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

ITA 3845/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 1122 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-07-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: J
• Next Hearing Date: 06-07-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 12-06-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: HARIGOVIND SINGH
• Assessee Lawyers: RINKESH DEVNANI
• Keywords: Question of law; Corroborative evidences; Capital expenditure
• Section: 143(3); 12

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH J : MUMBAI BEFORE SHRI D.K. AGARWAL, (JM) AND SHRI PRAMOD KUM AR ,(AM) ITA NO.3845/MUM/2009 ASSESSMENT YEAR : 2004-05 MS. SONALI BENDRE FLAT NO.62, PLOT NO.17 ROYAL ACCORD IV, OPP. APNA GHAR LOKHANDWALA COMPLEX, ANDHERI (W) MUMBAI-400 053. ..( APPELLANT ) P.A. NO. (ABBPB 5785 B) VS. THE ASSTT. COMMISSIONER OF INCOME TAX-11(1) ROOM NO.439, 4 TH FLOOR AAYAKAR BHAVAN, M.K. ROAD MUMBAI-400 020. ..( RESPONDENT ) APPELLANT BY : SHRI RINKESH DEVNANI RESPONDENT BY : SHRI HAR I GOVIND SINGH O R D E R PER D.K. AGARWAL (JM). THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER DATED 19.3.2009 PASSED BY THE LD. CIT(A) FOR TH E ASSESSMENT YEAR 2004-05. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSESSEE, AN INDIVIDUAL, IS A FILM ACTRESS, MODEL AND ALSO TRADES IN SHARES. THE RETURN WAS FILED DECLARING TOTAL INCOME AT RS.1,04,40,9 20/-. HOWEVER, THE ASSESSMENT WAS COMPLETED AT AN INCOME OF RS.1,14,68,950 /- ITA NO.3845/M/09 A.Y:04-05 2 INCLUDING THE ADDITION IN THE PROPERTY INCOME RS.1,66, 475/-, DISALLOWANCE ON ACCOUNT OF PERSONAL EXPENDITURE RS.2,11,0 71/-, INSURANCE ON MOTOR CAR TREATED AS CAPITAL EXPENDITURE R S.85,575/-, LEGAL EXPENSES RS.4,25,000/- AND DISALLOWANCE OF DEDUCTIO N U/S.80RR RS.1,56,712/-, VIDE ORDER DATED 17.11.2006 PASSED U/S. 143(3) OF THE INCOME TAX ACT, 1961 (THE ACT). ON APPEAL, THE LD. C IT(A) PARTLY ALLOWED THE APPEAL. 3. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A) T HE ASSESSEE IS IN APPEAL BEFORE US . 4. GROUND NO.1 AND 2 ARE AGAINST THE SUSTENANCE OF ADDI TION OF INCOME FROM HOUSE PROPERTY. 5. THE BRIEF FACTS OF THE ABOVE ISSUE ARE THAT IT WAS OB SERVED BY THE ASSESSING OFFICER THAT IT IS SEEN FROM THE BALANCE SHEET THA T THE ASSESSEE IS OWNING THREE PROPERTIES BEING FLAT AT ROYAL A CCORD IV, FLAT AT SHIV SMRUTI, KHAR AND GALA AT HAMMER SMITH INDL. THE ASSESSEE HAS OFFERED ONLY RS.16,800/- AS INCOME FROM HOUSE PROPER TY AND AS SUCH THE ASSESSEE WAS ASKED TO EXPLAIN THE BASIS ON WHICH THE COMPUTATION OF HOUSE PROPERTY INCOME HAS ARRIVED. IN R ESPONSE, THE ASSESSEE'S REPRESENTATIVES VIDE LETTER DATED 25.09.06 HAS SU BMITTED THAT THE FLAT AT ROYAL ACCORD-IV IS USED FOR SELF OCCUPATI ON AND THE FLAT AT SHIV SMRUTI, KHAR WAS PURCHASED IN THE MONTH OF NOV . 