SHAH RUKH KHAN, MUMBAI V. ACIT CEN CIR 29, MUMBAI

ITA 623/MUM/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 7765 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 1 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-03-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: L
• Next Hearing Date: 16-03-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 23-01-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: JASBIR CHOUHAN
• Keywords: Gift; Business expenditure; Residential status; Double taxation relief; Commercial expediency
• Section: 143(3); 234B; 37(1); 90

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH L, MUMBAI BEFORE SHRI G.S.PANNU, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER ITA NO.623/MUM/2013 (ASSESSMENT YEAR 2009-10) ITA NO.4763/MUM/2013 (ASSESSMENT YEAR 2010-11) MR. SHAH RUKH KHAN, 44, MANNAT, B.J.ROAD, BANDRA(W), MUMBAI 400 050 PAN: AAHPK 3293L ..... APPELLANT VS. THE ACIT, CEN. CIR.29, ROOM NO.411, 4 TH FLOOR, AAYKAR BHAVAN,M.K.ROAD, MUMBAI 400 020 .... RESPONDENT APPELLANT BY : SHRI HIRO RAI RESPONDENT BY : SHRI JASBIR CHOU HAN DATE OF HEARING : 03/02/2017 DATE OF PRONOUNCEMENT : 17/03/201 7 ORDER PER G.S.PANNU,A.M: THE CAPTIONED ARE TWO APPEALS PERTAINING TO THE SA ME ASSESSEE FOR ASSESSMENT YEAR 2009-10 AND 2010-11 AND SINCE THEY INVOLVE CERTAIN COMMON ISSUES THEY HAVE BEEN CLUBBED AND HEARD TOGETHER AN D A CONSOLIDATED ORDER IS BEING PASSED FOR THE SAKE OF CONVENIENCE AND BREVIT Y. 2 ITA NO.623/MUM/2013, A.Y.2009-10) ITA NO.4763/MUM/2013, A.Y. 2010-11 2. ITA NO 623/MUM/2013 FOR ASSESSMENT YEAR 2009-10 IS TAKEN AS THE LEAD CASE. THIS APPEAL PERTAINING TO ASSESSMENT YEAR 2009-10 IS DIRECTED AGAINST AN ORDER PASSED BY CIT(A)-40, MUMBAI DATED 02/11/2 012, WHICH IN TURN, ARISES OUT OF AN ORDER PASSED BY THE ASSESSING OFFICER UN DER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) DATED 3 0/12/2011. IN THIS APPEAL ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- THE GROUNDS OF APPEAL RAISED HEREIN ARE ALL WITHOU T PREJUDICE TO ONE ANOTHER: THE LEARNED CIT(APPEALS) WAS NOT JUSTIFIED IN CONFI RMING THE ACTION OF THE LEARNED ASST. CIT IN: 1. DISALLOWING AN AMOUNT OF RS. 10,00,00,000/- BEIN G PROFESSIONAL FEES RETURNED TO STAR INDIA P LTD. THE SAID AMOUNT HAD BEEN INCURRED BY THE APPELLANT FOR THE PURPOSES OF HIS PROFESSION AND ON GROUNDS OF COMMERCIAL EXPE DIENCY. THE REASONS GIVEN BY BOTH THE LEARNED CIT(APPEALS) AND THE LEARNED ASST. CIT IN THIS REGARD, PARTICULARLY THEIR READING OF THE AGREEMENT DATED 30-3-2007, ARE INCORRECT, ERRONEOUS AND INVALID. 2. ADDING AN AMOUNT OF RS. 7,00,00,000/- AS ALLEGED PROFESSIONAL FEES. THE REASONS GIVEN BY BOTH THE LEARNED CIT(APPEALS) AND THE LEAR NED ASST. CIT IN THIS REGARD ARE INCORRECT, ERRONEOUS AND BASED PURELY ON ASSUMPTION S, CONJECTURES AND SURMISES. 3. BRINGING THE ANNUAL VALUE OF THE DUBAI VILLA TO TAX IN INDIA. 4. LEVYING INTERESTS U/S 234B AND 234C OF THE ACT. 3. IN BRIEF, THE RELEVANT FACTS ARE THAT THE APPELL ANT IS AN INDIVIDUAL WHO IS A FILM ACTOR BY PROFESSION. FOR THE ASSESSMENT YEAR 2009-10, HE FILED A RETURN OF INCOME DECLARING A TOTAL INCOME OF RS.146,15,23,852 /-, WHICH WAS SUBJECT TO SCRUTINY ASSESSMENT WHEREBY THE TOTAL INCOME HAD BE EN ASSESSED AT RS.163,83,39,790/-, AFTER MAKING CERTAIN ADDITIONS/ DISALLOWANCES. THE ASSESSEE HAD CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A), WHO ALLOWED PARTIAL RELIEF. NOT BEING SATISFIED WITH THE ORDER OF THE CIT(A) AS SESSEE IS IN FURTHER APPEAL BEFORE US ON THE AFORESAID GROUNDS OF APPEAL. 3.1 IN SO FAR AS THE FIRST GROUND IS CONCERNED, TH E SAME ARISES FROM THE ACTION OF THE ASSESSING OFFICER IN DISALLOWING A C LAIM OF DEDUCTION OF RS.10 3 ITA NO.623/MUM/2013, A.Y.2009-10) ITA NO.4763/MUM/2013, A.Y. 2010-11 CRORES WHILE COMPUTING INCOME FROM PROFESSION. BRI EF FACTS IN THIS CONTEXT CAN BE SUMMARIZED AS FOLLOWS. DURING THE YEAR UNDER CO NSIDERATION, ASSESSEE BEING AN ACTOR BY PROFESSION, HAD DECLARED INCOME FROM PROFESSION BASED ON THE CASH METHOD OF ACCOUNTING. THE ASSESSING OFFIC ER NOTICED THAT IN THE INCOME AND EXPENDITURE ACCOUNT FOR THE YEAR UNDER C ONSIDERATION, ASSESSEE HAD CLAIMED AN EXPENDITURE OF RS.10 CRORES UNDER T HE HEAD PROFESSIONAL FEES RETURNED TO STAR INDIA PRIVATE LIMITED. THE SAI D AMOUNT REPRESENTED PAYMENT BY THE ASSESSEE TO KNIGHT RIDERS SPORTS PVT . LTD. ON BEHALF OF STAR INDIA PRIVATE LTD. FOR GRANT OF SPONSORSHIP RIGHTS FOR IPL SEASON -2. ON BEING ASKED TO EXPLAIN, ASSESSEE CONTENDED THAT IN TERMS OF AN ARTIST SERVICE AGREEMENT WITH STAR INDIA PVT. LTD. DATED 30/03/200 7, THE ASSESSEE WAS LIABLE TO ACT AS ANCHOR AND HOST OF THE PROGRAMME TO BE PRODUCED BY STAR INDIA LTD., NAMELY KAUN BANEGA CROREPATI FOR A TOTAL OF 104 E PISODES, DIVIDED INTO TWO SEASONS OF 52 EPISODES EACH. THE TOTAL CONSIDERATI ON PAYABLE WAS RS.72 CORES, WHICH WAS RECEIVED BY THE ASSESSEE IN ADVANC E AND THE SAME WAS OFFERED FOR TAX IN AN EARLIER YEAR ON RECEIPT BASIS . IT WAS EXPLAINED THAT ASSESSEE RENDERED THE SERVICES FOR THE FIRST SEASO N OF 52 