9911796707
TMI Blog2011 (5) TMI 20X X X X Extracts X X X X X X X X Extracts X X X X ..... case, in brief, are that the assessee is a leading cricketer and filed his return of income on 31-10-2003 declaring total income of Rs. 18,51,06,510. In the computation statement filed along with the return, the assessee had shown salary income of Rs. 16,000 from M/s IDL Ltd; Rs. 19,51,98,706 shown as income from business/profession and Rs. 77,63,166 as income from other sources. The Assessing Officer, noted from the tax audit report filed in Form No.3CD that the nature of business/profession has been mentioned as 'sports sponsorship/modelling'. The income and expenditure account has shown Rs. 19,95,27,085 as gross receipts from 'sports sponsorship and advertisements'. As per Schedule-1, this consists of Rs. 5,92,31,211 received in foreign exchange and Rs. 14,02,95,874 received in Indian rupees. The amount of Rs. 5,92,31,211 received in foreign exchange is from the following companies: Sl. No. Name of the company Amount (Rs.) 1 ESPN Star Sports 3,19,94,795 2 Pepsico Inc. 73,33,500 3 VISA 1,99,02,916 Total 5,92,31,211 2.2 The assessee has claimed deduction u/s 80RR amounting to Rs. 1,77,69,363 in respect of the above receipts received in foreign exchange. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the department has however, held that expenses attributable to the earning of this income ought to be deducted. The matter has been partially allowed by the CIT(A) in the past and is pending before the Tribunal. Accordingly, it was submitted that there should not be any reason to deviate from the stand taken by the department in the past. 2.5 On being questioned by the Assessing Officer to explain as to why the income from playing cricket is claimed to be taxed under the head 'other sources', it was explained that since playing cricket is not his profession, the income from playing cricket and logo money received from the BCCI has been shown as 'income from other sources'. This issue has been accepted by the Tribunal in Assessment Year 1997-98 which upheld the contention of the assessee that he is a non-professional cricketer. 2.6 Regarding the claim that the deduction u/s 80RR has been allowed in earlier years, the Assessing Officer noted that firstly, the returns for the last few years have not been scrutinized u/s 143(3) and has only been processed u/s 143(1). He held that the principle of res judicata does not apply to income tax proceedings. Secondly, in the Tribunal's order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... voice of Tendulkar (ii) Product spokesman work, personal appearances (e.g corporate meetings), media appearances (e.g TV shows, internet chats etc.) (iii) Use of clothing and footwear (iv) Endorsements of other commercial activities such as and including restaurants, cafes, franchise arrangement through investments or otherwise. Agreement dated 30-6-2000 with VISA International: (1) Sachin agrees to allow his face, name, signature, voice, photography, any facsimile or image to appear on and be used in connection with the promotion of VISA products and Services (2) Use of Sachin's name 4.3 Sachin gives the Advertise the right to use Sachin's photograph and autograph during the term of the agreement on the following items such as: 4.1.3 Booklets/diaries on Sachin's statistics; 4.1.4 Post cards and Dummy VISA cards which will be used only as gift items/ memorabilia and/or prizes, but not sold, eg. Dummy VISA cards; 5.1.1 Sachin shall sign items including certificates of honour/achievements 5.1.3 For sales force/merchant establishments/sales agents of VISA international's member banks. Agreement dated 26-6-2002 with ESPN Star Sports: (I) 'Player Id ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve, the pocket Oxford Dictionary says that an actor is a person whose profession is acting'. By endorsing certain products in advertisements, the assessee does not become a person "whose profession is acting". This is because endorsing a product in an advertisement is an activity which is peripheral to his profession of cricketer. Celebrity endorsements capitalize on the celebrity status of the person endorsing the product. They do not make the celebrity an actor by profession. (2) When somebody watches the assessee endorse a particular product in say, an advertisement film, he tends to appreciate the product because Sachin has endorsed the product and not because Sachin is a very good model or actor. For example, if Sachin endorses a brand in an ad film, the viewer of the Ad film appreciates the brand because it is Sachin who is endorsing it. There are models and actors who may be better performers but if they were to endorse that brand, it does not have the same impact as Sachin endorsing the brand. (3) It is also remarkable that in all the advertisements in which the assessee appears, what is highlighted is his personality as a cricketer. The advertisem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ause showing that they would be terminated if the assessee was to stop playing cricket is of the essence and rightly so. With due respect, Sachin is Sachin, because he is a cricketer and not because he is an actor. 