CINE ARTISTS INCURRING EXPENSES FOR RASIGAR MANDRAMS ALLOWABLE DEDUCTION.

[DR.MARIAPPAN GOVINDARAJAN]

                        While calculating income for the purpose of income tax certain expenditures are allowed for deduction.  Many cases are coming for litigation to interpret the provisions of the Income Tax Act, rules etc.,  One interesting case is to be discussed case.   Every Cine actor/actress are maintaining their own ‘rasigar mandrams’ and they are incurring certain expenditures for the same.   Such mandrams are for the purpose of promoting their films among public at large. 

                        In ‘Commissioner of Income Tax V. A. Vijayakant’ – 2009 -TMI - 77158 – (MADRAS HIGH COURT) the Madras High Court allowed the expenses incurred for rasigar mandrams for deduction from the income.   Shri A. Vijayakant is a popular cine actor.  For the assessment year 2004-05 the assessee claimed Rs.20,19,000 towards ‘rasigar mandram’ expenses.   The assessing authority rejected the claim.  Aggrieved against the order of Assessing Officer the assessee filed an appeal before the Commissioner of Income Tax (Appeals).   The Commissioner of Income Tax (Appeals), after noticing the fact that for the assessment years 2001-02 to 2003-04 the disallowance on the said head was restricted to 20 per cent.  The Commissioner of Income Tax (Appeals) allowed the appeal by restricting the disallowance to 20 per cent for the assessment year 2004 – 05.  He further held that rasigar mandram expenses are most important expenses for the assessee in order to maintain the popularity among the fans and those expenses are relevant to the appellant’s profession. 

                        The Revenue filed appeal against the order of Commissioner of Income Tax (Appeals) before Appellate Tribunal.   The Tribunal concurred with the conclusion of the Commissioner of Income Tax (Appeals) and confirmed his order.

                        The Revenue field appeal against the order of the Appellate Tribunal before the High Court, Madras.  The Revenue has filed the appeal raising the following substantial questions of law:

• Whether on the facts and circumstances of the case, the Income tax Appellate Tribunal was right in upholding the order of the Commissioner of Income tax (Appeals) restricting the disallowance of rasigar mandram expenses to 20 per cent of the claim even though the expenses had not been established to be genuine with supporting vouchers or other forms of evidence?
• Whether on the facts and circumstances of the case, the Income Tax Appellate Tribunal was right in upholding the order of the Commissioner of Income Tax (Appeals) restricting the disallowance of rasigar mandram expenses to 20 per cent of the claim even though the assessee has not established that such expenditure, if any, had been incurred wholly, necessarily and exclusively for the purpose of his profession?

 The High Court also supports the reasoning of the Commissioner of Income tax (Appeals) as well as that of the Tribunal, having restricted the disallowance to an extent of 20 per cent.  The High Court further held that it is a well known fact that the popular cine artists promote their rasigar mandrams for the purpose of promoting their films among the public at large.   For that purpose, when it is claimed that substantial amount was spent towards dress, food etc., at the time of release of the new films as well as for the regular maintenance of the rasigar mandram activities, it cannot be held that it was not part of their professional activities, namely, acting in cine field.   Therefore the perception of the Commissioner of Income Tax (Appeals), which found favor with the Tribunal, cannot be faulted.