EPISODES BUT FOR SECOND SEASON COMPRISING OF THE BALANCE 52 EPISOD ES NO SERVICE WAS RENDERED AS THE PROGRAMME WAS DISCONTINUED BY STAR INDIA PVT. LTD. FOR COMMERCIAL REASONS. THE ASSESSEE EXPLAINED THAT AS THE BALANCE EPISODES WERE NOT DELIVERED, STAR INDIA PVT. LTD WANTED TO R ECOVER THE VALUE OF THE UNUTILIZED AMOUNT FROM THE ASSESSEE FOR NON-SHOOTIN G OF THE 2 ND SEASON AND, THEREFORE, IN TERMS OF A MUTUALLY AGREED ARRANGEMEN T DATED 20/03/2009, ASSESSEE AGREED TO GET FOR STAR INDIA PVT. LTD. THE FOLLOWING:- (A) A KEY SPONSORSHIP ASSOCIATION WITH KOLKOTA KNIGHT RIDERS TEAM FOR CALENDAR YEAR 2009 (IPL SEASON 2); AND, (B) OTHER ACCOMPANYING S PONSORSHIP RIGHTS AND 4 ITA NO.623/MUM/2013, A.Y.2009-10) ITA NO.4763/MUM/2013, A.Y. 2010-11 DELIVERABLES DETAILED IN THE ARRANGEMENT, COPY OF WHICH HAS BEEN PLACED IN THE PAPER BOOK. SUCH ACCOMPANYING DELIVERABLES, IN TER-ALIA, INCLUDED CERTAIN APPEARANCES AND PROMOTIONS BY THE ASSESSEE IN PRE SS CONFERENCES IN LONDON AND DUBAI. NOTABLY, THE ARRANGEMENT DID NOT ENVISA GE ANY LIABILITY OF STAR INDIA PVT. LTD. IN RESPECT OF ANY FEE OR COSTS, ETC . TO BE INCURRED BY THE ASSESSEE OR KNIGHT RIDER SPORTS PVT. LTD. IN RELATION TO THE DELIVERABLES MENTIONED AND THE SPONSORSHIP RIGHTS. IT WAS EXPLAINED THAT FOR PROCURING THE SPONSORSHIP RIGHTS OF KNIGHT RIDER SPORTS PVT. LTD. FOR IPL SEA SON -2, ASSESSEE PAID RS.10 CRORES ON BEHALF OF THE STAR INDIA PVT. LTD. TO KNI GHT RIDER SPORTS PVT. LTD. THIS AMOUNT WAS CLAIMED AS A PROFESSIONAL EXPENDITURE. THE ASSESSING OFFICER DID NOT ACCEPT THE PLEA OF THE ASSESSEE FOR DEDUCTION O F THE AFORESAID AMOUNT WHILE COMPUTING THE TAXABLE INCOME. FIRSTLY, AS PER THE ASSESSING OFFICER THE ASSESSEE WAS UNDER NO OBLIGATION TO REFUND ANY AMOU NT TO STAR INDIA PVT. LTD. BECAUSE THE NON-SHOOTING OF THE BALANCE 52 EPISO DES WAS NOT FOR REASONS ATTRIBUTABLE TO THE ASSESSEE. IN THIS CONTEXT, THE ASSESSING OFFICER REFERRED TO THE ARTIST SERVICE AGREEMENT DATED 30/03/2007 BETWE EN THE ASSESSEE AND STAR INDIA PVT. LTD. TO POINT OUT THAT THE ASSESSEE WAS LIABLE TO REFUND THE AMOUNT ONLY IF BREACH OF CONTRACT WAS ATTRIBUTABLE TO THE ASSESSEE AND IN THE PRESENT CASE THE REASON FOR DISCONTINUATION WAS NOT ATTRIBUTABLE TO THE ASSESSEE. SECONDLY, THE ASSESSING OFFICER ALSO OBS ERVED THAT DURING THE YEAR UNDER CONSIDERATION NO INCOME OF ANY NATURE HAD BEE N RECEIVED BY THE ASSESSEE FROM STAR INDIA PVT. LTD. AND, THEREFORE, THE EXPENDITURE OF RS.10 CRORES DEBITED UNDER THE HEAD PROFESSIONAL FEES RETURNED TO STAR INDIA PVT. LTD. DOES NOT HAVE ANY NEXUS OR BEARING ON ANY OF THE PROFESSIONAL RECEIPTS EARNED DURING THE YEAR UNDER CONSIDERATION, AND THEREFORE, THE IMPUGNED EXPENDITURE COULD NOT BE ALLOWED AS DEDUCTION IN TH E YEAR UNDER 5 ITA NO.623/MUM/2013, A.Y.2009-10) ITA NO.4763/MUM/2013, A.Y. 2010-11 CONSIDERATION. THIRDLY, THE ASSESSING OFFICER HAS ALSO REFERRED TO THE RESPONSE OF STAR INDIA PVT. LTD. TO CERTAIN QUERIES WHEREBY IT WAS CLEAR THAT THE ENTIRE AMOUNT OF RS.72 CRORES PAID TO THE ASSESSEE HAS BE EN ACCOUNTED FOR AS AN EXPENDITURE IN THE HANDS OF STAR INDIA PVT. LTD. A S PER THE ASSESSING OFFICER NONE OF THE AMOUNT COMPRISED IN THE RECEIPT OF RS.7 2 CRORES FROM STAR INDIA PVT. LTD. WAS REFUNDABLE BY THE ASSESSEE. ON THE BASIS OF THE AFORESAID, DEDUCTION FOR THE EXPENDITURE DEBITED UNDER THE HEAD PROFESSIONAL FEES RETURNED TO START INDIA PVT. LTD. WAS DENIED, WHI CH RESULTED IN AN ADDITION OF RS.10.00 CRORES TO THE RETURNED INCOME. 4. IN APPEAL BEFORE THE CIT(A), ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE ASSESSING OFFICER AND ASSAILED THE ADDIT ION ON FACTS AND IN LAW. BEFORE THE CIT(A), ASSESSEE CONTENDED THAT THE ASSE SSING OFFICER HAS NOT APPRECIATED AN ESTABLISHED BUSINESS PRACTICE, WHIC H STRESSES ON MAINTAINING GOOD RELATIONSHIP WITH CUSTOMERS WHILE EVALUATING T HE DEDUCTIBILITY OF THE IMPUGNED EXPENDITURE. THE ASSESSEE CANVASSED THAT BUSINESS PRACTICES SOMETIMES ENTAIL GRANT OF SOME CONCESSIONS TO CUST OMERS IN ORDER TO ENJOY THEIR CONTINUED PATRONAGE WITHOUT SOURING RELATION SHIPS, ESPECIALLY FOR REGULAR AND IMPORTANT CUSTOMERS. IT WAS POINTED OUT BEFO RE THE CIT(A) THAT DURING THE YEAR UNDER CONSIDERATION AS WELL AS IN THE TWO EARLIER YEARS ASSESSEE HAD RECEIVED PROFESSIONAL FEES AGGREGATING TO RS.132 C RORES, FROM STAR INDIA PVT. LTD. FOR TWO TELEVISION SERIES AND, THEREFORE, TH E GESTURE OF SECURING THE SPONSORSHIP OF THE KOLKATA KNIGHT RIDERS CRICKET TE AM FOR STAR INDIA PVT. LTD. ON PAYMENT OF RS.10 CORES WAS A PART OF HIS BUSINESS STRATEGY OF MAINTAINING HIS GOODWILL IN BUSINESS. IT WAS ALSO BROUGHT OUT BY TH E ASSESSEE THAT BOTH PARTIES HAD COME TO A MUTUALLY ACCEPTABLE COMPROMISE FORMUL A IN ORDER TO MAINTAIN CORDIAL RELATIONSHIP WITH EACH OTHER ON ACCOUNT OF PROFESSIONAL/COMMERCIAL 6 ITA NO.623/MUM/2013, A.Y.2009-10) ITA NO.4763/MUM/2013, A.Y. 2010-11 EXPEDIENCY. THAT UNDER THESE CIRCUMSTANCES THE PL EA OF THE ASSESSING OFFICER THAT THE IMPUGNED SUM WAS NOT LEGALLY PAYABLE BY THE ASSESSEE IS IRRELEVANT. WITH REGARD TO THE OBSERVATION