3. Rejecting the various explanations given by the assessee, the Assessing Officer rejected the claim of deduction u/s 80RR on the ground that the assessee is a professional cricketer. For a person to have second profession as an actor, the second profession of acting should be independent of his main profession. In the instant case, the assessee does not have any independent profession and income from acting by endorsing any products in advertisements the assessee does not become a person whose profession is acting. Further the income from modelling/acting and other activities relating to advertisement etc. does not amount to income derived from the exercise of his profession as cricketer. According to the A.O. the income from product endorsement may at best be claimed as attributable to the profession of cricket but the expression derived from has a narrower connotation than the expression 'attributable to'. The immediate and effective source of the above income is ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... escapably deduced that the alternative and protective arguments of the assessee regarding his being an 'artist' are legally supportable, valid and maintainable. 4.3 It was further submitted that the deduction u/s 80RR has been allowed by the department in the case of the assessee from Assessment Year 1994-95 up to 2002-03 and this is the first year in which it has been disputed by the Assessing Officer. It was also pointed out that some of the assessments have been completed u/s 143(3) and as such the issue was deliberated and discussed before here in the past. Accordingly, it was submitted that the department ought to take a consistent stand and should not merely on the basis of surmises and conjectures deviate from the stand taken by it in the past. Circulars issued by the CBDT from time to time were also brought to the notice of the CIT(A). It was submitted that although the assessee is a leading cricketer but one cannot deny that the direct source of the income was from the assessee acting in these TV commercials/films. 4.4 As regards the contention of the Assessing Officer that the said income from modelling/acting is attributable to his being a leading cricketer, but are no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... derived in exercise of his profession". The important question which arises is, what is the profession of the appellant? Whether the income which has been claimed to be exempt u/s 80RR is out of his profession or not? (ii) The second important issue as claimed by the appellant as an alternative argument is that the income is out of the profession of "an actor" or "an artist" which will also entitled him for the benefit. 6.2 Coming to the first issue, on analysing the facts and circumstances relating to the appellant, it is abundantly clear that he is primarily involved in playing cricket and irrespective of the fact whether he is a professional or not, it cannot be disputed that his profession is "playing cricket". Whenever he would undertake other activities like T V. commercials and shows for sponsoring products of various companies for which he is paid, it would only amount to subsidiary activities which are not directly relatable to his activity of playing cricket. These ancillary activities cannot be treated to be out of the profession of the appellant. By "appearing" in such commercials or events, no element or expertise relating to his profession is being used. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The appellant has in fact not been "acting" or performing as an "artist" in any of the commercials or sponsorship events in the spirit of the terms. What he has actually been doing is only "appearing" at these events and commercials. Such activities as earlier discussed are at best "ancillary" or "subsidiary" activities through which the appellant has earned income. The crucial factor is his "appearing" in such advertisements and commercials which is the sole important factor for his income. His nature of performance as an actor or an artist does not attract the interested parties for paying him substantial amounts of money. The very fact that the appellant in the advertisement or the commercials attracts the attention of the viewers and even if his performance is most average, the payment is made only on account of is "appearing" and not by virtue of him being an "Actor" or "Artist". The contention of the appellant with regard to being an Actor or Artist does not appear to be logical. The activity of "appearing" in such advertisement or commercial etc. cannot be equated with that of an Actor or Artist. This activity is subsidiary