2003 FOR ITA NO.3845/M/09 A.Y:04-05 3 PROFESSIONAL USE AND ITS INTERIOR WORK IS BEING CARRIED O UT. HOWEVER, WITHOUT PREJUDICE TO THIS CONTENTION, THE ASSESSEE HAS SUBMI TTED THAT THE ALV OF SUCH FLAT MAY BE AROUND RS.6,000/- PER MONT H AND THE BMC CHARGES ABOUT 55% OF THE SAME AS MUNICIPAL TAXES. HOWEV ER, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE'S SUBMISSION ARE WI THOUT ANY SUPPORTING EVIDENCE AND HE FURTHER OBSERVED THAT L OOKING AT THE AREA IN WHICH THE FLAT IS SITUATED, THE ANNUAL VALUE A DOPTED/OFFERED BY THE ASSESSEE APPEARS TO BE AT A MUCH LOWER SIDE. AS PER SECT ION 24, ANNUAL VALUE IS THE INHERENT CAPACITY OF THE PROPERTY TO EARN INCOME AND HAS BEEN DEFINED AS THE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR. SIN CE NO OTHER CRITERIA IS AVAILABLE TO DETERMINE THE REASONABLE RENT AND THE FLAT BEING A NEWLY ACQUIRED ONE, ANNUAL VALUE OF IT IS ADOPTED @ 8% OF RS.57,12,920/- AND ACCORDINGLY COMPUTED THE NET INCOME F ROM HOUSE PROPERTY FOR FOUR MONTHS AT RS.1,06,080/- AFTER DEDUCT ING MUNICIPAL TAXES AND STANDARD DEDUCTION. THE ASSESSING OFFICER ON TH E SIMILAR BASIS WORKED OUT THE ALV OF GALA AT HAMMER SMITH INDL RS.86,280/- BEING 8% OF THE COST OF RS.10,78,510/- AND AFTER ALLO WING STANDARD DEDUCTION WORKED OUT THE NET INCOME FROM THE SAID HOUSE PROPERTY AT RS.60,395/-. ON APPEAL, THE LD. CIT(A) OBSERVED THA T THE APPELLANT IS THE OWNER OF THREE PROPERTIES, ONE OF WHICH IS THE SOP , OUT OF OTHER TWO, THE APPELLANT HAD NOT OFFERED ANY INCOME FOR TA XATION ON THE GALA ITA NO.3845/M/09 A.Y:04-05 4 PROPERTY AT ALL AND FURTHER THE KHAR PROPERTY WAS RE CENTLY ACQUIRED. THE LD. CIT(A) WHILE AGREEING WITH THE ACTION OF TH E ASSESSING OFFICER WHICH IS SUPPORTED BY THE DECISION OF THE HONBLE ALLAHA BAD HIGH COURT IN THE CASE OF SMT. RADHA DEVI DALMIA VS. CIT(1980) 1 25 ITR 134, UPHELD THE ADDITION MADE BY THE ASSESSING OFFICER. 6. AT THE TIME OF HEARING THE LD. COUNSEL FOR THE A SSESSEE WHILE REITERATING THE SAME SUBMISSIONS AS SUBMITTED BEFORE THE ASSESSING OFFICER AND THE LD. CIT(A) FURTHER SUBMITS THAT WITH R EGARD TO THE INDUSTRIAL GALA NO ADDITION WAS MADE IN THE EARLIER A ND SUBSEQUENT ASSESSMENT YEARS BY THE DEPARTMENT. IT IS A CASE OF PROPER TY ACTUALLY RENTED OUT AND IN SUCH A CASE RENT ACTUALLY RECEIVED SHOU LD BE TREATED AS ANNUAL VALUE. WITH REGARD TO FLAT AT KHAR HE SUBM ITS THAT IT WAS ACQUIRED IN NOVEMBER 2003 AND THEREAFTER IT WAS BEING FURNISHED TILL MARCH 2004 AND IN SUPPORT THE LD. COUNSEL FOR THE ASSESSE E REFERRED TO PAGE NO.12, 13 AND 14 OF THE ASSESSEE'S PAPER BOOK TO SHOW THAT THE PROPERTY WAS UNDER FURNISHING DURING THE YEAR. HE THEREFORE, SUBMITS THAT THE INCOME FROM HOUSE PROPERTY AS SHOWN BY THE ASSESSEE BE ACCEPTED. 7. ON THE OTHER HAND THE LD. DR SUPPORTS THE ORDER OF THE ASSESSING OFFICER AND THE LD. CIT(A). ITA NO.3845/M/09 A.Y:04-05 5 8. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RI VAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THERE IS NO DISPUTE THAT THE ASSESSEE OWNS THREE PREMISES BEING FLAT AT ROYAL ACCORD IV, FLAT AT SHIV SMRUTI, KHAR AND GALA AT HAMME R SMITH INDL. ONE OF WHICH IS S.O.P. THE ASSESSEE HAS OFFERED ONLY RS.1 6,800/- AS INCOME FROM HOUSE PROPERTY . HOWEVER, THERE IS NO MATE RIAL ON RECORD TO SHOW AS TO HOW THE ASSESSEE HAS COMPUTED THE SAID INCOME FROM HOUSE PROPERTY I.E. FROM FLAT AT SHIV SMRUTI, KHAR A ND GALA AT HAMMER SMITH INDL. FURTHER THERE IS NO MATERIAL ON RECORD T O SHOW AS TO WHETHER THE ASSESSEE HAS FILED COPY OF LEDGER ACCOUNT OF FU RNITURE AND FIXTURE OF FLAT AT SHIV SMRUTI, KHAR, APPEARING AT PAGE-11 TO 14 OF THE ASSESSEE'S PAPER BOOK BEFORE THE ASSESSING OFFICER INASMUCH AS IT HAS BEEN OBSERVED BY THE ASSESSING OFFICER THAT WITH REGARD T O THE GALA AT HAMMER SMITH INDL. THE ASSESSEE HAS NOT MADE ANY SUBMISSION . WE FURTHER FIND THAT IT HAS BEEN OBSERVED BY THE LD. CIT (A) THAT THE APPELLANT HAD NOT OFFERED ANY INCOME FOR TAXATION O N THE GALA PROPERTY AT ALL . THIS BEING SO AND KEEPING IN VIEW T HAT THERE IS A CONTRADICTION IN THE RECORDING OF FACTS OF THE RENTAL I NCOME FROM HOUSE PROPERTY, WE ARE OF THE VIEW THAT IN THE INTEREST OF JUSTICE THE MATTER SHOULD GO BACK TO THE FILE OF THE ASSESSING OFFICER AND A CCORDINGLY WE SET ASIDE THE ORDER PASSED BY THE REVENUE AUTHORITIES ON THIS ACCOUNT AND SEND BACK THE MATTER TO THE FILE OF ASSESSING OFFICER WHO SHALL ITA NO.3845/M/09 A.Y:04-05 6 DECIDE THE SAME AFRESH IN THE LIGHT OF OUR OBSERVATIONS HEREINABOVE AND ACCORDING TO LAW AFTER PROVIDING REASONABLE OPPORT UNITY OF BEING HEARD TO THE ASSESSEE. THE GROUNDS TAKEN BY THE ASSESSEE A RE, THEREFORE, PARTLY ALLOWED FRO STATISTICAL PURPOSES. 9. GROUND NO.3 IS AGAINST THE SUSTENANCE OF DISALLOWANCE ON ACCOUNT OF PERSONAL EXPENSES. 10. THE BRIEF FACTS OF THE IMPUGNED ISSUE ARE THAT IT HAS BEEN OBSERVED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS CLAIMED EXPENDITURE ON COSTUMES RS.1,33,375/- AND COSMETICS RS.40,6 46/-. CONSIDERING THAT THE INVOLVEMENT OF PERSONAL ELEMENT IN THESE EXPENDITURES CANNOT BE RULED OUT AND BIFURCATION OF TH E SAME FOR PROFESSIONAL REQUIREMENT IS NOT POSSIBLE, THE ASSESSING OFF ICER DISALLOWED RS.87,010/- BEING 50% OF THE ABOVE EXPENSES. ON APPEAL, THE LD. CIT(A) FOLLOWING THE APPELLATE ORDER FOR TH E ASSESSMENT YEAR 2001-02 RESTRICTED THE DISALLOWANCE ON ACCOUNT OF COSTUMES T O 1/6 TH OF THE CLAIM. WITH REGARD TO DISALLOWANCE ON COSMETIC EXPE NSES THE LD. CIT(A) WHILE OBSERVING THAT IN THIS EXPENSE VERY HIGH DEGREE OF PERSONAL ELEMENT IS INVOLVED AND, HENCE, DISALLOWANCE OF 50% BY THE ASSESSING OFFICER IS IN ORDER AND NO INTERFERENCE IS CALLED FOR. 11. AT THE TIME OF HEARING THE LD. COUNSEL FOR THE A SSESSEE SUBMITS THAT THE DISALLOWANCE IN RELATION TO COSTUME EXPENSES HAS BEEN ITA NO.3845/M/09 A.Y:04-05 7 RESTRICTED TO 1/6 TH OF THE TOTAL EXPENDITURE, THEREFORE, DISALLOWANCE ON COSMETICS SHOULD HAVE BEEN EQUIVALENT TO 1/6 TH OF TOTAL EXPENDITURE I.E. RS.6,774/-. HE THEREFORE, SUBMITS THAT DUE RELIEF BE ALLOWED. 