LATA DINANATH MANGESHKAR,MUMBAI vs. ACIT 11(1), MUMBAI

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ITA 1181/MUM/2013Status: DisposedITAT Mumbai09 June 2016AY 2006-074 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that the revenue failed to provide material to prove the compensation paid was unreasonable compared to fair market value. Therefore, the addition made by the AO was unjustified.

What were the facts?

The assessee, a renowned singer, paid compensation to a private company for contract cancellation. The Assessing Officer disallowed a portion of this compensation under Section 40A(2) deeming it excessive. The CIT(A) restricted the disallowance.

What were the issues?

Whether the compensation paid by the assessee for contract cancellation was excessive and unreasonable under Section 40A(2) of the Income Tax Act.

Which sections of the Income-tax Act were involved?

Section 40A(2)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “A”, BENCH MUMBAI

Before: SHRI R.C.SHARMA, AM & SHRI RAM LAL NEGI, JM

Hearing: 02/06/2016Pronounced: 09/06/2016

Heard together (2 matters)

ITA No.1181/Mum/2013
ITA No.1907/Mum/2013

Read from the judgment's own cause title. This page is filed under one of them.

O R D E R PER R.C.SHARMA (A.M): These are the appeals filed by the assessee and revenue against the order of CIT(A), Mumbai, for the assessment year 2006-2007, in the matter of order passed u/s.143(3) r.w.s.263 of the I.T.Act.

2.

At the outset, ld. AR pointed out that tax effect in the appeal of revenue (i.e. is less than Rs.10 lakhs, insofar as 2 ITA No.1181&1907/13 addition deleted by CIT(A) amounts to Rs.13.04 lakhs in respect of disallowance deleted u/s.40A(2) and Rs.4.12 lakhs in respect of disallowance deleted u/s.14A of the I.T.Act.

3.

In view of the CBDT Circular No.21/2015, dated 10-12-2015, since the tax effect in the appeal of revenue is less than Rs.10 lakhs, we dismiss the appeal (i.e. ITA No.1907/Mum/13) filed by the revenue.

4.

The assessee in its appeal (i.e. Rs.21.99 lakhs made by the AO u/s.40A(2) of the I.T.Act.

5.

Rival contentions have been heard record perused. During the course of assessment the AO has disallowed assessee’s claim of compensation and made addition u/s.40A(2) amounting to Rs.34.03 lakhs. By the impugned order the CIT(A) restricted the disallowance to Rs.21.99 lakhs. The assessee is in further appeal for the disallowance so upheld by the CIT(A).

6.

We have considered rival contentions and found that assessee is a renowned singer, who has been awarded Highest Civilian Award “Bharat Ratna” by Government of India. During the year under consideration, assessee claimed compensation of Rs.2.47 crores paid to Musicurry Records and Entertainment Pvt. Ltd. (in short MREPL) for cancellation of contract. As per AO’s view since the company comes within the purview of 40A(2), the compensation so paid was not reasonable, therefore, he disallowed a sum of Rs.34,03,159/-. The AO opined that MREPL would have got not more than Rs.2,88,76,841/- . However, the assessee has

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