Income Tax Appellate Tribunal - Mumbai
Amitabh Bachchan vs Deputy Commissioner Of Income Tax on 29 November, 2006
Equivalent citations: (2007)106TTJ(MUM)925
ORDER
G.E. Veerabhadrappa, Vice President
1. These cross-appeals arise out of the order dt. 21st Feb., 2006 of the CIT(A), Central-VII, Mumbai for the asst. yr. 2002-03.
2. The assessee is an individual and a celebrity artist. As in the earlier year, the assessee acted as an anchor to the television programme show for M/s Star India Ltd., popularly known as "Kaun Banega Crorepati" (KBC) and received a payment of Rs. 50.92 crores. The said payment was received from E-Entertainment Ltd. (EEL) a foreign company incorporated under the laws of the British Virgin Islands. The assessee claimed to have transferred 70 per cent of the said amount to M/s Amitabh Bachchan Corporation Ltd. (M/s ABCL) in terms of the agreements dt. 10th Jan., 1995 and 1st Feb., 1995 and arbitration award dt. 19th June, 2002 passed on settlement of the dispute between the assessee and M/s ABCL on ownership of amount shown to have been received by the assessee from M/s EEL under tripartite agreement dt. 12th April, 2001 with M/s Star India Ltd. (M/s SIL) and M/s EEL. Taking the same stand as in the earlier year, the AO rejected all the claims of the assessee in this regard and brought to tax the entire sum of Rs. 50.92 crores in the assessee's hands. The assessee on this issue went up in appeal before the CIT(A) who gave his findings as under:
I have carefully considered the facts of the case and the submissions of the appellant. I have also gone through the order of the Tribunal, Mumbai dt. 18th May, 2005. There is no doubt the facts of the appellant's case, reasons for disallowance by the AO and the submissions against disallowance made by the appellant are similar to those for asst. yr. 2001-02. The Tribunal in its above order reached the following conclusions:
(i) It was established that the agreements entered into in 1995 by the appellant with ABCL were genuine agreements (para 6.2 of Tribunal's order).
(ii) The agreements of 1995 between the appellant and ABCL were not self-serving and did not represent a make-believe arrangement (para 7 of Tribunal's order).
(iii) The dispute between the appellant and ABCL was validly referred to the arbitrator on the strength of Clause 20 of the agreement dt. 10th Jan., 1995 and the dispute were validly resolved under the relevant provisions of the Arbitration Act, 1940 (para 7.1 of Tribunal's order).
(iv) Non-mentioning of obligation towards ABCL by the appellant in the tripartite agreement between him and EEL and SIPL, did not in any way take away the obligations of the appellant under the agreement with ABCL which had already been entered into by the appellant (para 7.2 of Tribunal's order).
(v) To the extent there was an outgoing from out of Rs. 23 crores as a result of the arbitration award, the same was the result of diversion of income at source before its accrual in the hands of the appellant (para 7.3 of Tribunal's order).
(vi) The appellant has entered into another agreement in violation of agreement dt. 10th Jan., 1995 and income earned thereafter was not his income but belonged to ABCL from the date of agreement and not from the date of arbitration award i.e. 19th June, 2002. Department's contention that the arbitration award was a contractual liability and, therefore, if applicable, it would be so only from asst. yr. 2003-04 was rejected as not tenable (para 7.4 of the Tribunal's order).
The Department has accepted similar agreements entered into by the appellant with ICICI, Pepsi and Luxor, etc. as per which income from these concerns had been made over by the appellant to ABCL and the Department had taxed such income in the hands of the ABCL, virtually accepting the agreement of 1995 as binding, valid and genuine. Therefore, the Department cannot act differently when it comes to assessment of income accruing to the appellant by virtue of the tripartite agreement (para 9 of the Tribunal's order).
In view of the above, and in consideration of similarity of facts and circumstances of the issue for asst. yr. 2002-03, with those for asst. yr. 2001-02, it is held that the decision of the Tribunal would apply to the facts of assessment year under appeal. Accordingly, the AO is directed to include only 30 per cent of the receipts of Rs. 50.92 crores as against addition of the entire amount to the income of the appellant for asst. yr. 2002-03.
