Case BriefsTribunals/Commissions/Regulatory Bodies

Income Tax Appellate Tribunal, Mumbai (ITAT): A Bench comprising Saktijit Dey (JM) and Manoj Kumar Aggarwal (AM), allowed actor Sushmita Sen’s appeal against the order of Commissioner of Income Tax (Appeals), holding that the amount received in lieu of sexual harassment claim is not taxable.

The assessee who had received a sum of Rs 1.45 crores from Coca-Cola India Limited as a settlement amount for breach of celebrity engagement contract, submitted only Rs 50 lakhs out of the said amount to tax claiming the balance Rs 95 lakhs to be capital receipts. CIT(A) held that the payment received by assessee actor arose out of cancellation of the contract and did not affect the trading structure of her profession. The termination was a part and parcel of her profession not amounting to the loss of an enduring asset causing abrupt close down of her profession or dislocation of the capital structure of her profession earning apparatus. Therefore, the entire amount was held to be revenue receipts. Aggrieved thereby, the instant appeal was filed.

Submission on behalf of the assessee was that the full amount of Rs 1.45 crores was received as compensation for her sexual harassment by an employee of Coca-Cola. However, out of abundant caution, she considered a sum of Rs 50 lakhs due to her under the contract as her income and submitted the same for taxation.

The Tribunal, after appreciation of materials on record, found that in case of default by Coca-Cola, only Rs 50 lakhs was due to the assessee as per the terms of the contract. She had received Rs.1.45 crore out of which Rs 50 lakhs had been offered to tax. The balance amount of Rs 95 lakhs was received as a settlement in a sexual harassment claim. The appeal was allowed holding that since the said amount did not arise out of exercise of profession by the assessee, it could not be construed to be her income or profits and gains of profession within the meaning of Section 2(24) and Section 28 of the Income Tax Act, 1961.[Sushmita Sen v. CIT, Income Tax Appeal No. 4351/Mum/2015, decided on 14-11-2018]