ACIT - 16(1), MUMBAI V. JACKIE SHROFF, MUMBAI

ITA 2792/MUM/2016

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 6946 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-05-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 15-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAURABH DESHPANDEY
• Assessee Lawyers: SHRI
• Keywords: Capital receipt

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'J' BENCH, MUMBAI BEFORE SHRI SAKTIJITDEY, JUDICIAL MEMBER AND SHRIN.K. PRADHAN, ACCOUNTANT MEMBER ITA NO.2792/MUM/2016 (ASSESSMENT YEAR:2011-12) A C I T - 16(1) ROOM NO. 439, 4TH FLOOR AAYAKAR BHAVAN, M.K. ROAD MUMBAI 400020 VS. SHRI JACKIE SHROFF 1401, 14TH FLOOR VASTU CHS LTD., BAND STAND ROAD, BANDRA (W) MUMBAI 400050 PAN AAJPS6596A APPELLANT RESPONDENT APPELLANT BY: SHRI SAURABH DESHPANDEY RESPONDENT BY: SHRI PANKAJ K. JAIN DATE OF HEARING: 08.05.2018 DATE OF PRONOUNCEMENT: 23.05.2018 O R D E R PER SAKTIJITDEY, JM THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST T HE ORDER DATED 04.01.2016 OF THE COMMISSIONER (APPEALS)-4, MUMBAI FOR A.Y. 2011-12. 2. THE SOLITARY ISSUE ARISING FOR CONSIDERATION IN THE PRESENT APPEAL IS, WHETHER THE DAMAGES/COMPENSATION RECEIVED BY THE AS SESSEE AMOUNTING TO ` 6,97,94,580/- IS TO BE TREATED AS CAPITAL RECEIPT A S CLAIMED BY THE ASSESSEE OR TO BE TREATED AS REVENUE RECEIPT AS HEL D BY THE AO. 3. THE ASSESSEE IS A FILM ACTOR. FOR THE ASSESSMENT YE AR UNDER DISPUTE, ASSESSEE FILED HIS RETURN OF INCOME ON 29.09.2011 D ECLARING TOTAL INCOME AT ` 75,09,219/-. DURING THE ASSESSMENT PROCEEDINGS THE AO NOTICING THAT THOUGH THE ASSESSEE HAS RECEIVED US $1.5 MILLION, E QUIVALENT TO ` 6,97,94,580/- FROM ONE SUDESH IYER BUT HAS NOT OFFE RED IT FOR TAXATION. HE, THEREFORE, CALLED UPON THE ASSESSEE TO EXPLAIN THE REASON THEREOF. IN RESPONSE, IT WAS SUBMITTED BY THE ASSESSEE THAT HE ALONG WITH OTHER NON- RESIDENT INDIVIDUALS PROPOSED TO BRING SONY TV CHAN NEL TO INDIA. FOR THAT ITA NO. 2792/MUM/2016 SHRI JACKIE SHROFF 2 PURPOSE A COMPANY BY THE NAME ATLAS EQUFINPVT. LTD. (ATLAS) WAS INCORPORATED IN INDIA TO HOLD SHARES IN MULTI SCREE N MEDIA INDIA LTD. (MSM), THE OWNERS OF SONY TV CHANNEL. IT WAS SUBMIT TED THAT ATLAS CONSISTS OF INDIAN SHAREHOLDERS INCLUDING THE ASSES SEE AND A COMPANY INCORPORATED IN MAURITIUS KNOWN AS ALAUDI SECURITIE S LTD. WHEREIN, NON- RESIDENT GROUPS ARE SHAREHOLDERS. IT WAS SUBMITTED THAT THE AGGREGATE SHARE HOLDING OF ATLAS AND ANOTHER MAURITIUS BASE D COMPANY, GRANDWAY GLOBAL HOLDINGS (GRANDWAY) IN MSM WAS TO THE TUNE O F 23% AND THE BALANCE SHARES WERE HELD BY SONY INC. THE ASSESSEE SUBMITTED THAT ATLAS AND GRANDWAY WERE TRYING TO EXIT MSM FROM 1995 ONWA RDS AND VARIOUS MERCHANT BANKERS WERE BEING APPROACHED FOR THIS PUR POSE. FINALLY, STANDARD AND CHARTERED BANK, SINGAPORE (SCB) WAS GI VEN THE MANDATE. HOWEVER, THE SCB INSISTED THAT A JOINT MANDATE BE G IVEN BY ATLAS AND GRANDWAY