12. ON THE OTHER HAND THE LD. DR SUBMITS THAT ON COSMET IC EXPENSES HIGH DEGREE OF PERSONAL ELEMENT IS INVOLVED AND IN TH E ABSENCE OF ANY BIFURCATION, THE DISALLOWANCE MADE BY THE ASSESSING OFFIC ER AND SUSTAINED BY THE LD. CIT(A) BE UPHELD. 13. HAVING CAREFULLY HEARD THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSING THE MATERIAL AVAILABLE ON RECORD WE FIND THA T THERE IS NO DISPUTE THAT IN RESPECT OF DISALLOWANCE ON ACCOUNT OF COST UMES AND MOTOR CAR EXPENSES THE LD. CIT(A) FOLLOWING THE APPELL ATE ORDER FOR THE ASSESSMENT YEAR 2001-02 HAS RESTRICTED THE DISALLOWANCE TO 1 /6 TH OF THE CLAIM AS AGAINST DISALLOWANCE OF 50% OF RS.1,33,375 /-. HOWEVER, ON COSMETIC EXPENSES HE OBSERVED THAT THERE IS NO DECISION A S PRECEDENT AND KEEPING IN VIEW THAT THIS EXPENSE HAS VE RY HIGH DEGREE OF PERSONAL ELEMENT INVOLVED AND HENCE, HE UPHELD THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. CONSIDERING THE TOTALITY O F THE FACTS AND CIRCUMSTANCES OF THE CASE, THE TOTAL AMOUNT OF COSMETIC EXPEN SES RS.40,646/- AND KEEPING IN VIEW THAT IN RESPECT OF OTH ER EXPENSES, THE DISALLOWANCE OF PERSONAL IN NATURE WAS RESTRICTED TO 1/6 TH , WE ARE OF THE VIEW THAT THE DISALLOWANCE OF 1/6 TH FOR PERSONAL USE WOULD MEET ITA NO.3845/M/09 A.Y:04-05 8 THE ENDS OF JUSTICE AND ACCORDINGLY THE DISALLOWANCE ON CO SMETICS IS RESTRICTED TO 1/6 TH OF RS.40,646/-. WE HOLD AND ORDER ACCORDINGLY. GROUND TAKEN BY THE ASSESSEE IS, THEREFORE, PARTLY ALLOW ED. 14. GROUND NO.4 IS AGAINST THE SUSTENANCE OF DISALLOWANCE OF LEGAL EXPENSES. 15. THE BRIEF FACTS OF THE ABOVE ISSUE ARE THAT IT WAS O BSERVED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS CLAIMED LEGAL EXPENDIT URE OF RS.4,25,000/-. ON BEING ASKED IT WAS SUBMITTED BY THE REPRESENTATIVE OF THE ASSESSEE THAT THE SUM OF RS.4,25,000/- WAS PAID TO THE ADVOCATE SHRIKANT BHATT FOR DEFENDING SUIT FILED BY S OCIAL SERVICE BRANCH OF THE MUMBAI POLICE AS THEY HAVE FOUND SOME OF HER PHOTOGRAPH PUBLISHED IN A FILM MAGAZINE OBJECTIONABLE . IT WAS FURTHER SUBMITTED THAT THE COURT ACQUITTED THE ASSESSEE OF ALL CHA RGES AND THE LEGAL EXPENSES WERE INCURRED FOR DEFENDING LEGITIMATE PROFESSIONAL ACTIONS AND HENCE ARE ALLOWABLE U/S.37 OF THE ACT. HOW EVER, THE ASSESSING OFFICER WAS OF THE VIEW THAT THE CONTENTION OF T HE ASSESSEE IS NOT ACCEPTABLE SINCE THE EXPENDITURE INCURRED WAS TO DE FEND HERSELF IN COURT OF LAW IN A CASE OF INFRINGEMENT OF LAW FOR A N ACTION WHICH IS PROHIBITED BY LAW. THE PUBLICATION OF PHOTOGRAPHS WH ICH ARE TERMED AS OBSCENE BY AN AUTHORITY OF LAW HAS NO RELEVANCE WITH TH E ASSESSEE'S CAREER AS A PROFESSIONAL ACTOR. AS SUCH HE TREATED THE SA ID ITA NO.3845/M/09 A.Y:04-05 9 EXPENDITURE AS INCURRED IN A CASE OF INFRINGEMENT OF L AW AND NOT ALLOWABLE UNDER THE ACT. ON APPEAL THE LD. CIT(A) O BSERVED THAT THE CASE WAS INSTITUTED, IN THE FIRST PLACE, BECAUSE OF AN INFR INGEMENT OF LAW IS CERTAINLY A CONSIDERATION BUT EVEN OTHERWISE, IT WAS PURELY A PERSONAL MATTER AND COULD NOT HAVE BEEN ALLOWED AND A CCORDINGLY HE UPHELD THE DISALLOWANCE. 