September 22, 2018:

Issue was whether the money received compensation for withdrawing a Police complaint is capital receipt or revenue receipt.

Tribunal recently ruled in favour of Bollywood Actor Jackie Shroff in an Income Tax case relating to Compensation received by him for withdrawing a complaint

Issue was whether the money received is capital receipt or revenue receipt. If the former and not defined in the I-T Act, it will be exempt from income tax, explained Rahul Singh, an expert at Taxmann.

For Assessment year 2011-12, Jackie Shroff got $1.5 million (~69.8 million at the time) from one Sudesh Iyer. He did not offer it for taxation.

Issue dates back many years when Actor and others proposed bringing Sony TV channel to India.

A company Atlas Equfin was incorporated to hold shares in Multi Screen Media India (MSM), owners of Sony TV channel.

Aggregate share holding of Atlas and another Mauritius-based company, Grandway Global Holdings, in MSM was 23 per cent.

In 1995, Atlas and Grandway were trying to exit MSM and Standard Chartered Bank, Singapore (SCB) was given the mandate. Actor refused to sign it but found his signature on the mandate.

In 2010, Shroff filed a Complaint with Mumbai police's Economic Offences Wing (EOW) for an investigation into the matter. He stated that, he said, never signed that mandate.

After the complaint was made, he was approached to settle the matter amicably.

In January 2011, a Deed of Settlement was signed between the Actor and Sudesh Iyer for settling the dispute.

According to the terms, Iyer agreed to pay a sum of $3,500,000 on condition that Shroff withdraws the criminal complaint.

Amount was to be paid in two installments. Shroff withdrew his EOW complaint and got the first installment of ~69.8 million. Since the amount was compensation, the actor argued, he treated it as capital receipt and non-taxable.

However, I-T Assessing Officer disagreed and held the amount be treated as Shroff's income and hence taxable.

Jackie Shroff petitioned the Department's Commissioner (Appeals), who agreed with his contention that the amount should not be taxed.

Revenue Department then appealed against this order to Income Tax Appellate Tribunal (ITAT) at Mumbai which also agreed with Commissioner (Appeals) and Shroff.

ITAT, Mumbai stated that,"The compensation received by the assessee (Shroff) was not for his professional activities but for settlement of a dispute between him and some other party resulting in filing of a criminal complaint," the order said.

Source PTI

Picture Source :