TO SELL THEIR ENTIRE HOLDINGS SO THAT A BE TTER VALUE CAN BE OBTAINED FOR THE SHARES. ACCORDINGLY, ATLAS AND GRA NDWAY AND THE SHAREHOLDERS OF THESE COMPANIES WERE REQUESTED TO S IGN A JOINT MANDATE IN FAVOUR OF SCB. IT WAS SUBMITTED THAT THOUGH THE ASS ESSEE WAS REQUESTED TO SIGN THE MANDATE BY THE OTHER SHAREHOLDERS, HE REFU SED TO DO SO. IT WAS SUBMITTED, ON 24.03.2010 ASSESSEE RECEIVED A LETTER FROM CLIFFORD CHANCE PTE. LTD., ACTING ON BEHALF OF SCB WITH AN ENCLOSUR E WHICH WAS A MANDATE SIGNED BY THE SHAREHOLDERS OF ATLAS AND GRANDWAY. A SSESSEE WAS SURPRISED TO FIND THAT THE MANDATE BORE HIS SIGNATURE. THEREF ORE, ON 19.04.2010 ASSESSEE FILED A CRIMINAL COMPLAINT WITH THE OFFICE OF THE ECONOMIC OFFENCES WING AT MUMBAI REQUESTING AN INVESTIGATION IN TO THE MATTERAS THEASSESSEE NEVER SIGNED THE MANDATE. AFTER FILING OF THE AFORESAID COMPLAINT BY THE ASSESSEE, THE OTHER PARTY APPROACH ED THE ASSESSEE TO SETTLE THE MATTER AMICABLY AND ON 03.01.2011 A DEED OF SETTLEMENT WAS EXECUTED BETWEEN THE ASSESSEE AND SHRI SUDESH IYER FOR SETTLEMENT OF THE DISPUTE. AS PER THE TERMS OF THE SETTLEMENT DEED SH RI SUDESH IYER AGREED TO PAY A SUM OF US $3,500,000/- ON THE CONDITION THAT THE ASSESSEE WILL WITHDRAW THE CRIMINAL COMPLAINT FILED AGAINST HIM. AS PER THE TERMS OF AGREEMENT THE AMOUNT WAS TO BE PAID IN TWO INSTALME NTS. THE FIRST INSTALMENT OF US $1.5 MILLION WAS TO BE PAID IMMEDI ATELY ON CONFIRMATION ITA NO. 2792/MUM/2016 SHRI JACKIE SHROFF 3 FROM THE ECONOMIC OFFENCE WING THAT ASSESSEE HAD WI THDRAWN THE COMPLAINT AND THE BALANCE AMOUNT WAS TO BE PAID ON SALE OF SHARES HELD BY ATLAS AND GRANDWAY IN MSM. IT WAS SUBMITTED THAT AS PER THE TERMS OF THE SETTLEMENT DEED,ASSESSEE WITHDREW HIS COMPLAINT FILED BEFORE THE ECONOMIC OFFENCE WING AND RECEIVED THE FIRST INSTAL MENT OF US $1.5 MILLION, EQUIVALENT TO ` 6,77,94,580/-. HOWEVER, IT WAS SUBMITTED BY THE ASSESSEE THAT SINCE THE AMOUNT RECEIVED BY HIM WAS TOWARDS COMPENSATION/DAMAGE, IT WAS NOT IN THE NATURE OF CA PITAL RECEIPT AND NOT COMING WITHIN THE DEFINITION OF INCOME AS PROVIDED UNDER SECTION 2(24) OF THE ACT. AFTER CONSIDERING THE SUBMISSIONS OF THE A SSESSEE, THE AO DID NOT FIND MERIT IN THEM AND HELD THAT THE AMOUNT RECEIVE D BY THE ASSESSEE TOWARDS COMPENSATION/DAMAGE IS TO BE TREATED AS INC OME OF THE ASSESSEE AND TAXABLE IN THE IMPUGNED ASSESSMENT YEAR. ACCORD INGLY, HE ADDED BACK THE AMOUNT OF ` 6,77,94,580/- TO THE INCOME OF THE ASSESSEE. BEING AGGRIEVED OF SUCH ADDITION ASSESSEE PREFERRED APPEA L BEFORE THE LEARNED COMMISSIONER (APPEALS). 4. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE A ND RELYING UPON CERTAIN JUDICIAL PRECEDENTS LEARNED COMMISSIONER (A PPEALS) ACCEPTED ASSESSEES CLAIM THAT THE AMOUNT RECEIVED BY HIM TO WARDS COMPENSATION/DAMAGE IS IN THE NATURE OF CAPITAL REC EIPT, HENCE, NOT TAXABLE. ACCORDINGLY, HE DELETED THE ADDITION. 