16. AT THE TIME OF HEARING THE LD. COUNSEL FOR THE A SSESSEE SUBMITS THAT PROVIDING INTERVIEWS ARE PART AND PARCEL OF THE PROFESSION OF THE ASSESSEE AND THE SAID FACT IS UNDISPUTED. PERSONAL EXPENSES ARE THOSE WHICH HAVE NO BUSINESS CONNECTION. IN ASSESSEES CASE THERE IS A CLEAR NEXUS, THEREFORE, THE SAME ARE ALLOWABLE. THE RELIAN CE WAS ALSO PLACED ON THE DECISION IN MCKNIGHT (INSPECTOR OF TAXES) VS. SHEPPARD (HOUSE OF LORDS) (1999) 239 ITR 887 WHEREIN IT WAS HEL D THAT LEGAL EXPENSES INCURRED BY STOCK BROKER TO DEFEND HIMSELF IN PR OCEEDINGS BEFORE DISCIPLINARY COMMITTEE OF STOCK EXCHANGE WERE INCU RRED FOR PRESERVING HIS TRADE AND WERE ALLOWABLE AS DEDUCTION. HE THEREFORE, SUBMITS THAT THE DISALLOWANCE MADE BY THE ASSESSING OFFICER AND SUSTAINED BY THE LD. CIT(A) BE DELETED. 17. ON THE OTHER HAND THE LD. DR SUPPORTS THE ORDER O F THE ASSESSING OFFICER AND THE LD. CIT(A). ITA NO.3845/M/09 A.Y:04-05 10 18. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE R IVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIN D THAT THE FACTS ARE NOT IN DISPUTE INASMUCH AS THE CRIMINAL CASE FILED BY THE STATE (S.S. BRANCH ), MUMBAI AGAINST MS. SONALI BENDRE ALLE GING THAT IN THE ISSUE OF MARCH 1998 MAGAZINE SHOW TIME PUBLISHED FRO M MUMBAI, TWO PHOTOGRAPHS OF AN ACTRESS I.E. MS. SONALI BENDRE ON THE COVER PAGE AND PAGE NO.61 IN THE SAID MAGAZINE IN WHICH MS. SONALI BENDRE WAS WEARING VERY SCANTY APPARELS WITH THE HOLY SIGNS OF HIN DUS, AMOUNT TO OUTRAGE OF THE FEELINGS OF THE HINDUS, 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 EX PENSES INCURRED IN DEFENDING PROSECUTION WOULD DEPEND UPON : (A) THE NAT URE AND OBJECT OF PROSECUTION, AND (B) THE PURPOSE OF THE DEFENCE. TH E TEST IS WHETHER THE ASSESSEE IS INCURRING THE EXPENDITURE BONAFID E AND WITH NO ULTERIOR MOTIVE. AS REGARDS THE PURPOSE OF DEFENCE , THE DEFENCE MAY HAVE BEEN UNDERTAKEN (I) FOR THE ESTABLISHMENT O F FAIR NAME 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 MAT ERIAL ON RECORD TO SHOW THAT THE INTERVIEW IN THE MAGAZINE NAM ELY SHOW TIME ITA NO.3845/M/09 A.Y:04-05 11 WAS PERSONAL IN NATURE AND HAD NOTHING TO DO WITH ASSE SSEE AS AN ACTRESS. SINCE PROVIDING INTERVIEW IN THE MAGAZINE IS PART OF PROFESSIONAL ACTIVITIES OF AN ACTOR, THEREFORE, WE ARE O F THE VIEW THAT THE LEGAL EXPENSE INCURRED BY THE ASSESSEE TO DEFEND HER SELF IN THE PROCEEDING BEFORE ADDITIONAL CHIEF METROPOLITAN MAGI STRATE FOR PRESERVING HER PROFESSION ARE ALLOWABLE AS A BUSINESS EXP ENDITURE AS THE SAME HAD BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR T HE PURPOSES OF BUSINESS OR PROFESSION. ACCORDINGLY THE DISALLOWANCE OF RS. 4,25,000/- MADE BY THE ASSESSING OFFICER AND SUSTAINED BY THE LD. CI T(A) IS DELETED. THE GROUND TAKEN BY THE ASSESSEE IS, THEREFORE , ALLOWED. 