SONALI BENDRE, MUMBAI V. ACIT 11(1), MUMBAI

ITA 1933/MUM/2010

• Counselvise Citation: 193319914 RSA 2010
• Duration Of Justice: 1 year(s) 1 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-04-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2005-2006
• Appeal Filed On: 10-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JI TENDRA YADAV
• Assessee Lawyers: SHAILESH CHAUHAN
• Keywords: Business income; Business expenditure
• Section: 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES D: MUMBAI BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER I.T.A. NO. 1933/MUM/2010 ASSESSMENT YEAR 2005-2006 MS. SONALI BENDRE MUMBAI-400 053. PAN ABBPB578B VS. THE ACIT 11 (1) MUMBAI 400 020 (APPELLANT) (RESPONDENT) FOR APPELLANT : SHRI SHAILESH CHAUHAN FOR RESPONDENT : SHRI JITENDRA YADAV (CIT/DR) ORDER PER D. MANMOHAN, V.P. 1. THE ONLY ISSUE IN DISPUTE IN THE APPEAL FILED B Y THE ASSESSEE PERTAINS TO THE DISALLOWANCE OF LEGAL EXPENSES AMOU NTING TO RS.8,65,000/-. 2. ASSESSEE IS ADMITTEDLY A FILM ACTRESS AND MODEL , APART FROM CARRYING ON ACTIVITY OF PURCHASE AND SALE OF SHARES . OUT OF THE BUSINESS INCOME DECLARED BY THE ASSESSEE, DEDUCTION TOWARDS LEGAL EXPENSES WAS CLAIMED ON THE GROUND THAT IT WAS WHOLLY AND EXCLUS IVELY INCURRED FOR THE PURPOSE OF BUSINESS AND THEREFORE, DEDUCTION IS PER MISSIBLE UNDER SECTION 37 OF THE ACT. ASSESSING OFFICER AS WELL AS CIT(A) REJECTED THE CONTENTION OF THE ASSESSEE. IT MAY BE NOTICED THAT IDENTICAL DISA LLOWANCE WAS MADE IN THE IMMEDIATELY PRECEDING YEAR AND THE LEARNED CIT(A) O BSERVED THAT THE MATTER IS IN CONTINUATION OF ASSESSMENT YEAR 2004-2005 WHE REIN SIMILAR EXPENDITURE WAS STATED TO HAVE BEEN PURSUANT TO THE ACTIVITY WHICH AMOUNTS TO INFRINGEMENT OF LAW AND THEREFORE, ANY EXPENDITU RE IN CONNECTION THEREIN IS NOT ALLOWABLE AS DEDUCTION. 3. AT THE TIME OF HEARING, LEARNED COUNSEL, APPEAR ING ON BEHALF OF THE ASSESSEE, PLACED BEFORE US A COPY OF THE ORDER OF THE ITAT, J BENCH, MUMBAI IN ASSESSEES OWN CASE FOR THE ASSESSMENT YE AR 2004-2005 (ITA. NO. 3845/MUM/2009 DATED 16-7-2010) WHEREIN THE BENCH OB SERVED AS UNDER : 18. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS O F THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE FACTS ARE NOT IN DISPUTE 2 INASMUCH AS THE CRIMINAL CASE FILED BY THE STATE (S .S. BRANCH ), MUMBAI AGAINST MS. SONALI BENDRE ALLEGIN G THAT IN THE ISSUE OF MARCH 1998 MAGAZINE SHOW TIME PUBLISHED FROM MUMBAI, TWO PHOTOGRAPHS OF AN ACTRES S I.E. MS. SONALI BENDRE ON THE COVER PAGE AND PAGE N O.61 IN THE SAID MAGAZINE IN WHICH MS. SONALI BENDRE WAS WEARING VERY SCANTY APPARELS WITH THE HOLY SIGNS OF HINDUS, AMOUNT TO OUTRAGE OF THE FEELINGS OF THE HI NDUS, WAS DISCHARGED BY ADDITIONAL CHIEF METROPOLITAN MAGISTRATE, 19 TH