judgements

CASE LAWS

PRICE WATERHOUSE COOPERS PVT. LTD. VS. CIT

Facts:

Penalty u/s 271(1)(c)—Assessee, by mistake claimed a

deduction in respect of provision towards payment of

gratuity in its return of income, even though Tax Audit

Report indicated that such provision was not allowable

—AO initiated penalty on assessee for concealing

income.

Held:

Tax Audit Report was filed along with the return and that it

unequivocally stated that the provision for payment was not

allowable under s 40A(7) of the Act indicates that the assessee

made a computation error in its return of income. The contents of

the Tax Audit Report suggest that there is no question of the

assessee concealing its income. There is also no question of the

assessee furnishing any inaccurate particulars. It appears that all

that has happened in the present case is that through a bona fide

and inadvertent error, the assessee while submitting its return,

failed to add the provision for gratuity to its total income….


Held:

… Cont

This can only be described as a human error which we are all

prone to make. The calibre and expertise of the assessee has

little or nothing to do with the inadvertent error. That the

assessee should have been careful cannot be doubted, but the

absence of due care, in a case such as the present, does not

mean that the assessee is guilty of either furnishing inaccurate

particulars or attempting to conceal its income.


JAVED AKHTAR VS. ACIT

Facts:

The assessee, a lyricist and a well known film personality, operated

his profession from two premises occupied by him in a building for

professional and residential purposes. The assessee was facing

inconvenience and hardship in his professional as well as private life

due to frequent break down of old lift in the said building. To

overcome this difficulty, the assessee offered to replace the lift of

the society with a new lift with one condition that lift would belong

to society and be used by all members.

The Assessee claimed the said expenditure as allowable expenditure

u/s 37(1), being incurred for smooth functioning of assessee's

profession…….

… Cont

The AO did not accept the explanation and contention

of the assessee and held that the elevators installed

was at the cooperative housing society and an

essential part of the building to be treated a capital

asset, and, therefore, it cannot be considered as

revenue expenditure.

The AO further held that it cannot be found to be

treated as capital expenditure because the assessee

was not the final owner of the asset on which the

depreciation is claimed.


Held:

It is mandatory condition for allowability of expenses

u/s 37(1) is that the expenditure has to be laid out

wholly and exclusively for the purpose of business or

profession of the assessee and it should not be on the

capital field.

In the present case, since the assessee does not

acquire any advantage in the capital account or any

new asset for its professional purpose and the lift in

question is not an apparatus of generating the

professional income, it cannot be considered as an

expenditure of capital nature as it does not create any

new asset belonging to the assessee……….


Held:

… Cont

Since the expenditure incurred remove the

inconvenience and hardship faced by the assessee in its

professional work as well as non-professional life and to

facilitate the assessee's professional activity to be

carried out more efficiently and profitably, 50% of the

total expenditure which was considered to be for the

professional purpose was allowed as revenue

expenditure.

.


SALMAN KHAN VS. ACIT

Facts:

Assessee is a leading film actor who derives income

from profession of acting and advertisement

assignments. In the return of Income, the assessee

has claimed expenses for defending himself in various

criminal proceedings pending in the court. The AO

disallowed the said expenses on the contention that

these were being personal expenses and the same

therefore could not be allowed as business

expenditure.

Held:

The counsel of the assessee aruged that the assessee

during his stay at Jodhpur for shooting Hindi movie

“Ham Sath Sath Hain” was implicated in false criminal

proceedings by leveling an allegation that he has shot a

black buck, which is an endangered specie and religious

in nature. He submitted that in order to obtain

exemptions from the personal hearings and defend

himself, he had incurred legal expenses for engagement

of Lawyers . He further aruged that if he could not

engaged lawyers then it would have resulted in his

absence from all the movies/projects undertaken by him

causing loss of revenue to him as well as to the

producers of his films…….


Held:

… Cont

Since the claim of the assessee was accepted by the

ld. CIT(A) on merit clearly shows that deduction on

account of legal expenses was a bonafide and hence,

it is not the case of the Revenue at any stage that the

expenses so claimed by the assessee were bogus and

has to be treated as concealment of particulars of

income by the assessee for furnishing of in-accurate

particulars of his income.


It is also not in dispute that the legal expenses

claimed by the assessee were actually incurred by

him and it is not the case of the Revenue at any stage

that the expenses so claimed by the assessee were

bogus. In the case of Reliance Petroproducts Ltd.,

(supra), the Hon’ble Supreme Court held that in order

to be covered by the provisions of section 271(1)(c),

there has to be concealment of particulars of income

by the assessee or furnishing of in-accurate

particulars of his income.


ACIT VS. MISS LATA MANGESHKAR

Facts:

In the present case, there is a payment entry in the ledger of

Third Party relating to the payment made by the said firm to

the assessee. On the basis of the said entries, the Assessing

Officer has made addition in the assessee’s income on account

of income from undisclosed. The Hon’ble ITAT on consideration

of evidence on record, holding that entries in the ledger of a

firm did not represent assessee’s income from undisclosed

sources.

Held :

The Bombay High Court has held that the Tribunal's

finding, on appreciation of evidence on record, that

entries in the ledger of a firm did not represent

assessee's income from undisclosed sources, are

findings of fact not giving rise to any referable

question of law.

ACIT VS. MISS LATA MANGESHKAR

SHRI SACHIN R. TENDULKAR VS ACIT

Facts:

The assessee is a leading Cricketer. The assessee filed Tax Audit

Report in form No. 3CD wherein he has mentioned the nature of

business/profession as ‘Sport Sponsorship/Modelling’. The assessee

has shown income from playing cricket under the head “ Income

From Other Sources”. The assessee claimed deduction u/s 80RR,

“being an actor”, on account of Income received from ‘Sport

Sponsorship and Advertisement. The Assessing officer disallowed

the claim of the assessee on the ground that the assessee is a

professional cricketer. The Assessing officer also observed that if

Sachin is not a Cricketer then who is a Cricketer?


Held:

The Counsel of the assessee argued that the

assessee, while appearing in advertisement and

commericals, has to face the lights and camera. As a

model, the assessee brings to his work a degree of

imagination, creativity and skill to arrange elements in

a manner that would affect human senses and

emotions and to have an aesthetic value. There is no

doubt, being a successful cricketer, it has added to his

brand value as a model. But the fact remains that the

assessee has to use his own skills, imagination and

creativity. ……


Held:

… Cont

Every person or for that matter every sportsman do not possess

that degree of talent or skill or creativity and face the lights and

camera etc.

Therefore, the income received by the assessee from modelling

and appearing in T.V. commercials and similar activities can be

termed as income derived from the profession of “an artist”.

Hence Sachin Tendulkar is an actor and cricketer but not a

professional cricketer