3. The Department has filed the present appeal to keep the matter alive as the issues are stated to be pending before the Hon'ble Bombay High Court. In view of the similarity of facts and circumstances of the case between these two years, respectfully following the earlier order of the Tribunal, the Departmental appeal is liable to be dismissed and the same is dismissed.
4. That takes us to the assessee's appeal. In the assessee's appeal the following two grounds have been raised:
1. On the facts and in the circumstances of the case and in law the learned CIT(A) erred in confirming the addition of Rs. 6,34,734 on account of receipt of Versa car from Maruti Udyog Ltd. and the reasons assigned for doing so are wrong and contrary to the facts and circumstances of the case and provisions in law.
2. On the facts and in the circumstances of the case and in law the learned CIT(A) erred in holding that the appellant is not eligible for deduction under Section 80RR of the IT Act, 1961 and the reasons assigned by him in this regard are contrary to the facts and circumstances of the case and provisions of the IT Act, 1961 and rules made thereunder.
5. The assessee along with his son Shri Abhishek Bachchan had entered into an agreement dt. 10th Jan., 2005 with M/s Maruti Udyog Ltd. (M/s MUL) wherein they had agreed to render their services for sale promotion of the company's new product 'Versa car'. The consideration receivable for such services was agreed to be Rs. 4.02 crores and one Versa car. The assessee had not included the value of the car in the income returned for the asst. yr. 2002-03 on the plea that the same got registered only during the accounting year relevant to the asst. yr. 2003-04. However, the AO after going through the agreement with M/s MUL found that the car was to be delivered within two months of launching of the product and the assessee failed to establish as to when he actually received the said car. The AO verified the return of income filed for the asst. yr. 2003-04 where also it was found that the assessee has not offered the value of the car to tax as the assessee failed to provide the details when the car was received, the AO brought the same to tax as income of the year in question.
6. It is the contention of the learned counsel for the assessee before the AO as well as before us that the car is said to be received only on the date of registration. According to the learned counsel for the assessee if the registration is not done the person would never own the car.
7. The learned Departmental Representative on the other hand, however, strongly supported the findings of the AO. The learned Departmental Representative pointed out that the assessee has not even offered the same to tax in the asst. yr. 2003-04 and has not provided the full particulars as to the date of receipt of the car.
8. We have carefully considered the rival contentions and have gone through the records. The assessee has entered into an agreement with M/s MUL (with) his son Shri Abhishek Bachchan for endorsing the brand. This agreement was entered in the asst. yr. 2002-03 and the assessee has received a Versa car as part of consideration in addition to a sum of Rs. 4.02 crores for doing the services under the said agreement during the year in question. The assessee in this case has not provided any particulars when exactly the car was delivered.
Therefore, the AO has relied on the insurance certificate to bring the value of the car at Rs. 6,34,734 as part of his professional income. In our view the AO is perfectly justified in bringing the same to tax as his professional income in the year in question as the assessee has not acknowledged the receipt towards rendering the services as per the agreement which itself was entered into on 10th Jan., 2005 with MUL. Thus, the assessee has in all probability received the car during the year under consideration. In absence of contrary evidences brought on record by the assessee the Department is justified in bringing the same as part of the professional income of the assessee in the year in question and we decline to interfere.