activity of the appellant and is also not directly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nchor for the said show is income derived by him as an artist and deduction u/s 80RR was accordingly allowed in respect of such income. Referring to the decision of the Tribunal in the case of Shahrukh Khan vide [IT Appeal No. 3894/Mum./2000] and other appeals vide order dated 19-6-2008 the ld. counsel for the assessee drew the attention of the Bench to para 13 (page 9) of the order of the Tribunal wherein the Tribunal has allowed the deduction u/s 80RR on amounts received by Mr. Shahrukh Khan for allowing his name to be used for a product for which he had to attend photo sessions, launch sessions in media and his appearance for the products. The Revenue's appeal in the said case was dismissed by the Tribunal. 6.3 Referring to the decision of the Hon'ble Bombay High Court in the case of CIT v. Tarun R Tahiliani [2010] 192 Taxman 231, he submitted that the Hon'ble High Court has held that the work of a dress designer involves a high degree of imagination, creativity and skill and, therefore, a dress designer is an artist for the purposes of sec. 80RR. 6.4 Regarding the allegation of the Assessing Officer that if the assessee had not been a cricketer, no person would have appointed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ived by exercise of profession of sports/acting/artist having direct nexus only to be eligible for deduction u/s 80RR. 6.6 The ld. D.R. submitted that the assessee claims that he is not a professional cricketer. He plays for his employer and BCCI with which it has contract for which he is paid by BCCI. The assessee claims the exemption of awards as per circular No. 447 of CBDT proclaiming himself to be a non-professional cricketer and ITAT in its earlier orders have allowed the exemption holding that the assessee is not a professional cricketer. The income from playing cricket has been shown by assessee itself as "income from other sources" further proves that the assessee himself does not claim to be a professional cricketer and hence cannot be said that he exercises the "profession" of cricket. 6.7 He submitted that the income from endorsements relate to wide variety of services rendered by assessee as per the agreements with World Tel Inc., Pepsi Co., VISA etc. some of which include allowing the use of his name, photo or voice samples, autographs on booklets and diaries on Sachin's statistics, product spokesman, corporate meetings, media appearances, internet chats, use of spe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cisions of the Tribunal in the case of Amitabh Bachchan (supra) and in the case of Shahrukh Khan (supra) as relied on by the ld. Counsel for the assessee are quite different because they are basically actors. Here the assessee is not an actor and is a cricketer. Therefore, the benefit of deduction u/s 80RR cannot be granted to the assessee. He submitted that the assessee is also not entitled to be called as an artist for getting the deduction u/s 80RR. 6.13 As regards the contention of the ld. counsel for the assessee that benefit of deduction u/s 80RR was provided in the past and therefore, rule of consistency should be applicable, he submitted that principles of res judicata do not apply to income tax proceedings and each assessment year is distinct and separate. The A.O. is not barred from taking a different view than the view taken already by an Assessing Officer. He submitted that here it is a question of law therefore, rule of consistency cannot be applicable as claimed by the assessee and therefore, the same should be given a go bye. For this proposition, he relied on a number of decisions. 6.14 As regards the submission of the ld. counsel for the assessee that a person ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble to the facts of the present case. In that case it was held that the income earned by the assessee by exercise of his profession as a Chartered Accountant which has nothing to do with the exercise of his profession as an author was not eligible for deduction u/s. 80RR. 6.20 As regards the decision in the case of Lallubhai Nagori & Sons (supra), he submitted that in that case it was held that activity of share brokers does not amount to "profession". However, in the instant case the issue is modelling in ad films as acting or artist. 7. We have considered the rival submissions made by both the sides, perused the orders of the A.O. and the CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. There is no dispute to the fact that the assessee has received an amount of Rs. 19,92,27,085/- as gross receipts from sports sponsorship and advertisements which included an amount of Rs. 5,92,31,211/- received in convertible foreign exchange from ESPN Star Sports, Pepsico Inc and VISA. There is also no dispute to the fact that in the Tax Audit Report in Form No. 3CD filed along with return of income, the nature of business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Tribunal before the Hon'ble High Court. 