19. GROUND NO.5 IS AGAINST THE DISALLOWANCE OF DEDUCTION U/S.80RR. 20. THE BRIEF FACTS OF THE ABOVE ISSUE ARE THAT IT WAS O BSERVED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS CLAIMED DEDUCTION OF RS.1,56,712/- U/S.80RR OF THE ACT BEING 15% OF PROFESSIO NAL INCOME FROM FOREIGN SOURCES. HE FURTHER OBSERVED THAT THE PAYM ENTS RECEIVED IN CONVERTIBLE FOREIGN EXCHANGE WERE IN RELATION TO T HE SERVICES RENDERED BY THE ASSESSEE AS A BRAND AMBASSADOR TO M/S. OMEG A LIMITED, SWITZERLAND. ON BEING ASKED TO JUSTIFY THE CLAIM OF DEDUCTION OF SECTION 80RR, THE ASSESSEE HAS NOT OFFERED ANY SPECIFIC E XPLANATION. IN THE ABSENCE THEREOF, THE ASSESSING OFFICER IN VIEW OF THE PROVISIONS ITA NO.3845/M/09 A.Y:04-05 12 OF SECTION 80RR WAS OF THE VIEW THAT THE ASSESSEE THOUGH A N ACTOR HAS EARNED THE INCOME IN EXERCISE OF CARRYING OUT THE ACTIV ITY OF THE ADVERTISEMENT OF THE COMPANY AND NOT IN CARRYING OUT H ER PROFESSION AS AN ACTOR AND, HENCE, THE ASSESSEE IS NOT ELIGIBLE FOR D EDUCTION U/S.80RR. ON APPEAL, THE LD. CIT(A) WHILE DISTINGUI SHING THE DECISION IN THE CASE OF AMITABH BACHHAN (12 SOT 95) HAS HELD THA T THE EARNING OF FOREIGN INCOME WAS CLEARLY NOT IN EXERCISE OF ACTIVITY AS AN ACTOR AND HENCE NOT ALLOWABLE AS A DEDUCTION AND ACCORDINGLY UPHEL D THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. 21. AT THE TIME OF HEARING THE LD. COUNSEL FOR THE A SSESSEE, AT THE OUTSET, SUBMITS THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN THE CASE OF DCIT VS. AISH WARYA K. RAI AND VICE VERSA (2009-TIOL-636-ITAT-MUM.) WHEREIN THE TRIBUNAL FOLLOWING THE DECISION OF THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF SHARUK KHAN IN ITA NO.3894/M/02 AND OTHERS DAT ED 19.6.208 HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. HE ALSO P LACED ON RECORD THE COPY OF THE SAID ORDER OF THE TRIBUNAL APPE ARING AT PAGE 45 TO 63 OF THE ASSESSEE'S PAPER BOOK. 22. ON THE OTHER HAND THE LD. DR SUBMITS THAT FOR THE REASONS AS MENTIONED IN THE ASSESSMENT ORDER THE LD. CIT(A) WAS FU LLY JUSTIFIED IN ITA NO.3845/M/09 A.Y:04-05 13 UPHOLDING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER A ND HENCE, THE ORDER PASSED BY THE LD. CIT(A) BE UPHELD. 23. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE R IVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND MERIT IN THE PLEA OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE ISSUE IS SQUAR ELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL I N THE CASE OF DCIT VS. MS. AISHWARYA K. RAI AND VICE VERSA WHEREIN T HAT ASSESSEE HAS CLAIMED DEDUCTION U/S.80RR ON FOREIGN RECEIPTS OF RS.1,85,32,585/- IN RESPECT OF STAGE SHOWS AND ADVERTISEM ENTS. ONE OF THE GROUNDS FOR MAKING THE DISALLOWANCE WAS THAT TH E RECEIPTS ON PERFORMING STAGE SHOWS AND MODELING FOR ADVERTISEMENTS A RE NOT AMOUNT TO RECEIPTS AS AN ACTOR. IT HAS BEEN HELD BY T HE TRIBUNAL VIDE PARA-9 OF ITS ORDER DATED 7.9.2009 AS UNDER :- 9. AS REGARDS REASON NO.