OF THE ASSESSING OF FICER THAT DURING THE YEAR UNDER CONSIDERATION, NO INCOME OF ANY NATURE HAS BE EN RECEIVED BY THE ASSESSEE FROM STAR INDIA PVT. LTD., ASSESSEE POINT ED OUT THAT HE HAS RECEIVED AN AMOUNT OF RS.60 CRORES IN THE INSTANT YEAR FROM STAR INDIA PVT. LTD, WHICH CONSTITUTED ALMOST 40% OF THE GROSS RECEIPTS OF TH E CURRENT YEAR. IN NUTSHELL, THE CLAIM OF THE ASSESSEE WAS THAT THE EXPENDITURE OF RS.10 CORES INCURRED FOR SECURING SPONSORSHIP FOR STAR INDIA PVT. LTD. WAS A GENUINE BUSINESS EXPENDITURE INCURRED WITH THE PURPOSE OF BENEFITIN G THE ASSESSEE IN MAINTAINING HIS RELATIONSHIP WITH STAR INDIA PVT. L TD. THE CIT(A) HAS DISAGREED WITH THE ASSESSEE, AS ACCORDING TO HIM, THE IMPUGNE D PAYMENT COULD NOT BE CONSTRUED AS COMMERCIALLY EXPEDIENT SINCE THE AM OUNT WAS NEITHER PAYABLE NOR ENFORCEABLE IN TERMS OF THE TERMS AND CONDITIO NS OF THE AGREEMENT WITH STAR INDIA PVT. LTD. AS PER THE CIT(A), THE PAYMEN T WAS GRATUITOUS IN NATURE AND, THEREFORE, ON THIS COUNT ALSO THE SAID AMOUNT WAS NOT DEDUCTIBLE AS AN EXPENDITURE. THE CIT(A) NOTED THAT AS THE EXPENDI TURE RELATED TO THE INCOME OF RS.72.00 CRORES WHICH WAS OFFERED TO TAX ON RECE IPT BASIS IN A PRECEDING YEAR AND, THUS, SUCH EXPENDITURE WAS NOT RELATABLE TO TH E INCOMES OF THE CURRENT YEAR, AND WAS A PRIOR PERIOD EXPENDITURE IN SO FAR AS THE CURRENT YEAR WAS CONCERNED. FOR ALL THE ABOVE REASONS, THE CIT(A) S USTAINED THE ACTION OF THE ASSESSING OFFICER DISALLOWING THE EXPENDITURE OF RS .10 CORES. 5. BEFORE US, THE LD. REPRESENTATIVE FOR THE ASSESS EE HAS VEHEMENTLY POINTED OUT THAT BOTH THE LOWER AUTHORITIES HAVE NO T APPRECIATED THE FACTS IN PROPER PERSPECTIVE INASMUCH AS ASSESSEE HAD A LONG -STANDING PROFESSIONAL RELATIONSHIP WITH STAR INDIA PVT. LTD. AND THAT THE IMPUGNED EXPENDITURE WAS 7 ITA NO.623/MUM/2013, A.Y.2009-10) ITA NO.4763/MUM/2013, A.Y. 2010-11 INCURRED ON ACCOUNT OF COMMERCIAL EXPEDIENCY. THE LD. REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT STAR INDIA PVT. LTD. WAS A MAJOR CLIENT OF THE ASSESSEE INASMUCH AS BETWEEN ASSESSMENT YEARS 2007-08 TO 200 9-10 ALMOST A SUM OF RS.132 CORES HAVE BEEN EARNED BY THE ASSESSEE FROM STAR INDIA PVT. LTD. AND EVEN FOR THE YEAR UNDER CONSIDERATION, OUT OF THE T OTAL GROSS RECEIPTS OF RS.150 CRORES, APPROXIMATELY A SUM OF RS.60 CORES HAS BEEN EARNED FROM THE SAID CONCERN. FOR ALL THE ABOVE REASONS, THE PLEA OF TH E ASSESSEE IS THAT THERE WAS SUFFICIENT COMMERCIAL EXPEDIENCY FOR INCURRING THE IMPUGNED EXPENDITURE AND THAT IT HAS TO BE EXAMINED FROM THE POINT OF VIEW O F A BUSINESSMAN AND THE ASSESSING OFFICER HAS MISDIRECTED HIMSELF. IN THE COURSE OF HIS ARGUMENTS, THE LD. REPRESENTATIVE REFERRED TO THE PROPOSITIONS LAI D DOWN IN THE FOLLOWING JUDGMENTS IN SUPPORT OF THE CASE OF THE ASSESSEE : - (I) SASSOON J. DAVID & CO. PVT. LTD. VS. CIT, 118 I TR 261(SC) (II) S.A BUILDERS VS. CIT, 288 ITR 1(SC) (III) CIT VS. DHANRAJGIRI RAJA NARASINGIRIJI, 91 IT R 544 (SC) 6. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESEN TATIVE HAS REITERATED THE STAND OF THE ASSESSING OFFICER, WHICH WE HAVE A LREADY NOTED IN THE EARLIER PARAS. AS PER THE LD. DEPARTMENTAL REPRESENTATIVE, THERE WAS NO BREACH OF AGREEMENT BY THE ASSESSEE AND, THEREFORE, HE WAS U NDER NO OBLIGATION TO EITHER REFUND THE FEES FOR THE NON-PRODUCED EPISODE S OR SPEND THE AMOUNT OF RS.10 CRORES FOR GRANT OF SPONSORSHIP OF KOLKATA K NIGHT RIDERS CRICKET TEAM TO STAR INDIA PVT. LTD. IT WAS THEREFORE, ARGUED THAT THE EXPENDITURE IN QUESTION WAS NOT BORNE OUT OF ANY BUSINESS NECESSITY AND WAS , RATHER, GRATUITOUS IN NATURE. IT WAS ALSO POINTED OUT THAT THE ENTIRE FE E WAS RECEIVED BY THE ASSESSEE UPFRONT AND OFFERED FOR TAX IN EARLIER AS SESSMENT YEAR ON RECEIPT 8 ITA NO.623/MUM/2013, A.Y.2009-10) ITA NO.4763/MUM/2013, A.Y. 2010-11 BASIS AND THEREFORE, EVEN IF THE IMPUGNED EXPENDITU RE IS IN RELATION TO THE INCOME FROM STAR INDIA PVT. LTD., IT CANNOT BE ALLO WED WHILE DEDUCTING CURRENT YEARS INCOME AS IT IS IN THE NATURE OF PRIOR PERIO D EXPENDITURE. IN SUM-AND- SUBSTANCE, THE LD. DEPARTMENTAL REPRESENTATIVE HAS DEFENDED THE ACTION OF THE LOWER AUTHORITIES BY PLACING RELIANCE ON THE RE SPECTIVE ORDERS. 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. EVIDENTLY, THE DISPUTE IN THIS GROUND REVOLVES AROUND THE IMPORT OF THE PROVISIONS OF SECTION 37(1) OF THE ACT. SECTION 37(1) OF THE ACT, INTER- ALIA, RELATES TO DEDUCTION OF AN EXPENDITURE LAID OUT OR EXTENDED WHOLLY AND EXCLUSI VELY FOR THE PURPOSE OF BUSINESS OR PROFESSION WHILE COMPUTING THE INCOME C HARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION. PRE CISELY PUT, THE CONTROVERSY BEFORE US IS AS TO WHETHER THE EXPENDITURE OF RS.10 CRORES INCURRED BY THE ASSESSEE BY WAY OF PAYMENT TO KNIGHT RIDERS SPORTS PVT. LTD. FOR OBTAINING SPONSORSHIP RIGHTS IN FAVOUR OF STAR INDIA PVT. LT D. WOULD CONSTITUTE AN EXPENDITURE EXPENDED WHOLLY AND EXCLUSIVELY FOR TH E PURPOSE OF ASESSEES BUSINESS OR PROFESSION SO AS TO BE DEDUCTIBLE IN TE RMS OF SECTION 37(1) OF THE ACT. THE FACT-SITUATION LIES