Judgements

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

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