(1), THE LEARNED AR SUBMITTED THAT ON IDENTICAL SET OF FACTS THE ITAT I N CASE OF SHARUK KHAN IN ITA NO.3894/MUM/02 & OTHERS ORDER DATED 19.06.2008 HAS DECIDED IN FAVOUR OF THE ASSES SEE BY ALLOWING DEDUCTIONS U/S.80RR IN RESPECT OF STAGE SHOWS, MODELING & ADVERTISEMENT. THE RELEVANT FIN DING OF ITAT IS REPRODUCED BELOW:- 13. WE HEARD THE RIVAL SUBMISSIONS, GONE THROUGH THE ORDERS OF THE REVENUE AUTHORITIES AND THE DECIS IONS CITED. WE ARE OF THE VIEW THAT THE APPEAL BY THE ASSESSEE ON THIS GROUND IS TO BE ALLOWED. IN THE C ASE OF AMITAB BACCHAN VS. DCIT (SUPRA), THE TRIBUNAL HELD, IF AN ACTOR USED HIS SKILLS AS AN ACTOR OR AS AN ARTIS T IN ANCHORING THE TELEVISION SHOW, RECEIPT FROM SUCH SH OW IS INCOME DERIVED BY HIM AS AN ARTIST AND DEDUCTION UNDER SECTION 80RR IS ALLOWABLE ON SUCH PAYMENT. IN THE INSTANT CASE OF THE ASSESSEE, THE REASONING OF ASSE SSING ITA NO.3845/M/09 A.Y:04-05 14 OFFICER TO DISALLOW THE CLAIM OF THE ASSESSEE IS TH AT ASSESSEE IS NOT ACTING AND ASSESSEE BEING AN ACTOR, ONLY INCOME DERIVED FROM ACTING COULD BE TREATED FOR THE PURPOSE OF DEDUCTION U/S.80RR. HOWEVER, WE ARE UNABLE TO AGREE WITH THIS PROPOSITION. ANY ARTIST IS ENTITLED FOR DEDUCTION U/S.80RR, WHICH IS ENUMERATE D IN THE SECTION, WHICH INCLUDES AN AUTHOR, PLAYWRIGHT, ARTIST, MUSICIAN, ACTOR OR SPORTSMAN, INCLUDING AN ATHLETE. AN ACTOR DOES NOT MEAN ONLY ACTING IN THE FILMS. IT CAN BE EVEN ON STAGE. TRUE, EVERY APPEARANCE OF A FILM S TAR ON STAGE MAY NOT BE HIS ACTING. BUT IF AN ACTOR IS PROFESSIONAL, ENGAGE BY A PARTY, WHEREIN THE ASSESS EE HAS TO GIVE PHOTO SESSIONS PARTICIPATE IN VIDEO SHO OTS ETC. IT AMOUNTS TO ACTING. HERE IN THE INSTANT C ASE OF THE ASSESSEE IT IS NOT DISPUTED THAT THE ASSESSEE A T LEAST EXPLOITING EITHER IN REAL LIFE OR IN CELLULOID. HE RE IT IS IN REAL LIFE. ASSESSEE HAS TO GIVE PHOTO SESSIONS ET C.ETC. THE PARTY IS USING THE ASSESSEES NAME. IN VIEW OF THE ABOVE, WE ARE OF THE VIEW THAT THE CLAIM OF THE ASS ESSEE THAT THE IMPUGNED INCOME IS DERIVED FROM ASSESSEES PROFESSOR BEING AN ACTOR, IS TO BE ACCEPTED. HENCE, THE APPEAL BY THE ASSESSEE ON THIS GROUND IS ALLOWED AN D THE APPEAL BY THE REVENUE ON THIS GROUND IS DISMISS ED. SINCE FACTS OF THE CASE UNDER CONSIDERATION & FACTS OF ABOVE CASE ARE DECIDED BY ITAT ARE IDENTICAL, WE THEREFORE RESPECTFULLY FOLLOW THE ABOVE ORDER OF IT AT AND IN THE LIGHT OF THAT THE ASSESSING OFFICER IS DIREC TED TO ALLOW THE CLAIM OF ASSESSEE U/S.80RR INCLUDING THE PORTION OF CLAIM WHICH HAS BEEN DISALLOWED BY THE CIT(A). 24. RECENTLY THE HONBLE JURISDICTIONAL HIGH COURT IN CI T VS. M/S. TARUN R. TAHILIANI IN INCOME TAX APPEAL NO.2440 OF 2 009 AND INCOME TAX APPEAL (L) NOS. 922 AND 1275 OF 2009 DATED 14.6. 