7.4 As regards the submission of the learned counsel for the assessee that the income from modelling and sponsorship has to be considered either as 'actor' or an 'artist', we find similar issue had come up before the Tribunal in the case of Mr. Amitabh Bachchan (supra). In that case the payment received by Mr. Amitabh Bachchan for acting as an 'anchor' for a TV programme by using his skill as an actor/artist anchoring TV show, which contributed greater understanding of our country and immense popularity was held to be derived by him as an artist and deduction u/s 80RR was allowed to him in respect of payment receive by him from foreign company. The relevant observations of the Tribunal at para 17 of the order reads as under:- "If we look into the definitions, it is very difficult to exclude the present assessee from being an artist. After all the word 'artist' is term of wider connotation and does not accept the restrictions as are made out by the Department. The Board itself examined the word "artist" to include photographers and YV news film cameraman as also a director of a film or a script writer. The various meanings assigned to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resources of our country but that is not enough to claim tax deduction under s. 80RR of the Act, whereas if one were to look into the contents of the KBC programme, the programme itself is so designed wherein actor is required to make the programme very interesting and imaginative and has definitely contributed greater understanding of our country and its culture abroad. The programme of KBC was not only watched in India but all over the globe and mainly dealt with Indian history, its geography, rich cultural heritages, its mythological stories, its constitution and legal system and its rich resources. Even on this account, the activities of Shri Amitabh Bachchan are clearly distinguishable to that of a television presenter and TV commentator of cricket matches as was held in the case of Harsha Bhogle (supra). The assessee has produced before us some of the literatures on KBC programme which we have already reproduced elsewhere in our order. We are therefore of the opinion that the assessee is an artist while he received the disputed income within the meaning of s. 80RR of the Act. We, therefore, direct the A.O. to grant relief of deduction under s. 80RR of the Act." 7.5 We find ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atograph films and television programmes in foreign countries." The circular refers to the object as being to promote a greater understanding of the country and its culture abroad and the enhancement of foreign exchange reserves. Yet, it must be noted that the statutory provision does not require an author or playwright to write a book or play on an aspect of Indian culture to qualify for a deduction. The freedom of the author, and for that matter, of a playwright, musician, artist or actor to choose the medium of the message is as wide as it can be under the constitutional guarantee of free speech. The content of the message is not structured by s. 80RR. Even fiscal legislation has to be deferential to constitutional rights. Parliament has contemplated the grant of a deduction to broad categories. Those categories are not artificially defined. The nature of the work which is the source of the income is subject to the requirement that the income must be derived from the 'exercise of the profession'. In a Circular (No. 31) of the Board, dt. 25th Oct., 1969 it was clarified that the expression artist includes photographers and TV cameramen for s. 80RR. By a Circular (No. 675), dt. 3r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... performer, a proficient, a connoisseur." In the Concise Oxford Dictionary the expression has been defined as follows : "(i) a painter (ii) a person who practices any of the arts (iii) an artist (iv) a person who works with the dedication and attributes associated with an artist, (v) a devotee; a habitual practiser of a specified activity." 9. Simply stated, an artist is a person who engages in an activity which is an art. Artists, as we understand them, use skill and imagination in the creation of aesthetic objects and experiences. Drawing, painting, sculpture, 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 designer uses the process of design and her work requires a distinct and significant element of creativity. The canvass of design is diverse and includes graphic design and fashion design. An artist, as part of his or her creative work, seeks to arrange elements in a manner 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. Though the field of designing ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... both the sides, we find the assessee had claimed an amount of Rs. 57,969/- towards