5. BEFORE US THE LEARNED D.R. RELIED UPON THE OBSERVAT IONS OF THE AO. 6. THE LEARNED A.R. STRONGLY RELYING UPON THE FINDINGS OF THE LEARNED COMMISSIONER (APPEALS) SUBMITTED THAT THE AMOUNT RE CEIVED BY THE ASSESSEE BEING IN THE NATURE OF COMPENSATION/DAMAGE S FOR WITHDRAWAL OF A CRIMINAL COMPLAINT IS A CAPITAL RECEIPT AND CANNOT BE TREATED AS INCOME AS DEFINED UNDER SECTION 2(24) OF THE ACT. IN SUPPORT OF SUCH CONTENTION HE RELIED UPON THE DECISION OF HON'BLE BOMBAY HIGH COU RT IN THE CASE OF CIT VS. AMAR DYE CHEM LTD. (1994) 74 TAXMAN 254 AND THE DECISION OF THE ITAT MUMBAI BENCH IN THE CASE OF ITO VS. VINAY P. K AARVE (2015) 152 ITD 58. ITA NO. 2792/MUM/2016 SHRI JACKIE SHROFF 4 7. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED MATERIA L ON RECORD. UNDISPUTED FACTS ARE, DUE TO IMPERSONATION/FORGING OF ASSESSEES SIGNATURE IN RESPECT OF SALE OF SHAREOF A COMPANY, THE ASSESS EE FILED A CRIMINAL COMPLAINT BEFORE THE ECONOMIC OFFENCE WING. IT IS A FACT ON RECORD THAT TO SETTLE THE DISPUTE, THE PERSON AGAINST WHOM THE ASS ESSEE FILED COMPLAINT CAME FORWARD FOR AMICABLE SETTLEMENT OF THE DISPUTE AND A SETTLEMENT DEED WAS EXECUTED BETWEEN THE PARTIES. AS PER THE TERMS OF SETTLEMENT DEED THE ASSESSEE WAS TO RECEIVE CERTAIN AMOUNT TOWARDS COMP ENSATION/DAMAGE IN LIEU OF WITHDRAWING THE CRIMINAL COMPLAINT FILED BE FORE THE ECONOMIC OFFENCE WING OF THE MUMBAI POLICE. IN TERMS OF THE SETTLEMENT DEED ASSESSEE WITHDREW THE CRIMINAL COMPLAINT FILED BY H IM AND IN LIEU THEREOF RECEIVED COMPENSATION OF ` 6,77,94,580/-. THUS, AS COULD BE SEEN, THE COMPENSATION RECEIVED BY THE ASSESSEE WAS NOT FOR H IS PROFESSIONAL ACTIVITIES BUT FOR SETTLEMENT OF DISPUTE BETWEEN HI M AND SOME OTHER PARTY RESULTING IN FILING OF A CRIMINAL COMPLAINT. THAT B EING THE CASE, THE AMOUNT RECEIVED TOWARDS COMPENSATION/DAMAGE CANNOT FIT IN TO THE DEFINITION OF INCOME AS PER SECTION 2(24) R.W.S 4 OF THE ACT. THI S VIEW OF OUR GETS SUPPORT FROM THE DECISION OF THE HON'BLE JURISDICTIONAL HIG H COURT IN THE CASE OF AMAR DYE CHEM LTD. (SUPRA) WHEREIN THE HON'BLE HIGH COURT HELD THAT THE AMOUNT RECEIVED TOWARDS COMPENSATION/DAMAGE FOR SET TLEMENT OF DISPUTE IS CAPITAL RECEIPT, HENCE NOT TAXABLE. SAME VIEW WA S EXPRESSED BY THE ITAT MUMBAI BENCH IN THE CASE OF VINAY P. KARVE (SUPRA). THE LEARNED D.R. HAS NOT BROUGHT TO OUR NOTICE ANY CONTRARY DECISION. IN VIEW OF THE AFORESAID, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LE ARNED COMMISSIONER (APPEALS) IN DELETING THE ADDITION. 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS D ISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD MAY, 2018. SD/ - SD/ - (N.K. PRADHAN) (SAKTIJITDEY) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 23 RD MAY, 2018 ITA NO. 2792/MUM/2016 SHRI JACKIE SHROFF 5 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) -4, MUMBAI 4. THE PR. CIT- 16, MUMBAI 5. THE DR, J BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.