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TMI Blog2017 (8) TMI 921X X X X Extracts X X X X X X X X Extracts X X X X ..... tuitous act of the donor company and the onus was on revenue to establish the contrary, which, in our opinion, has remained undischarged. Lastly, so far as taxability of gift in kind is concerned, we find that the gift of immovable property on or after 01/10/2009 has been brought to tax by Finance Act, 2009 vide amendment to Section 56(2)(vii)(b). Before this amendment, any sum of money exceeding ₹ 50,000/- received by an individual / HUF without consideration could be brought to tax vide Section 56(2)(vii)(a). Since we are dealing with AY 2008-09 about taxability of an immovable property, the said amendment does not apply to the case of the assessee and therefore could not help the revenue in any manner. In view of the above we find that the contention / conduct of the assessee outweigh the revenue’s contention. Therefore, we are inclined to hold that the said Villa was received in gift by the assessee and not out of exercise of profession and therefore, not taxable in assessee’s hands - Decided in favour of assessee. - I.T.A. No. 8555/Mum/2011, I.T.A. No. 80/Mum/2012 - - - Dated:- 18-8-2017 - Shri Saktijit Dey, JM And Shri Manoj Kumar Aggarwal, AM Assessee by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ional receipts being covered under Section 28(iv) of the Income Tax Act, 1961. On the other hand, the assessee, vide his letter dated 26/11/2010 denied having rendered any professional services to Nakheel PJSC and attributed the receipt of flat to simply a unilateral gratuitous act of gift by Nakheel PJSC on account of natural love and affection of personal friend of the assessee namely H.E.Sultan Ahmed Bin Sulayem [Sultan], being Executive director / Chairman of the Nakheel PJSC and therefore could not be said to have arisen out of exercise of any profession being covered by Section 28(iv). Moreover, there was no contractual obligation on any party and the gift was not on account of exercise of profession as per Section 28(iv) since the said term signifies carrying out of any positive act. 3.2 However, Ld. AO noted that the assessee derived major income from advertisement and stage shows and was regularly endorsing various brands because of his iconic image and globally recognized fame and charging brand endorsement fees ranging from 6.50 crores to 8 crores per endorsement during the impugned AY. 3.3 The Ld. AO gathered / collected certain material from the website of N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Dubai based company which is an artificial juristic person devoid of any natural senses such as love and affection, and the fact that the assessee s brand name has been used to advertise the project since 2004 and subsequently has performed at the Annual Day of the company, for which he has not shown any receipt/income, thus ruling out the concepts of natural love and affection and without any consideration which are vital element to characterize the gift. The assesse got the letter from Nakheel dated 16th December, 2004 and has made several visits to company s sales centre in the year 2004 and 2005 as mentioned in company s function along with the materials in the company s website clearly establish that this transaction has resulted out of the exercise of assessee s profession. The assesse is an artist and is regularly endorsing various brands and performing at various events and shows, and is charging enormous amount for endorsement and performances. The alleged gift thus represents remuneration or payment for utilizing the assessee s image and brand name and in lieu of his performance at company s event. The receipt has clearly arisen in the course of the exercise o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d further the assessee s performance at the Annual Day Celebration was only a gesture of personal friendship of the assessee with the Sultan. The assessee further contended that there was no commercial linkage of the said attendance at Annual Day in any manner and the visit was only out of personal courtesy without any consideration. The assessee further drew attention to the fact that the said gift was offered in the year 2004 and the assessee sought permission of government agency viz. RBI which has been granted to the assessee vide RBI letter dated 20/04/2007 which clearly shows that the gift was received much earlier, although fructified later on due to government permission and therefore, no linkage with assessee s appearance at the Annual Day which took place in the year 2007. 3.7 However, not convinced, the Ld. AO concluded that the mere presence of the assessee and speech given by him at the Annual Day tantamount to advertisement for the Donor and came to further conclusion that the said arrangement was nothing but a fa ade of Gift / quid pro quo arrangement and hence professional receipts of the assessee. Finally, the Ld. AO, taking the value of the said Villa as ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns / contentions could not find favor with Ld. CIT(A) who justified the action of Ld. AO by concluding the matter with following observations:- 4.10 I have carefully considered the issue. The appellant claimed that the gift was given totally on a gratuitous basis and even the no objection letter received from the Reserve Bank of India for acceptance of gift was obtained before the acceptance of gift. The gift was received from Nakheel PJSC, which is one of the most reputed construction companies in U.A.E. through its Executive Chairman and after obtaining the permission of the Reserve Bank of India which has in turn taken approval from Ministry of Home Affairs and Ministry of External Affairs. Therefore, in the opinion of the ld. AR of the appellant, the stand taken by the assessing officer is incorrect and unfair. The assessing officer has wrongly questioned the validity of the legal procedures that the appellant has diligently followed and complied with. 4.11. The assessing Officer, on the other hand, established that there is no element of love and affection between the donor company and the appellant. He established the element of consideration between the donor com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er wishes and desires of the donor and the done merely accepts or rejects the same. 4.12. The Ld. AO's reliance on the ratio of the judgment in the case of ACT vs. Rajeev Tandon 294 ITR 219 (Del) is also very well placed. In the cited case, the Hon'ble High Court had the occasion to examine whether the amount received by the assessee was a genuine gift. In that case also, the donors were not related to the assessee and had no occasion to make such a gift. Applying the test of human probabilities, the Hon'ble High court upheld the conclusion of the Ld.AO that appellants own unexplained money was routed through the donors simply to increase the capital of the assessee The ratio of the said judgment is fairly applicable to the facts of the appellant's case. 4.13. Considering the entire gamut of facts and circumstances described in the foregoing paragraphs, it is held that the ld.AO has correctly treated the alleged gift as not genuine and brought its value to tax under income-tax Act. Accordingly, ground no.1, 2 and 3 are dismissed. 4.6 However, while upholding the said addition, Ld. CIT(A) agreed with the valuation arrived at by the valuer Hamptons In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s etc. 5.2 The Ld. AR further explained that the Ld. AO visited the official website of the Nakheel and obtained few photographs depicting the face of the assessee and extracted one of the news items from amongst many news items which contained information about assessee s visit at the sales office of the company. Nevertheless, the said news items was placed in an obscure portion of the website and was not prominently displayed to public at large and the said news items had to be extracted from the website of the company. Therefore, the material gathered by Ld. AO in no way could lead to a conclusion that the assessee undertook any sort of brand endorsement or advertisement for donor to attract customers. The assessee as well as the donor, at all stages denied having indulged in any sort of brand endorsement etc. and therefore, the burden was on revenue to prove the factum of brand endorsement conclusively. In nutshell, Ld. AR stressed the point that the said gift was nothing but unilateral gratuitous gift out of natural love and affection the Sultan was having towards the assessee and the assessee was under no contractual obligation whatsoever to benefit the company in any mann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 2004 2005 to fulfill the said pursuits. The permission of RBI was statutory requirement and do not prove the nature of the transaction. When the permission was obtained in the year 2007, the gift deed was got executed by the assessee in exchange for performance at the Annual Day Celebrations of the Company. The mere presence of the assessee resulted into attracting prospective buyers to the said project and the donor company used assessee s photograph at its official website for the said purpose. Not only this, the news items concerning assessee s visit was also placed on the website and the assessee never objected to the same. Therefore, the Gift was not gratuitous act but, in fact, a barter transaction and therefore, rightly been added in assessee s hand. 6.2 The Ld. DR further contended that the gift was offered by Sultan but gift deed was executed by the corporate entity which has separate legal identity and is quite distinct from its owners. The said corporate entity being artificial juridical person could not have human sentiments / emotions like natural love and affection and therefore, was incompetent to execute the said gift. Therefore, the transaction in reality wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ference to RBI permission dated 20/04/2007. We find that all these events are interlinked and in tandem with each other. These events are, prima facie, part and parcel of the same transaction solely aimed at fulfilling Sultan s wish to gift a Villa in assessee s favor. 7.3 The whole material relied upon by the revenue is news items concerning assessee and few photographs of assessee at Nakheel s Annual Day in the year 2007 which was placed on the website of the company. This material has been referred by Ld. AO at various places in the assessment order to reach a conclusion that the assessee undertook brand endorsement for the donor in exchange of gift. However, a perusal of the photograph as placed on Page Nos. 8 9 of the assessment order reveals that the assessee figures in Event Gallery 7 9. However, the same in no way suggest stage performance by the assessee, in any manner rather the assessee is shown with a mike in Event Gallery 7 which, in fact, corroborates the arguments of the Ld. AR that the assessee merely addressed the employees of the company at the said gathering. 7.4 The Ld. AO has placed reliance on another photograph depicting the event of assessee s visi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the revenue. Even in Indian context, Mumbai Tribunal in the case of DCIT Vs. KDA Enterprises Private Limited [57 Taxmann.com 284] has held that the companies are competent to make gift and there is no requirement of any natural love or affection for making or receiving gifts by companies. Upon perusal of chain of events leading to execution of gift as enumerated in Para 7.2, we have already reached an inevitable conclusion that all events /actions were interlinked and part and parcel of the same gift transaction and therefore, gift deed was executed by the Nakheel at the behest of Sultan only in view of the fact that ownership was vested with the company. 7.7 Finally, it is well settled law that no addition could be made merely on the basis of mere suspicion, conjectures or surmises. The assessee has therefore, in our opinion, discharged the onus of proving the gift transaction being unilateral gratuitous act of the donor company and the onus was on revenue to establish the contrary, which, in our opinion, has remained undischarged. 7.8 Lastly, so far as taxability of gift in kind is concerned, we find that the gift of immovable property on or after 01/10/2009 has been broug ..... X X X X Extracts X X X X X X X X Extracts X X X X
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