IN A NARROW COMPASS A ND HAS ALREADY BEEN NOTED BY US IN SUFFICIENT DETAIL IN THE EARLIER PART OF THIS ORDER. BE THAT AS IT MAY, IT WOULD SUFFICE TO NOTE THAT ASSESSEE, WHO IS AN ACTO R BY PROFESSION, ENTERED INTO AN ARTIST SERVICE AGREEMENT ON 30/03/2007 WIT H STAR INDIA PVT. LTD. FOR ACTING AS ANCHOR AND HOST OF A PROGRAMME KAUN BA NEGA CROREPATI, WHICH WAS TO BE PRODUCED BY STAR INDIA LTD. THE AGREEMEN T WAS FOR A TOTAL OF 104 EPISODES DIVIDED INTO TWO SEASONS OF 52 EPISODES EA CH. THE TOTAL CONSIDERATION PAYABLE WAS RS.72 CRORES, WHICH WAS R ECEIVED BY THE ASSESSEE IN ADVANCE AND THE SAME HAS ALSO BEEN OFFERED TO TAX I N AN EARLIER ASSESSMENT YEAR ON RECEIPT BASIS. IT TRANSPIRES THAT AFTER PR ODUCTION OF 52 EPISODES IN THE 9 ITA NO.623/MUM/2013, A.Y.2009-10) ITA NO.4763/MUM/2013, A.Y. 2010-11 FIRST SEASON, THE STAR INDIA PVT. LTD. DECIDED NOT TO PRODUCE THE BALANCE 52 EPISODES FOR COMMERCIAL REASONS. IT FURTHER EMERGE S THAT SINCE THE BALANCE EPISODES WERE NOT PRODUCED, STAR INDIA PVT. LTD. WA NTED TO RECOVER THE VALUE OF THE UNUTILIZED AMOUNT FROM THE ASSESSEE FOR NON- SHOOTING OF THE SECOND SEASON. IN TERMS OF A MUTUALLY AGREED ARRANGEMENT, ASSESSEE, INTER-ALIA, AGREED TO SECURE FOR STAR INDIA PVT. LTD. A SPONSOR SHIP ASSOCIATION WITH KOLKATA KNIGHT RIDERS CRICKET TEAM FOR IPL SEASON -2. FO R SECURING SUCH SPONSORSHIP, ASSESSEE PAID RS.10 CRORES TO KNIGHT RIDERS SPORTS PVT. LTD. AND IN RETURN SPONSORSHIP RIGHTS WERE AWARDED TO STAR INDIA PVT. LTD. THE SAID EXPENDITURE HAS BEEN CLAIMED AS DEDUCTIBLE WHILE COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSI ON. 7.1 FACTUALLY SPEAKING, THERE IS NO DISPUTE THAT AS SESSEE AND STAR INDIA PVT. LTD. SHARE A BUSINESS RELATIONSHIP, INASMUCH AS, TH E ASSESSEE HAS EARNED SUBSTANTIAL PROFESSIONAL RECEIPTS FROM START INDIA PVT. LTD. NOT ONLY IN THIS YEAR BUT ALSO IN THE PAST YEARS. AT THIS POINT, WE MAY OBSERVE THAT THE ASSESSING OFFICER HAS WRONGLY NOTED THAT ASSESSEE HAS NOT REC EIVED ANY PROFESSIONAL RECEIPT FROM THE SAID CONCERN IN THE INSTANT ASSESS MENT YEAR. ON THE CONTRARY, THE DETAILS ON RECORD REVEAL THAT ASSESSEE HAS EARN ED A SUM OF RS.60 CRORES FROM STAR INDIA PVT. LTD., WHICH IS A PART OF THE T OTAL PROFESSIONAL RECEIPTS FOR THE YEAR UNDER CONSIDERATION. IN FACT, THE LD. RE PRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE AMOUNT OF RS.60 CRORES RECEIVED FROM STAR INDIA PVT. LTD. DURING THE YEAR UNDER CONSIDERATION CONSTITUTED ALM OST 40% OF THE TOTAL RECEIPTS. BE THAT AS IT MAY, WHAT WE ARE TRYING T O EMPHASIZE IS THAT THERE IS A SUBSISTING PROFESSIONAL RELATIONSHIP BETWEEN ASSESS EE AND STAR INDIA PVT. LTD.AND THE IMPUGNED ARRANGEMENT HAS TO BE VIEWED F ROM THE PRISM OF A PRINCIPAL CLIENT RELATIONSHIP. IN TERMS OF THE A RTIST SERVICE AGREEMENT DATED 10 ITA NO.623/MUM/2013, A.Y.2009-10) ITA NO.4763/MUM/2013, A.Y. 2010-11 30/03/2007, ASSESSEE WAS TO SHOOT FOR 104 EPISODES BUT NO SHOOTING TOOK PLACE FOR 52 EPISODES ON ACCOUNT OF A DECISION OF S TAR INDIA PVT. LTD., WHEREAS THE CONSIDERATION FOR THE ENTIRE EPISODES WAS PAID TO THE ASSESSEE IN ADVANCE. IN SUCH A SITUATION, INTENTION OF STAR INDIA PVT. L TD TO OBTAIN OR RECOVER THE VALUE OF THE UNUTILIZED AMOUNT FROM ASSESSEE FOR NO N-SHOOTING OF THE BALANCE 52 EPISODES IS QUITE PLAUSIBLE. AS PER THE REVENUE , THE ARTIST SERVICE AGREEMENT DATED 30/03/2007 DID NOT OBLIGATE THE ASS ESSEE TO REFUND THE UNUTILIZED AMOUNT BECAUSE THE NON-SHOOTING ON A DEC ISION TAKEN BY STAR INDIA PVT. LTD. NO DOUBT, THE POINT MADE BY THE REVENUE MAY BE CORRECT IN THE CONTEXT OF THE TERMS AND CONDITIONS OF THE ARTIST S ERVICE AGREEMENT DATED 30/03/2007 BUT THE ALLOWABILITY OF THE IMPUGNED EXP ENDITURE HAS TO BE EXAMINED IN THE CONTEXT OF ITS COMMERCIAL EXPEDIENC Y. THE ASSESSEE ENTERED INTO AN ARRANGEMENT WITH STAR INDIA PVT. LTD. ON A MUTUALLY AGREED BASIS WHEREBY THE LOSS SUFFERED BY STAR INDIA PVT. LTD. W AS SOUGHT TO BE RECOUPED WITH THE EARNINGS FROM THE SPONSORSHIP OF KOLKATA K NIGHT RIDERS CRICKET TEAM FOR WHICH ASSESSEE INCURRED RS.10 CRORES ON BEHALF OF STAR INDIA PVT. LTD. IN OUR CONSIDERED OPINION, IT IS NOT THE LEGAL NECESSITY T O SPENT THE EXPENDITURE WHICH IS DETERMINATIVE OF ITS ALLOWABILITY; RATHER, IT IS THE EXISTENCE OR OTHERWISE OF COMMERCIAL EXPEDIENCY WHICH GUIDES THE ALLOWABILITY OF EXPENDITURE UNDER SECTION 37(1) OF THE ACT. FROM THE POINT OF VIEW O F COMMERCIAL EXPEDIENCY, IT IS ABUNDANTLY CLEARLY THAT ASSESSEE HAD A LONG-STAN DING PROFESSIONAL RELATIONSHIP WITH STAR INDIA PVT. LTD. AND THERE IS A NEXUS BETWEEN THE IMPUGNED EXPENDITURE AND THE PURPOSE OF BUSINESS. THE LD. REPRESENTATIVE FOR THE ASSESSEE HAS RIGHTLY RELIED UPON THE JUDGME NT OF DHANRAJGIRI RAJA NARASINGIRIJI (SUPRA) TO CONTEND THAT IT WAS NOT FO R THE REVENUE TO PRESCRIBE WHAT EXPENDITURE SHOULD AN ASSESSEE INCUR AND UNDER WHAT CIRCUMSTANCES. IN 11 ITA NO.623/MUM/2013, A.Y.2009-10) ITA NO.4763/MUM/2013, A.Y. 2010-11 THE PRESENT CASE, THERE IS NO CHALLENGE TO THE BONA FIDES OF THE EXPENDITURE INCURRED AND, IN OUR VIEW, THE SAME CAN BE