staff welfare expenses. We find the assessee claimed before the A.O. that staff welfare expenses included expenses incurred for tea, snacks etc. provided to staff. The A.O. noted from the details filed by the assessee that only six persons worked during the year as his staff for which the assessee has separately debited an amount of Rs. 2,43,300/- towards salary and perquisites. Since the expenses claimed were in cash and were unverifiable in nature, the A.O. disallowed an amount of Rs. 10,000/- on estimate basis. On appeal, the ld. CIT(A) restricted the same to Rs. 5000/-, which in our opinion is reasonable under the facts and circumstances of the case. Accordingly, the same is upheld. Ground No. 2 by the assessee is, therefore, dismissed. 9. In ground No. 3, the assessee has challenged the order of the ld. CIT(A) in confirming the disallowance of Rs. 50,000/- on account of entertainment expenses. 9.1 After hearing both the sides, we find the assessee had debited an amount of Rs. 6,16,041/- towards entertainment expenses. On being questioned by the A.O., it was submitted that the above expenses w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jected the explanation given by the assessee holding the same to be a vague and general reply and disallowed 1/5th of these expenses amounting to Rs. 1,42,824/- on account of probable personal use. In appeal, the CIT(A) confirmed the disallowance made by the A.O. for which the assessee is in appeal before us. 10.4 After hearing both the sides, we are of the considered opinion that there is no infirmity in the order of the CIT(A). Admittedly, no log book has been maintained by the assessee, therefore, personal use of motor car for self and other family members cannot be ruled out. Accordingly, the disallowance of 1/5th of the motor car expenses amounting to Rs. 1,42,824/-being very reasonable under the facts and circumstances is justified. The ground No. 5 raised by the assessee is accordingly dismissed. 11. Ground No. 6 relates to initiation of penalty proceeding u/s 271(1)(c) of the Act. 11.1 After hearing both the sides, we are of the opinion that the above ground is pre-mature at this juncture. Accordingly, the same is dismissed. ITA No. 430/Mum/2008 (A.Y. 2004-05) 12. In ground No. 1, the assessee has challenged the order of the CIT(A) in denying the assessee's claim for d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y proceeding u/s 271(1)(c) of the Act. 17.1 After hearing both the sides, we are of the opinion that the above ground is pre-mature at this juncture. Accordingly, the same is dismissed. ITA No. 428/M/2008 (A.Y. 2001-02) 18. Ground No. 1 relates to the order of CIT(A) in upholding the reassessment proceedings initiated by the A.O. 18.1 The facts of the case in brief are that the assessee filed return of income declaring total income at Rs. 6,94,52,995/- on 29th October, 2001 which was processed u/s 143(1) of the I.T. Act. Subsequently, the A.O. reopened the assessment u/s 147 for the reason that incorrect claim of deduction has been made by the assessee u/s 80RR of the Act. Accordingly, notice u/s 148 was issued and served upon the assessee on 31.3.2006. 18.2 Before the CIT(A) it was submitted that the A.O. had no reason to believe that any income chargeable to tax had escaped assessment for the year under consideration. However, the CIT(A) was not satisfied with the explanation given by the assessee. He noted that since the return was processed u/s 143(1) and the A.O. had no occasion to apply his mind, therefore, the contention of the assessee that A.O. had no reason to believ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee. 22.1 After hearing both the sides, we find the above ground is identical to ground No. 5 in ITA No. 429/Mum2008 for A.Y. 2003-04. We have already decided the issue and the ground raised by the assessee has been dismissed. Following the same ratio, the ground raised by the assessee is dismissed. 23. Ground No. 6 relates to initiation of penalty proceeding u/s 271(l)(c) of the Act. 23.1 After hearing both the sides, we are of the opinion that the above ground is pre-mature at this juncture. Accordingly, the same is dismissed. ITA No. 6862/Mum/2008 (A.Y. 2002-03) 24. Ground No. 1 relates to the order of CIT(A) in confirming the reopening of assessment u/s 147 of the I.T. Act. 24.1 After hearing both the sides, we find the original return of income declaring total income at Rs. 13,96,11,299/- was filed on 29th October, 2002. The same was processed u/s 143(1) of the Act on 25.01.2003. Subsequently, the case was re-opened u/s 147 for the reason that incorrect claim of deduction has been made by the assessee u/s 80RR of the Act. Accordingly, notice u/s 148 was issued on 16.11.2006. Since the original assessment was completed u/s 143(1) and the notice is issued within 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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