9. For the assessment year in question the assessee has filed his return of income on 31st Oct., 2002 declaring a total income of Rs. 14,19,92,580. He filed a revised return of income on 31st Oct., 2003 declaring the revised income at Rs. 8,11,45,120. The revised return was filed after claiming the deduction of estimated expenses of 30 per cent of the professional receipts. During the course of assessment proceedings for the earlier year, viz., 2001-02, the assessee was asked to support his claim of deduction of the estimated expenses claimed in the revised return. The claim was withdrawn for the asst. yr. 2001-02 vide letter dt. 13th March, 2004. In the asst. yr. 2001-02, the assessee did not furnish the prescribed form in Form No. 10H for the purpose of claiming deduction under Section 80RR of the Act. Subsequently, during the course of assessment proceedings the assessee filed a revised return reverting to the earlier return of income of Rs. 14,19,92,580. As regards the claim of deduction under Section 80RR it was submitted that all the formalities under Section 80RR are satisfied and there is a difference in the facts of the case in the last year as also the year under consideration. In the last year, it was claimed that the remittance was received directly by M/s EEL whereas the remittance was received through M/s ABCL. As regards the claim of deduction under Section 80RR, it was specifically submitted by the assessee that all the points stipulated in Section 80RR are satisfied by the assessee and the income was received from foreign sources and the benefits were available to the recipient. According to the AO the assessee should have brought the convertible foreign exchange into India. The above phrase "brought into" as used in the said provisions signifies that the income has to be earned outside India and the claimant should go out of India and then through banking channels bring the professional receipts for his services. In contrast to this, the phrase "received in" shows a passive state where the person while still in India receives money. The AO was of the view that the assessee is not entitled for any deduction under Section 80RR as held by the Tribunal, Mumbai Bench in the case of Harsha Bhogle v. AO (2004) 87 TTJ (Mumbai) 892 : (2003) 86 ITD 714 (Mumbai), as the assessee performed only as anchor/host in the TV programme of KBC. The AO extracted the paras 22 and 23 of the Tribunal order in the case of Harsha Bhogle v. AO (supra) and came to the conclusion that the aforesaid decision is squarely applicable to the present case. In the case of Harsha Bhogle (supra), according to the AO, the claimant was actually performing outside India since he was giving running commentary while the game was being played, where in the case of the assessee, the entire game show has been shot in India in a studio provided by M/s SIPL, who acted as a production house for the game show. According to the AO, the assessee is not entitled to claim deduction under Section 80RR in spite of the fact that the assessee has produced Form No. 10H required for the purpose of claiming deduction under Section 80RR.
10. It was submitted before the learned CIT(A) that the assessee is an individual resident in India and is a well known artist. The income has been received from a person non-resident in India, viz. EEL, a foreign company incorporated in British Virgin Islands. The income has been brought into India by the assessee or on his behalf in terms of the tripartite agreement with EEL and SILP which is in consonance with the provisions of Section 80RR of the Act. It was contended on behalf of the assessee that the assessee need not go out of India and earn income from outside India as opined by the AO. According to him, these were the requirements of Section 80RR of the Act and that the assessee is entitled to claim exemption under Section 80RR in exercise of his profession even in India. The exemption is available only to authors, playwrights, artists, musicians and actors and derives an income through the source outside India in convertible foreign exchange and brings such foreign exchange in the manner laid down by Section 80RR of the Act. It was contended on behalf of the assessee before the CIT(A) that in the KBC programme the assessee had displayed his creative skills by facial expressions, body movements, voice modulations and thereby made the programme highly interesting, entertaining and occasionally full of suspense. It was submitted that the assessee acted in KBC programme as an artist which cannot be equated with the programme given by an anchor man, who presents merely a live television programme and co-ordinates the contributions of the participants as was done in the case of Harsha Bhogle (supra). But for the skills of the assessee as an actor/artist the KBC programme would not have given such a public entertainment and his performance in this show was widely applauded in the country and across the border. In the case of Harsha Bhogle (supra) it was contended that he was merely a commentator on other's actions and was not an actor by profession as the assessee undoubtedly is. According to the assessee, the facts and circumstances of the case are different from the facts of Harsha Bhogle's case (supra) and the ratio of that decision cannot be applied. The learned CIT(A) reached the following conclusion:
I have considered the submissions of the appellant and also perused the assessment order. The contentions of the AO in the aforesaid remand reports and the appellant's replies thereto have been taken into consideration while disposing of the dispute arising out of denial of deduction under Section 80RR of the IT Act. The main issue to be decided in this regard is whether the appellant's role in conducting the KBC programme was that of an anchor/host or his role was that of an artist/actor. In this regard, it is seen that in the instant case as per the terms of contract with EEL and SIPL, the appellant had hosted/ anchored a quiz type of programme/game show called KBC, which was associated with prize money. The KBC programme was a totally computerized game show where the appellant asked questions from the participant from the computer screen placed before him which reflected all the questions and answers along with the detailed information about the correct answers. The appellant primarily was conducting a question and answer session with the participant where on occasions the audience was also asked to participate. The appellant was required to ask the question and elicit response from the participant. To make the programme interesting to the audience the appellant used his skill as an anchor but there was hardly any element of imaginative, creative or innovative skill required on the part of the appellant in the KBC programme. Though the appellant is one of the finest actors of Indian cinema but that would not change the role of the appellant in the KBC programme as an anchor. Since the appellant was conducting the programme it was his responsibility to make the show interesting and to that extent he might have used his acting skill but the role expected of him in the KBC programme was that of an anchor or a host. Though the appellant was technically quite competent to make the show highly interesting for the public but he cannot be treated as an artist or an actor in his role of an anchor for the KBC programme.