UNDERSTO OD TO HAVE BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS WITHIN THE MEANING OF SECTION 37(1) OF THE ACT. IN FACT, THE HON'BLE SUP REME COURT IN THE CASE OF SASSOON J. DAVID (SUPRA) HAS HELD THAT THE EXPRESS ION WHOLLY AND EXCLUSIVELY USED IN SECTION10(2)(XV) OF THE INCOME TAX ACT, 1922 ( WHICH IS PARI-MATERIA TO SECTION 37(1) OF THE ACT ) DOES NOT MEAN THAT EX PENDITURE HAS TO BE NECESSARILY INCURRED. AS PER HON'BLE SUPREME COU RT, AN EXPENDITURE INCURRED VOLUNTARILY AND WITHOUT ANY NECESSITY WOUL D BE ALLOWABLE SO LONG AS IT HAS BEEN INCURRED FOR PROMOTING THE BUSINESS OF THE ASSESSEE. IN OUR CONSIDERED OPINION, THE COMMERCIAL EXPEDIENCY CANVA SSED BY THE ASSESSEE IN THE INSTANT CASE CLEARLY ESTABLISHES THAT THE IMPUG NED EXPENDITURE FALLS WITHIN THE SCOPE OF THE EXPRESSION WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OR PROFESSION WITHIN THE MEANING OF SECTION 37(1) OF THE ACT. THEREFORE, ON THIS ASPECT, ASSESSEE HAS TO SUCCEED. ACCORDINGLY, THE ORDER OF THE CIT(A) IS SET-ASIDE AND THE ASSESSING OFFICER IS DIRECTED TO DELETE THE ADDITION OF RS.10 CRORES. THUS, ASSESSEE SUCCEEDS ON THIS GROUND. 8. THE SECOND GROUND OF APPEAL RELATES TO AN ADDITI ON OF RS. 7 CRORES AS PROFESSIONAL FEE. BRIEFLY PUT, THE RELEVANT FACTS IN THIS CONTEXT CAN BE SUMMARIZED AS FOLLOWS. THE GENESIS OF SAID ADDITIO N IS ALSO THE MUTUAL UNDERSTANDING ARRIVED AT BETWEEN THE ASSESSEE AND M /S. STAR INDIA PVT. LTD. IN RELATION TO THE ARTIST SERVICE AGREEMENT DATED 30.3 .2007. AS HAS BEEN NOTED BY US EARLIER, IN TERMS OF THE UNDERSTANDING WITH S TAR INDIA PVT. LTD., ASSESSEE WAS TO SECURE SPONSORSHIP RIGHTS OF KOLKATA KNIGHT RIDERS CRICKET TEAM FOR IPL SEASON-II FOR WHICH ASSESSEE HAD PAID THE RELEVANT CONSIDERATION TO M/S. KNIGHT RIDERS SPORTS PVT. LTD. ON BEHALF OF M/S. ST AR INDIA PVT. LTD. AS A PART OF 12 ITA NO.623/MUM/2013, A.Y.2009-10) ITA NO.4763/MUM/2013, A.Y. 2010-11 THE UNDERSTANDING, ASSESSEE HAD AGREED TO ATTEND ON E PRESS CONFERENCE EACH AT LONDON AND DUBAI ON MUTUALLY SUITABLE DATES FOR PROMOTION OF M/S. STAR INDIA PVT. LTD. AS SPONSORER OF KOLKATA KNIGHT RIDE RS CRICKET TEAM. THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO EXPLAIN AS TO WHY THE ASSESSEE HAD NOT SHOWN ANY PROFESSIONAL RECEIPT ON THIS COUNT SI NCE HE HAD AGREED FOR APPEARANCES AND PROMOTIONS, WHICH IS A PART OF HI S NORMAL PROFESSIONAL ACTIVITY. THE ASSESSING OFFICER OBSERVED THAT ASSE SSEE WAS EARNING PROFESSIONAL RECEIPTS FROM FILMS, ADVERTISEMENTS & ENDORSEMENTS AND STAGE PERFORMANCES. THE ASSESSING OFFICER FURTHER NOTICED THAT THE ACTI VITY OF APPEARING IN A PRESS CONFERENCE WAS ALSO IN THE REALM OF ASSESSEES PROF ESSIONAL ACTIVITY. ACCORDING TO THE ASSESSING OFFICER, THE ENORMOUS BRAND EQUITY ENJOYED BY ASSESSEE WAS EXPLOITED FOR SUCH AN ARRANGEMENT BOTH BY M/S. STAR INDIA PVT. LTD. AND M/S. KNIGHT RIDERS SPORTS PVT. LTD. AND THAT INCIDENTALL Y THE SUBSTANTIAL SHAREHOLDER OF M/S. KNIGHT RIDERS SPORTS PVT. LTD. WAS M/S. RED CHILLIES ENTERTAINMENT PVT. LTD. IN WHICH ASSESSEE AND HIS WIFE WERE THE SHAREH OLDERS. THE ASSESSING OFFICER ALSO NOTICED THAT IN THE SUBSEQUENT YEAR, A SSESSEE HAD ACQUIRED SUBSTANTIAL SHARES IN M/S. KNIGHT RIDERS SPORTS PVT . LTD. AND, THEREFORE, THE BENEFITS WHICH ACCRUED TO THE SAID CONCERN FROM END ORSEMENT BY ASSESSEE HAD BENEFITTED THE ASSESSEE IN A ROUNDABOUT MANNER, WHI CH WAS REFLECTED IN THE ACQUISITION OF SHARES OF THE SAID COMPANY BY THE AS SESSEE IN THE SUBSEQUENT YEAR. THE ASSESSING OFFICER ESTIMATED THE VALUE OF SUCH ARRANGEMENT AT RS. 7 CRORES BEING THE AVERAGE RATE OF ENDORSEMENT FEE CH ARGED BY ASSESSEE AND THE SAME WAS BROUGHT TO TAX AS PROFESSIONAL FEE. 9. BEFORE THE CIT(A), ASSESSEE POINTED OUT THAT THO UGH HE HAD AGREED TO ATTEND ONE PRESS CONFERENCE EACH AT LONDON AND DUBA I ON MUTUALLY SUITABLE DATES FOR PROMOTION OF M/S. STAR INDIA PVT. LTD. AS SPONSORER OF KOLKATA KNIGHT 13 ITA NO.623/MUM/2013, A.Y.2009-10) ITA NO.4763/MUM/2013, A.Y. 2010-11 RIDERS CRICKET TEAM, BUT THESE EVENTS NEVER TOOK PL ACE AND THEY WERE NEVER DEMANDED BY M/S. STAR INDIA PVT. LTD. THE ASSESSEE ALSO ASSERTED BEFORE THE CIT(A) THAT HE HAD NOT RECEIVED ANY AMOUNT IN CONNE CTION WITH SUCH ARRANGEMENT AND THAT THE SAME WAS IN LIEU OF GIVING UP SHOOTING OF 52 EPISODES OF KAUN BANEGA CROREPATI BY STAR INDIA PVT . LTD. FOR WHICH THE ASSESSEE HAD ALREADY RECEIVED PROPORTIONATE CONSIDE RATION OF RS. 36 CRORES IN THE EARLIER YEARS. THEREFORE, THE ASSESSEE RESISTE D THE ADDITION MADE BY THE ASSESSING OFFICER. THE ASSESSEE ALSO ASSAILED THE INVOKING OF SEC. 2(24)(IV) OF THE ACT BY THE ASSESSING OFFICER BY POINTING OUT TH AT NO BENEFIT OR PERQUISITE HAS BEEN OBTAINED BY ASSESSEE FOR GETTING SPONSORSH IP OF KOLKATA KNIGHT RIDERS CRICKET TEAM FOR M/S. STAR INDIA PVT. LTD. AND, THE REFORE, THE IMPUGNED ADDITION WAS UNTENABLE ON THIS POINT ALSO. IN SUM AND SUBST ANCE, THE CLAIM OF ASSESSEE WAS THAT THE IMPUGNED ADDITION WAS A NOTIONAL ASSES SMENT AND THERE WAS NO REAL INCOME ON THIS COUNT. WITH REGARD TO THE OBSE RVATION OF ASSESSING OFFICER OF HAVING ACQUIRED THE SHARES OF M/S. KNIGHT RIDERS SPORTS PVT. LTD. IN THE SUBSEQUENT YEAR FOR A CONSIDERATION, ASSESSEE POINT ED OUT THAT THE CONSIDERATION PAID WAS VERY MUCH ABOVE THE THEN BOO K VALUE OF SHARES AND THAT SUCH SHARES WERE PURCHASED FROM M/S. RED CHILL IES ENTERTAINMENT PVT. LTD., WHO WAS INITIALLY FUNDED BY THE ASSESSEE FOR ACQUISITION OF SUCH SHARES. IN SUM AND SUBSTANCE, THE ASSESSEE ARGUED THAT THERE W AS NO JUSTIFICATION FOR SUCH AN ADDITION. THE CIT(A), HOWEVER, WAS NOT IMP RESSED WITH THE ARGUMENTS OF ASSESSEE AND HAS UPHELD THE ADDITION MADE BY THE ASSESSING OFFICER. AGAINST THE AFORESAID, ASSESSEE IS IN FURTHER APPEA L BEFORE US. 10. BEFORE US, THE LEARNED REPRESENTATIVE FOR THE A SSESSEE VEHEMENTLY POINTED OUT THAT THE IMPUGNED ADDITION REFLECTS ASS ESSMENT OF NOTIONAL 14 ITA NO.623/MUM/2013, A.Y.2009-10) ITA NO.4763/MUM/2013, A.Y. 2010-11 INCOME AND IS THEREFORE COMPLETELY UNTENABLE. REFE RRING TO THE APPEARANCES AND PROMOTIONS AGREED TO WITH M/S. STAR INDIA PVT. LTD., THE LEARNED REPRESENTATIVE EXPLAINED THAT THE SAME WERE A PART OF THE MUTUALLY AGREED TERMS AND CONDITIONS AS A CONSIDERATION FOR NON-SHO OTING OF 52 EPISODES OF KAUN BANEGA CROREPATI BY M/S. STAR INDIA PVT. LTD. FOR WHICH ASSESSEE HAD ALREADY RECEIVED PROPORTIONATE CONSIDERATION OF RS. 36 CRORES IN THE EARLIER YEARS. NEVERTHELESS, IT WAS POINTED OUT THAT SUCH EVENTS IN THE SHAPE OF PRESS CONFERENCES AT LONDON AND DUBAI NEVER TOOK PLACE AN D, THEREFORE, THERE WAS NO JUSTIFICATION FOR ASSESSING OFFICER TO ASSUME TH AT ASSESSEE HAD EARNED ANY INCOME THEREOF. THE LEARNED REPRESENTATIVE RELIED UPON THE FOLLOWING JUDGMENTS IN SUPPORT OF THE PROPOSITION THAT ONLY R EAL INCOME IS REQUIRED TO BE TAXED :- I) SHOORJI VALLABHDAS AND CO., 46 ITR 144 (SC) II) GODHRA ELECTRICITY CO. LTD., 225 ITR 746 (SC) 11. ON THE OTHER HAND, THE LD. CIT-DR APPEARING FOR THE REVENUE HAS REITERATED THE STAND OF THE LOWER AUTHORITIES, WHIC H WE HAVE ALREADY NOTED IN THE EARLIER PARAS AND IS NOT BEING REPEATED FOR THE SAKE OF BREVITY. 12. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. A PERUSAL OF THE ASSESSMENT ORDER REVEALS THAT THE ASSESSING OFFICER ISSUED SHOW-CAUSE NOTICE DATED 8.12.2011, WHICH READS AS UNDER :- IN SUPPORT OF PROFESSIONAL FEES RETURNED STAR INDI A LTD . VIDE LETTER DATED 11.11.2011, YOU HAVE SUBMITTED A TRIPARTITE AGREEMENT BETWEEN YOU, STAR INDIA P. LTD. & KNIGHT RIDERS SPORTS P LTD. IN SCHED ULE 2 OF THIS AGREEMENT, YOU HAVE AGREED FOR APPEARANCES & PROMOTIONS, BUT YOU HAVE NOT SHOWN ANY RECEIPTS IN THIS REGARD. IN LIGHT OF THESE FACTS, YOU ARE SHOW CAUSED AS TO 15 ITA NO.623/MUM/2013, A.Y.2009-10) ITA NO.4763/MUM/2013, A.Y. 2010-11 WHY APPEARANCES & PROMOTIONS SHOULD NOT BE CONSTRUED AS A PROFESSIONAL ACTIVITY THAT YOU ARE NORMALLY CARRYING OUT AS AN ARTIS T AND ACCORDINGLY, PROFESSIONAL FEES ON AN AVERAGE BASIS SHOULD BE CHARGE D AS AN INCOME IN YOUR HANDS. THE AFORESAID SHOW-CAUSE NOTICE OF ASSESSING OFFICE R REVEALS THE REASON FOR HIS ACTION OF ESTIMATING AN INCOME OF RS. 7 CRORES AS P ROFESSIONAL FEE EARNED BY THE ASSESSEE. FACTUALLY SPEAKING, IT HAS BEEN CONSISTE NTLY ASSERTED BY THE ASSESSEE THAT THE APPEARANCES AND PROMOTIONS BEING REFERRED TO BY ASSESSING OFFICER NEVER TOOK PLACE AND, THEREFORE, THERE WAS NO OCCAS ION FOR EARNING ANY INCOME THEREOF. FURTHER, IT HAS ALSO BEEN ASSERTED BEFORE THE LOWER AUTHORITIES THAT THE AGREED APPEARANCES AND PROMOTIONS REFERRED TO W ERE A PART OF THE UNDERSTANDING ARRIVED AT WITH M/S. STAR INDIA PVT. LTD. AS A CONSEQUENCE OF NON-SHOOTING OF 52 EPISODES FOR WHICH PROPORTIONATE FEE WAS ALREADY RECEIVED IN THE EARLIER YEARS. ON BOTH THE AFORESAID ASSERT IONS, WE FIND NO NEGATION BY THE INCOME-TAX AUTHORITIES, THEREFORE, IT IS ABUNDA NTLY CLEAR THAT THE IMPUGNED ADDITION OF RS. 7 CRORES IS MERELY AN ASSESSMENT OF A NOTIONAL INCOME, WHICH IS NEITHER SUPPORTED BY RECEIPT OR ACCRUAL OF INCOME. IT CANNOT BE OVER- EMPHASISED THAT WHAT IS REQUIRED TO BE ASSESSED TO INCOME-TAX IS THE REAL INCOME AND NOT A HYPOTHETICAL OR NOTIONAL INCOME. AS PER THE HON'BLE SUPREME COURT IN THE CASE OF GODHRA ELECTRICITY CO. LTD. (SUPRA) IN CASE OF ACCRUAL OF INCOME OR RECEIPT OF INCOME, WHAT IS OF RELEVANCE IS TO ASSESS AN INCOME WHICH MATERIALISES. IF AN INCOME DOES NOT R ESULT AT ALL, OBVIOUSLY THERE CANNOT BE TAXATION OF SUCH AN INCOME. IN THE ORDER S OF THE AUTHORITIES BELOW AS WELL AS BEFORE US, THE REVENUE HAS NOT BEEN ABLE TO POINT OUT AS TO HOW ASSESSEE BECOMES ENTITLED TO EARNING OF THE IMPUGNE D PROFESSIONAL INCOME. BE THAT AS IT MAY, THE DISCUSSION IN THE ORDERS OF THE AUTHORITIES BELOW REVEALS THAT THE ADDITION HAS BEEN SOUGHT TO BE JUSTIFIED A LSO IN ANOTHER MANNER, WHICH 16 ITA NO.623/MUM/2013, A.Y.2009-10) ITA NO.4763/MUM/2013, A.Y. 2010-11 WE DEAL HEREINAFTER. AS PER REVENUE, THE ASSESSEE, ON ACCOUNT OF HIS PROFESSIONAL STANDING, ENJOYS BRAND EQUITY AND, THE REFORE, THE APPEARANCES AND PROMOTIONS HAS ADDED VALUE TO THE ENTITIES ON B EHALF OF WHICH SUCH APPEARANCES TAKE PLACE. IN THE PRESENT CASE, AS PE R THE REVENUE, THE BRAND EQUITY OF M/S. KNIGHT RIDERS SPORTS PVT. LTD. AND M /S. STAR INDIA PVT. LTD. WAS ENHANCED BECAUSE OF SUCH APPEARANCES BY THE ASSESSE E. IT IS ALSO NOTED THAT IN THE SUBSEQUENT YEAR, ASSESSEE HAD PURCHASED THE SHA RES OF M/S. KNIGHT RIDERS SPORTS PVT. LTD. FROM M/S. RED CHILLIES ENTERTAINME NT PVT. LTD. AND IN THIS MANNER THE EVENTS HAVE BEEN SO PLANNED THAT THE BRA ND OF M/S. KNIGHT RIDERS SPORTS PVT. LTD. WAS PROMOTED BY THE ASSESSEE IN TH IS YEAR ITSELF. BECAUSE OF THE AFORESAID ARRANGEMENT, THE REVENUE CONTENDS THA T THERE IS A CERTAIN AMOUNT OF INCOME WHICH CAN BE ATTRIBUTABLE TO SUCH SERVICES RENDERED BY THE ASSESSEE. IN OUR CONSIDERED OPINION, THE AFORESAID PROPOSITION MADE OUT BY REVENUE IS ENTIRELY MIS-CONCEIVED INASMUCH AS NO SU CH APPEARANCES AND PROMOTIONS HAVE INDEED BEEN CARRIED OUT. FURTHER, AS PER THE REVENUE BECAUSE OF SUCH AN ARRANGEMENT, ASSESSEE HAS EARNED A BENEFIT WITHIN THE MEANING OF SEC. 2(24)(IV) OF THE ACT. ON THIS ASPEC T ALSO, IN OUR VIEW, THE ACTION OF LOWER AUTHORITIES IS COMPLETELY MISDIRECTED AND IS DEVOID OF ANY FACTUAL SUPPORT. THE ASSESSING OFFICER HAS NOT BEEN ABLE T O ESTABLISH AS TO WHAT BENEFIT HAS BEEN OBTAINED BY ASSESSEE WITHIN THE ME ANING OF SEC. 2(24)(IV) OF THE ACT IN THE INSTANT YEAR AS NOTHING IS SHOWN TO HAVE BEEN RECEIVED BY THE ASSESSEE. THEREFORE, IN A NUTSHELL, IN OUR OPINION , THE ADDITION OF RS. 7 CRORES MADE BY ASSESSING OFFICER IS PURELY ON CONJECTURES AND SURMISES AND IS UNTENABLE IN LAW AND ALSO ON FACTS. THEREFORE, ON THIS ASPECT ALSO, ASSESSEE SUCCEEDS. ACCORDINGLY, WE SET-ASIDE THE ORDER OF C IT(A) ON THIS ASPECT AND DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION . 17 ITA NO.623/MUM/2013, A.Y.2009-10) ITA NO.4763/MUM/2013, A.Y. 2010-11 13. THE NEXT GROUND IN THIS APPEAL IS WITH REGARD T O THE ACTION OF THE ASSESSING OFFICER IN BRINGING TO TAX ANNUAL VALUE O F THE DUBAI VILLA AT RS.67,20,000/-. 13.1 IN THIS CONTEXT, BRIEF FACTS ARE THAT ASSESSEE WAS GIFTED A VILLA IN DUBAI BY NAKHEEL PJSE AND POSSESSION WAS RECEIVED BY THE ASS ESSEE ON 18/06/2008. THE ASSESSING OFFICER SHOW CAUSED THE ASSESSEE TO E XPLAIN AS TO WHY THE DEEMED ANNUAL LETTING VALUE WITHIN THE MEANING OF S ECTION 23(1)(A) OF THE ACT SHOULD NOT BE ADOPTED IN RESPECT TO THE SAID PROPER TY. BEFORE THE ASSESSING OFFICER ASSESSEE CONTENDED THAT IN VIEW OF THE PROV ISIONS OF PARA -1 OF ARTICLE - 6 OF THE DOUBLE TAXATION AVOIDANCE AGREEMENT BETWE EN INDIA AND UAE, NO INCOME IN RESPECT OF THE SAID PROPERTY WAS REQUIRED TO BE ASSESSED. HOWEVER, ASSESSING OFFICER DID NOT ACCEPT THE PLEA OF THE AS SESSEE AND ESTIMATED THE ANNUAL LETTING VALUE AT RS.96.00 LACS AND THEREAFTE R, ALLOWING THE DEDUCTION UNDER SECTION 24(A) OF THE ACT AMOUNTING TO RS.28,8 0,000/-, THE INCOME FROM HOUSE PROPERTY WAS ASSESSED AT RS.67,20,000/-. BEF ORE THE CIT(A), ASSESSEE REITERATED THE SUBMISSIONS PUT FORTH BEFORE THE ASS ESSING OFFICER. THE CIT(A) HAS UPHELD THE STAND OF THE ASSESSING OFFICER IN TH E LIGHT OF THE NOTIFICATION NOS.90 & 91 OF 2008 DATED 28/08/2008 ISSUED BY THE CBDT. AS PER THE CIT(A), IN VIEW OF THE AFORESAID NOTIFICATIONS, THE ANNUAL LETTING VALUE OF THE SAID PROPERTY WAS INCLUDIBLE IN THE TOTAL INCOME OF THE ASSESSEE. AGAINST SUCH DECISION OF THE CIT(A) ASSESSEE IS IN FURTHER APPE AL BEFORE THE TRIBUNAL. 13.2 BEFORE US, THE LD. REPRESENTATIVE FOR THE ASSE SSEE VEHEMENTLY POINTED OUT THAT THE ASSESSMENT OF NOTIONAL INCOME FROM DUB AI VILLA IS NOT AS PER THE PROVISIONS OF THE ACT AND DOUBLE TAXATION AVOIDANCE ACT (DTAA) BETWEEN INDIA AND UAE AND, THEREFORE, THE ORDERS OF THE AUTHORITI ES BELOW BE SET-ASIDE. 18 ITA NO.623/MUM/2013, A.Y.2009-10) ITA NO.4763/MUM/2013, A.Y. 2010-11 ACCORDING TO THE LD. REPRESENTATIVE, ARTICLE-6 OF THE DOUBLE TAXATION AVOIDANCE AGREEMENT BETWEEN INDIA AND UAE PRESCRIBE S THAT INCOME DERIVED BY A RESIDENT OF A CONTRACTING STATE FROM IMMOVABLE PROPERTY SITUATED IN THE OTHER CONTRACT STATE MAY BE TAXED IN THAT OTHER STA TE. THEREFORE, ACCORDING TO THE LD. REPRESENTATIVE, THE INCOME FROM THE PROPER TY SITUATED IN DUBAI IS LIABLE TO BE TAXED IN UAE AND, THEREFORE, THE ASSES SEE DID NOT OFFER THE INCOME TO TAX. 13.3 ON THE OTHER HAND, LD. DEPARTMENTAL REPRESENTA TIVE APPEARING FOR THE REVENUE HAS DEFENDED THE ORDERS OF THE AUTHORITIES BELOW BY PLACING RELIANCE THEREON. 13.4 WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMIS SIONS. ON THIS ASPECT, AT THE OUTSET, WE MAY SAY THAT THE ACTION OF THE LOWER AUTHORITIES DESERVES TO BE UPHELD IN VIEW OF THE NOTIFICATION NOS.90 & 91/2008 DATED 28/08/2008. IN FACT, THE ENTIRE CONTROVERSY IS ARISING FROM THE UNDERSTA NDING OF THE EXPRESSION MAY BE TAXED IN THAT OTHER STATE AS MENTIONED IN PARA-1 OF ARTICLE-6 OF THE DOUBLE TAXATION AVOIDANCE AGREEMENT BETWEEN INDIA A ND UAE. THE MEANING OF THE SAID EXPRESSION HAS BEEN EXPLAINED BY OUR CO -ORDINATE BENCH IN THE CASE OF ESSAR OIL LTD. V/S. ACIT, ITA NO.2428/MUM/2007 DATED 28/08/2013 IN THE FOLLOWING WORDS:- I) THE RATIO OF ALL THE JUDGMENTS RENDERED BY THE HON'BLE HIGH COURTS, AS DISCUSSED HEREIN ABOVE AND CONFIRMED BY THE HON'BLE SUPREME C OURT SPECIFICALLY IN THE CASE OF TURQUOISE INVESTMENT, ON THE INTERPRETATION OF THE EXPRESSION 'MAY BE TAXED', THAT ONCE THE TAX IS PAYABLE OR BANK OF BARODA 23 PAID I N THE COUNTRY OF SOURCE, THEN COUNTRY OF RESIDENCE IS DENIED OF THE RIGHT TO LEVY TAX ON SUCH INCOME OR THE SAID INCOME CANNOT BE INCLUDED IN RETURN OF INCOME FILED IN INDIA, WOULD NO LONGER APPLY AFTER THE INSERTION OF PROVISION OF SUB-SECTION (3) OF SECTION 90 W.E.F. 1ST APRIL, 2004, I.E. ASSESSMENT YEAR 2004-05. THE SAID PROVISION AS CONFERRED UPON THE CENTRAL GOVERNMENT A POWER TO ISSUE NOTIFICATION, ASSIGNING MEANING TO THE TERMS USED IN THE DTAA, WHICH HAS NEITHER BEEN DEFINED UNDER THE ACT NOR IN THE AGREEMENT PROVIDED THAT SUCH A MEANING SHOULD NOT BE INCONSIS TENT WITH THE PROVISIONS OF THE 19 ITA NO.623/MUM/2013, A.Y.2009-10) ITA NO.4763/MUM/2013, A.Y. 2010-11 ACT OR AGREEMENT. IN PURSUANCE OF SUCH A STATUTORY EMPOWERMENT, CENTRAL GOVT. HAS ISSUED A NOTIFICATION ON 28TH AUGUST, 2008, CLEARLY SPECIFYING THAT WHERE THE DTAA ENTERED INTO BY THE CENTRAL GOVT. WITH THE GOVT. OF ANY OTHER COUNTRY PROVIDES THAT ANY INCOME OF A RESIDENT OF INDIA 'MAY BE TAXED' IN THE OTHER COUNTRY, SUCH INCOME SHALL BE INCLUDED IN HIS TOTAL INCOME CHARGEABLE TO TAX IN INDIA IN ACCORDANCE WITH THE PROVISIONS OF THE INCOME TAX ACT, 1961 AND RELIEF S HALL BE GRANTED IN ACCORDANCE WITH THE METHOD FOR ELIMINATION OR AVOIDANCE OF DOUBLE T AXATION PROVIDED IN SUCH AGREEMENT. THIS MEANING ASSIGNED TO THE TERM 'MAY B E TAXED' HAS CHANGED ITS COMPLEXION; II) THE NOTIFICATION DATED 28TH AUGUST 2008, REFLECTS A PARTICULAR INTENT AND OBJECTIVE OF THE GOVERNMENT OF INDIA, AS UNDERS TOOD DURING THE COURSE OF NEGOTIATIONS LEADING TO FORMALIZATION OF TREATY. TH EREFORE, SUCH A NOTIFICATION HAS TO BE RECKONED AS CLARIFICATORY IN NATURE AND HENCE IN TERPRET TATION GIVEN BY GOVT. OF INDIA THROUGH THIS NOTIFICATION WILL BE EFFECTIVE F ROM 1ST APRIL 2004, I.E., FROM THE DATE WHEN PROVISION OF SECTION 90(3) WAS BROUGHT IN THE STATUTE, GIVING A LEGAL FRAME WORK FOR CLARIFYING THE INTENT OF ONE OF THE NEGOTIATING PARTIES; III) THE PHRASE 'MAY BE TAXED' IS NOT APPEARING IN THE STATUTE, BUT IT IS A PPEARING IN THE AGREEMENT AND THEREFORE, THE INTERPRETATION AS UNDERSTOOD AND INT ENDED BY THE NEGOTIATING PARTIES SHOULD BE ADOPTED. HERE ONE OF THE PARTIES I.E., GO VERNMENT OF INDIA HAS CLEARLY SPECIFIED THE INTENT AND THE OBJECT OF THIS PHRASE. IF PHRASE IS USED IN A STATUTE, THEN 'ANY INTERPRETATION GIVEN BY THE HIGH COURT OR THE SUPREME COURT IS BINDING ON ALL THE SUBORDINATE COURTS AND HAS TO BE RECKONED AS LAW OF THE LAND. HOWEVER, THE MEANING ASSIGNED BY GOVERNMENT OF INDIA FOR A PHRASE OR TER M USED IN THE AGREEMENT THROUGH NOTIFICATION WILL PREVAIL AT LEAST FROM THE ASSESSM ENT YEAR 2004-05. BECAUSE, WHILE INTERPRETING THE TREATY, THE INTENTION OF THE PARTI ES TO THE AGREEMENT HAS TO BE BANK OF BARODA 24 GIVEN PRIMACY AND HAS TO BE UNDERSTOOD IN THAT MANNER ONLY. THEREFORE, THE NOTIFICATION IS NOT CONTRARY TO THE PROVISIONS OF THE ACT. CONSEQUENTLY, THE EARLIER JUDGMENTS RENDERED IN ASSESSEE'S CASE PRIOR TO ASSE SSMENT YEAR 2004-05, WILL NOT HAVE BINDING PRECEDENCE IN THIS YEAR OR SUBSEQUENT YEAR; 13.5 IN VIEW OF THE AFORESAID PRECEDENT, IT HAS TO BE HELD THAT INCOME FROM THE DUBAI VILLA IS LIABLE TO BE TAXED IN INDIA INA SMUCH AS THE SAME IS INCLUDIBLE IN THE RETURN OF INCOME AND WHATEVER TAXES THAT MAY HAVE BEEN LEVIED IN THE OTHER CONTRACTING STATE, THE CREDIT THEREOF IS REQU IRED TO BE ALLOWED AS PER LAW. THEREFORE, IN VIEW THEREOF WE HOLD THE ISSUE AGAIN ST THE ASSESSEE AND DIRECT THE ASSESSING OFFICER TO REWORK THE FINAL TAX LIABI LITY IN ACCORDANCE WITH AFORESAID DIRECTION. THUS, ON THIS ASPECT ASSESSEE FAILS ON ITS GROUND. 13.6 THE LAST GROUND RAISED BY THE ASSESSEE IS IN R ESPECT OF CHARGING OF INTEREST UNDER SECTION 234B & 234C OF THE ACT, WHIC H IS CONSEQUENTIAL IN NATURE, AND THEREFORE THIS GROUND OF APPEAL IS DIS MISSED. 20 ITA NO.623/MUM/2013, A.Y.2009-10) ITA NO.4763/MUM/2013, A.Y. 2010-11 14. IN THE APPEAL FOR ASSESSMENT YEAR 2010-11, THE ONLY GROUND RAISED BY THE ASSESSEE IS WITH REGARD TO BRINGING THE ANNUAL VALE OF DUBAI VILLA TO TAX IN INDIA WHICH HAS ALREADY BEEN DECIDED BY US WHILE DI SPOSING OFF THE APPEAL OF ASSESSEE FOR ASSESSMENT YEAR 2009-10 IN THE EARLIER PARAS. AS THE FACTS AND CIRCUMSTANCES IN THE APPEAL FOR ASSESSMENT YEAR 201 0-11 IS PARI MATERIA TO THOSE CONSIDERED BY US IN APPEAL FOR ASSESSMENT YEA R 2009-10, OUR DECISION THEREIN SHALL APPLY MUTATIS MUTANDIS TO THE SAID APPEAL ALSO. 15. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED, AS ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 17/03/2017 SD/- SD/- ( AMIT SHUKLA) (G.S. PANNU) JUDICIAL MEMBER ACCOCUNTANT MEMBER MUMBAI, DATED 17/03/2017 VM , SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT , 2. THE RESPONDENT. 3. THE CIT(A)- 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI