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2010 (10) TMI 196 - AT - Income TaxDeduction u/s 80RR - Expenditure u/s 37(1) - personal expenditure - assessee had claimed deduction under section.80RR at the rate of 30 per cent on professional remuneration of Rs. 1,26,39,773 for doing shows abroad - Held that - Assessing Officer has clearly noted that assessee has filed a letter from Shri Vijay Taneja and has not submitted any such agreements. Further in the Form-10H Annexed with the assessment order in the column of place of residence in respect of all items the particular filled are not available . - since assessee has been deprived from filing of the papers before us because of the fault of on behalf of assessee only, we are of the view that in the interest of justice this matter should go back to Assessing Officer to be re-examined in the light of observations. Addition of Income On accout of legal expenses and professional charges without appreciating the fact that the criminal offence was committed by assessee in his personal capacity and not in his professional capacity as an actor - Hence, the same being personal in nature cannot be allowed under section 37(1) of the Act Appeal is partly allowed
Issues Involved:
1. Deduction under section 80RR of the Income-tax Act, 1961. 2. Disallowance of legal expenses and professional charges under section 37(1) of the Income-tax Act, 1961. Issue-wise Detailed Analysis: 1. Deduction under section 80RR of the Income-tax Act, 1961: The revenue challenged the CIT(A)'s decision to allow the deduction under section 80RR, arguing that the income derived by the assessee was not in exercise of his profession as an actor from foreign sources. The revenue also contended that the CIT(A) failed to consider the ITAT Mumbai decision in Harsha Bhogle 86 Income-tax Digest 714. The assessee, a film actor, claimed a deduction under section 80RR on professional remuneration for shows performed abroad. The Assessing Officer (AO) requested copies of agreements, passports, and other details of the visits. The CIT(A) allowed the deduction, stating that the assessee met the conditions of section 80RR, including being a resident individual, an actor, and receiving income from foreign sources. The CIT(A) referenced several CBDT circulars supporting the deduction for artists performing abroad. The AO argued that the letters provided did not indicate that payments were made in advance and that the place of residence of the remitters was not mentioned in Form-10H. The AO also noted that the exemption under section 80RR should be construed strictly and that the assessee, being an actor, could not be strictly classified as a stage artist. The Tribunal found merit in the AO's observations and noted inconsistencies in the assessee's claims. The Tribunal decided to remit the matter back to the AO for re-examination, directing the AO to verify the correct figure allowable under section 80RR and to give the assessee adequate opportunity to explain his case. 2. Disallowance of legal expenses and professional charges under section 37(1) of the Income-tax Act, 1961: The AO disallowed Rs. 11,70,000 out of Rs. 12,90,000 incurred towards legal expenses, arguing that these were personal expenses related to criminal proceedings against the assessee. The CIT(A) allowed the expenses, stating that they were incurred to defend the assessee in criminal proceedings arising out of his professional activity. The revenue argued that the expenses were personal, related to an alleged criminal act (shooting a prohibited bird) during a film shoot, and had nothing to do with the assessee's profession. The revenue contended that the CIT(A) wrongly relied on the Supreme Court decisions in CIT v. Birla Cotton Spinning & Wv. Mills and CIT v. Dharajgiri Raja Narasingirji, which involved business-related expenses. The Tribunal agreed with the revenue, noting that the criminal proceedings were personal and not related to the assessee's professional activities. The Tribunal found the CIT(A)'s reliance on the cited cases distinguishable and restored the AO's order, disallowing the legal expenses. Separate Judgments: The Tribunal delivered separate judgments for two appeals (I.T.A. No. 2836/Mum./2008 and I.T.A. No. 2837/Mum./2008), addressing identical issues. Both appeals were partly allowed for statistical purposes, with directions for re-examination by the AO and disallowance of legal expenses.
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