2010 HAS OBSERVED VIDE PARA-9 AS UNDER : 9. SIMPLY STATED, AN ARTIST IS A PERSON WHO ENGAGE S IN AN ACTIVITY WHICH IS AN ART. ARTISTS, AS WE UNDERSTAND THEM, USE SKILL AND IMAGINATION IN THE CREATION OF AESTHE TIC OBJECTS AND EXPERIENCES. DRAWING, PAINTING, SCULPTU RE, ACTING, DANCING, WRITING, FILM MAKING, PHOTOGRAPHY AND MUSIC ALL INVOLVE IMAGINATION, TALENT AND SKILL IN THE CREATION OF WORKS WHICH HAVE AN AESTHETIC VALUE. A ITA NO.3845/M/09 A.Y:04-05 15 DESIGNER USES THE PROCESS OF DESIGN AND HER WORK RE QUIRES A DISTINCT AND SIGNIFICANT ELEMENT OF CREATIVITY. T HE CANVASS OF DESIGN IS DIVERSE AND INCLUDES GRAPHIC D ESIGN AND FASHION DESIGN. AN ARTIST, AS PART OF HIS OR HE R CREATIVE WORK, SEEKS TO ARRANGE ELEMENTS IN A MANNE R THAT WOULD AFFECT HUMAN SENSES AND EMOTIONS. DESIGN , IN A CERTAIN SENSE, CAN BE CONSTRUED TO BE A RIGOROUS FORM OF ART OR ART WHICH HAS A CLEARLY DEFINED PURPOSE. THO UGH THE FIELD OF DESIGNING MAY BE REGARDED AS A RIGOROUS FA CET OF ART, CREATIVITY, IMAGINATION AND VISUALIZATION ARE THE CORE OF DESIGN. DRESS DESIGNING HAS ASSUMED SIGNIFICANCE IN THE AGE IN WHICH WE LIVE, INFLUENCED AS IT IS BY TH E MEDIA AND ENTERTAINMENT. AS A DRESS DESIGNER, THE ASSESSE E MUST BRING TO HIS WORK A HIGH DEGREE OF IMAGINATION , CREATIVITY AND SKILL. THE FACT THAT DESIGNING INVOL VES SKILL AND EVEN TECHNICAL EXPERTISE DOES NOT DETRACT FROM THE FACT THAT THE DESIGNER MUST VISUALIZE AND IMAGINE. A DESIGNER IS AN ARTIST. IT HAS BEEN HELD AS UNDER :- 12. THE TRIBUNAL IN THE PRESENT CASE, WAS NOT IN ER ROR IN HOLDING THAT THE ASSESSEE IS AN ARTIST FOR THE P URPOSES OF SECTION 80RR. THE QUESTION OF LAW IS ANSWERED IN THE AFFIRMATIVE, IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. IT IS AN ADMITTED POSITION BEFORE THE COUR T THAT THE DEDUCTION WAS SOUGHT BY THE ASSESSEE ONLY IN RE SPECT OF DESIGN FEES THAT WERE RECEIVED BY HIM IN CONVERT IBLE FOREIGN EXCHANGE. 25. IN THE ABSENCE OF ANY CONTRARY DECISION BROUGHT ON R ECORD BY THE REVENUE WE RESPECTFULLY FOLLOWING THE RATIO LAID DOWN BY THE HON'BLE JURISDICTIONAL HIGH COURT SUPRA, AND THE CONSISTENT VIEW O F THE TRIBUNAL HOLD THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN SUSTAININ G THE DISALLOWANCE OF DEDUCTION OF SECTION 80RR OF THE ACT AND ACCORDINGLY T HE ASSESSING OFFICER IS DIRECTED TO ALLOW DEDUCTION OF RS.1,56,712/- CLAIMED BY THE ITA NO.3845/M/09 A.Y:04-05 16 ASSESSEE U/S.80RR OF THE ACT. THE GROUND TAKEN BY THE ASSESSE E IS, THEREFORE, ALLOWED. 26. GROUND NO.6 AND 7 ARE GENERAL IN NATURE AND IN THE ABSENCE OF ANY SPECIFIC PLEA THE SAME ARE, THEREFORE, REJECTED. 27. IN THE RESULT, ASSESSEES APPEAL STANDS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 16.7.2010. SD/- SD/- (PRAMOD KUMAR) ( D.K. AGARWAL ) ACCOUNTANT MEMBER J UDICIAL MEMBER MUMBAI, DATED: 16.7.2010. JV. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI. ITA NO.3845/M/09 A.Y:04-05 17 DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 6.7.10 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 7.7.10 SR.PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON 16.7.10 SR.PS/PS 7. FILE SENT TO THE BENCH CLERK 20.7.10 SR.PS/PS 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER