2003 (3) TMI 82 - HC - Income Tax

Whether, on the facts and in the circumstances of the case, the Tribunal was right in law and had valid materials in holding that gifts made by the producers to the children of the assessee cannot be construed as consideration received by the assessee for the professional service rendered by him and accordingly, in excluding these gifts from the total income of the assessee? - We do not find any error in the reasoning of the Tribunal. We uphold the same. - Whether, on the facts and in the circumstances of the case, the Tribunal was right in law and had material in holding that out of the total consideration of Rs. 1,45,000 towards lease consideration received by the assessee only a sum of Rs. 29,000 is to be assessed for the assessment year 1986-87? - This question is answered against the assessee and in favour of the Revenue.

Summary

Issues:
1. Whether gifts made by producers to the children of the assessee can be considered as consideration received by the assessee for professional services rendered.
2. Whether the total consideration towards lease received by the assessee should be fully assessed for the relevant assessment year.

Analysis:
1. The first issue pertains to gifts made by producers to the children of the assessee and their tax implications. The Assessing Officer contended that these gifts should be treated as additional remuneration to the assessee due to a perceived pattern of the children receiving gifts from producers whose films the assessee agreed to act in. However, the Tribunal disagreed, emphasizing that the burden of proof lies with the Revenue to establish that such gifts constitute income of the assessee. The Tribunal noted that the gifts were received by the children, accounted for, and gift-tax paid. The donors confirmed the amounts were gifts, not part of the assessee's remuneration. The Tribunal found no evidence supporting the Assessing Officer's inference, concluding that the gifts were not in consideration for the services rendered by the assessee. The court upheld the Tribunal's decision, ruling in favor of the assessee.

2. The second issue concerns the lease consideration received by the assessee for film distribution. The assessee argued that only the amount to be adjusted annually towards rental should be treated as income for each year. However, the Assessing Officer included the entire amount received under the agreement as income for the relevant year, citing the absence of an obligation for the assessee to return any part of the amount in the future. The court agreed with the Assessing Officer, ruling that the full amount received should be assessed as income for that year. This question was answered against the assessee and in favor of the Revenue.