as deductible expenditure under the head scholarship expenses. 7. The Brief facts shows that assessee has paid a scholarship of INR 1 867392/ to M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y in Oxford University to deliver lectures. 7) Secondly, it also increased the number of Indian students who have had the benefit of international education. My Indian practices strongly supported by the number of juniors who are in my Chambers. I have presently for juniors who have educated themselves in either Oxford University (3) or other international universities (1). I do hope that some of the juniors who passed out of Oxford will join my Chambers at some point. In fact, the very first scholar, Ms Deeksha Sharma, did her Masters in International taxation with focus on the Vodafone case. When I was preparing that case for arguing the appeal in the Supreme Court, she sat in the meetings and made valuable contributions. 8) All these activities add a lot of value to my CV. Recently the government of Singapore appointed me on committee constituted to recommend the establishment of international commercial courts in Singapore. None of this would have happened if I did not have the visibility, which I have been able to achieve in this manner. 9) That apart, it is necessary for successful lawyers to be seen as being supportive of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee and gives contacts but this scholarship being a gift is totally unrelated to the profession of the assessee. He further held that giving scholarships to the students cannot be a factor, which will lead to building the overall persona of the assessee contributing to the professional stature of the assessee. In nutshell, he held that the above amount of scholarship of INR 2845872/ incurred by the assessee is not an expenditure wholly and exclusively incurred for the purpose of the profession and not allowable u/s 37 (1) of the act. Therefore, he disallowed it. 9. Aggrieved, assessee challenged the same before the learned CIT A. The assessee raised the similar argument. The learned CIT A held that the aim and object of the expenditure incurred by the assessee is (1) Future expansion of the business, (2) Prolonging the life of an existing business, (3) Forming a conceivable nucleus for posterior profit earning, (4) conduct of the business, (5) Avoiding inroads and incursions on its concrete presence, (6) Commercial expediency, (7) Pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is is not at all related to the assessee. He therefore submitted that orders of the lower authorities may be set aside. 11. The learned authorised representative submitted that identical issue of contribution by a professional has been considered by the coordinate bench in ITA number 1382/del/2012 for assessment year 2009 10 when a noted lawyer contributed to the building of a professional body, which was held to be allowable as revenue expenditure. He further submitted that the above decision has been approved by the honourable Delhi High Court in ITA number 50/2014 dated 11/8/2015 and therefore the issue is squarely covered in favour of the assessee. He submitted that issue is squarely covered in favour of the assessee. 12. The learned departmental representative vehemently supported the order of the learned assessing officer and submitted that assessee has set up an annual scholarship for the Indian students who are going to study in that college which is affiliated with the Oxford University. It is a means of a scholarship to the Indian student, which by no stretch of imagination can be said to be expenditure wholly and exclusively incurred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profession. He knows better that what kind of expenditure he should incur for furtherance of his business. To judge allowability of an expenditure, the learned assessing officer should put himself into the shoes of the assessee and then decide that whether the expenditure incurred by the assessee is necessary or not for the business of the assessee. Thus, allowability of expenditure should always be judged from the mindset of the assessee. The AO cannot put his thinking to say that the expenditure incurred by the assessee is not wholly and exclusively incurred for his profession, unless, he brings his level of thinking to the level of the professional, like assessee. The requirement of incurring the expenditure by a professional/businessman changes by the changes in the dynamics of the business, its complexities and its uniqueness. The level at which the assessee is carrying on the profession, perhaps, he might not have thought it proper to increases visibility by attending the conferences, seminars et cetera. He has different vision of carrying himself in the professional field to increases visibility and social status. He thought fit to set up a scholarship to Indian students in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the far better footing. Hence, we reverse the order of the lower authorities, and direct the learned assessing officer to delete the above disallowance. In view of this, we allow ground number 1 of the appeal of the assessee and dismiss ground number 1 of the appeal of the learned assessing officer. 14. Thus, we allow ground number 1 and 2 of the ground of appeal of the assessee and dismiss ground number 1 of the appeal of the revenue. 15. Now we come to the 2nd ground of the appeal of the assessing officer, the only issue left in this appeals, wherein the learned AO has challenged the action of the assessing officer in deleting the addition of INR 1 371818/ on account of foreign exchange loss. It is necessary to mention important facts of the issue. As it is already stated, that assessee is a lawyer by profession and he is following the cash system of accounting. The assessee records the invoices raised on foreign clients in his books of account at the exchange rate prevailing as on that date of raising of the invoice. Thus, at that time, he records his service income as per the exchange rate prevailing on the date of raising of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see. He vehemently supported the order of the learned CIT A and referred to the accounting entries made by the assessee which are recorded at page number 45 and 46 of the order of the CIT A. He therefore submitted that there is no error in the order of the learned CIT A in deleting the above addition. 18. We have carefully considered the rival contention and perused the orders of the lower authorities. We have already recorded the method of accounting adopted by the assessee, which is cash method of accounting. We have also stated in earlier paragraphs by stating the facts of the issue that how the entries are made in the books of accounts. Admittedly, the method of accounting of the invoices raised in foreign currency adopted by the assessee of recording the same at the foreign exchange rate prevailing as on the date of raising of the invoice. Further when there is a realization, naturally, there would be a difference in the rates of exchange between currencies, such loss or gain would be accounted for in the profit and loss account itself. Whenever, the bills are realized the necessary impact of foreign exchange gain or loss going to profit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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