COURT, ESPLANADE, MUMBAI VIDE ORDER DATED 11.8.2004 HOLDING THAT THIS IS A FIT CASE IN WHICH ALL ACCUSED NOS. 1 TO 4 DESERVE TO BE DISCHARGED U/S.239 OF CR.P.C. ACCORDING TO SAMPATH IYENGERS LAW OF INCOME TAX 10 TH EDITION, VOL. 2, PAGE 3388, THE DEDUCTIBILITY OF EXPENSES INCURRED IN DEFENDING PROSECUTION WOULD DEPEND UPON : (A) THE NATURE AND OBJECT OF PROSECUTION, AND (B) THE PURPOSE OF THE D EFENCE. THE TEST IS WHETHER THE ASSESSEE IS INCURRING THE EXPENDITURE BONAFIDE AND WITH NO ULTERIOR MOTIVE. AS REGARDS THE PURPOSE OF DEFENCE, THE DEFENCE MAY HAV E BEEN UNDERTAKEN (I) FOR THE ESTABLISHMENT OF FAIR N AME AND REPUTATION OF THE BUSINESS; OR (II) PARTLY FOR THE ONE OR THE OTHER OF THE AFORESAID PURPOSES. IN THE CASE BEFORE US THERE IS NO MATERIAL ON RECORD TO SHOW TH AT THE INTERVIEW IN THE MAGAZINE NAMELY SHOW TIME WAS PERSONAL IN NATURE AND HAD NOTHING TO DO WITH ASSES SEE AS AN ACTRESS. SINCE PROVIDING INTERVIEW IN THE MAGAZINE IS PART OF PROFESSIONAL ACTIVITIES OF AN A CTOR, THEREFORE, WE ARE OF THE VIEW THAT THE LEGAL EXPENS E INCURRED BY THE ASSESSEE TO DEFEND HERSELF IN THE PROCEEDING BEFORE ADDITIONAL CHIEF METROPOLITAN MAGISTRATE FOR PRESERVING HER PROFESSION ARE ALLOWA BLE AS A BUSINESS EXPENDITURE AS THE SAME HAD BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS OR PROFESSION. ACCORDINGLY THE DISALLOWAN CE OF RS.4,25,000/- MADE BY THE ASSESSING OFFICER AND SUSTAINED BY THE LD. CIT(A) IS DELETED. THE GROUND TAKEN BY THE ASSESSEE IS, THEREFORE, ALLOWED. 3 4. LEARNED COUNSEL, THEREFORE, SUBMITTED THAT IT W AS AN EXPENDITURE TO PRESERVE THE HONOUR AND RESPECT IN H ER PROFESSIONAL CAREER AND HENCE THE SAME IS ALLOWABLE AS DEDUCTION. ON TH E OTHER HAND, LEARNED DR RELIED UPON THE ORDERS PASSED BY THE TAX AUTHORI TIES. 5. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS AND PERUSED THE RECORD. IT IS NOT IN DISPUTE THAT IDENT ICAL CLAIM OF DEDUCTION WAS ACCEPTED BY THE ITAT (SUPRA) IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2004-2005. SUCH BEING THE CASE, CONSISTENT WITH THE VIEW TAKEN THEREIN, WE DIRECT THE ASSESSING OFFICER TO ALLOW THE CLAIM OF DEDUCTION OF RS.8,65,000/- AGAINST THE BUSINESS INCOME. 6. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED. PRONOUNCED ACCORDINGLY IN THE OPEN COURT ON 21-4- 2011. SD/- SD/- (B.RAMAKOTAIAH) (D.MANMOHAN) ACCOUNTANT MEMBER VICE PRESIDENT MUMBAI, DATE 21 ST APRIL, 2011 VBP/- COPY TO 1. MS. SONALI BENDRE, FLAT NO. 62, PLOT NO. 17, ROY AL ACCORD IV OPP. APNA GHAR, LOKHANDWALA COMPLEX, ANDHERI (W), MUMBAI- 400 053. PAN ABBPB578B 2. THE ACIT 11 (1), ROOM NO. 439, 4 TH FLOOR, AAYAKAR BHAVAN, M.K.ROAD, MUMBAI 400 020. 3. CIT(A)-3, MUMBAI. 4. CIT-11, MUMBAI 5. DR D BENCH 6. GUARD FILE. (TRUE COPY) BY ORDER ASST. REGISTRAR, ITAT, MUMBAI BENCHES MUMBAI.