The contention of the appellant that in the KBC programme, he was engaged as an artist to give a public entertainment programme and his performance in the said show had been in that capacity does not hold much water. In this regard, one cannot categorise an anchor as an artist even if he is a film actor. A person can have dual roles to perform and the nature of job in the two roles can be different. One cannot carry the artist's status for all that he does. Therefore, anchoring work done by the appellant in the KBC programme cannot accord him the status of an artist for the income-tax purposes.
In view of the above, I am of the considered view that the appellant is not eligible to claim deduction under Section 80RR of the IT Act. This ground, therefore, fails.
11. With the above observations, the assessee's claim for deduction under Section 80RR was denied by the CIT(A). It may be mentioned that the assessee has claimed deduction under Section 80RR in respect of the 30 per cent of the earnings from KBC which accrued to him while the rest of 70 per cent which was apportioned to ABCL on which the assessee has not claimed any deduction. In other words, the assessee's claim for deduction under Section 80RR is only a minor portion of the income to the extent it was accrued to him.
12. The learned counsel for the assessee reiterated the submissions that were made before the Revenue authorities. According to him the assessee is entitled to relief under Section 80RR of the Act, as he has satisfied all the necessary conditions laid down in the said provision. The Department has lost sight of the fact that the assessee is a well known artist as mentioned in the assessment order itself. The income from KBC has been derived by him in the exercise of his profession as an actor/artist. The income is received from EEL in British Virgin Island. The said income has been brought into India by the assessee as is evident from the certificate of Foreign Inward Remittance (FIC) received from Hong Kong & Shanghai Banking Corporation Ltd. as per Form No. 10H submitted to the AO and duly noted in the assessment order as such. The programme of KBC was highly popular and entertaining. It had wide viewership in India as well as abroad, while other programmes on Sony and Zee channels which were failed and closed down with heavy losses. The programme 'KBC' was highly educative and had covered wide variety of subjects about India which were seen and appreciated abroad in many countries. The questions covered following aspects of India and its culture and definitely contributed to greater understanding of India and its culture abroad:
(i) History of India right from Mughal to British Raj.
(ii) Geography of India, rivers, seas, coastal towns, weather.
(iii) Mahabharat and Ramayan.
(iv) Constitution of India, e.g. who can participate in debate in Parliament, Solicitor General or Advocate General. It was pointed out that on this question, Shri Navathe won Rs. 1 crore prize in the said programme.
(v) Indian agriculture, horticulture and animal kingdom.
(vi) Mythology.
All these activities were designed to encourage successful artiste like Shri Amitabh Bachchan to project these activities to viewers outside India with a view to contributing to greater understanding of the country i.e. India and its culture abroad, through his 'Karishma', articulation and imagination. It is submitted by the assessee that the entire programme was relayed throughout the world. Not only were the above conditions satisfied by the programme 'KBC' by aforesaid attributes of the programme, but under Clause 3.3 of the agreement the assessee was also required under the tripartite agreement to render services abroad by attending six international functions as directed by M/s EEL and by providing voice-overs for other international television channels owned and controlled by M/s EEL. Clause 16.2 of the agreement entitled M/s EEL to exploit the materials of the programme worldwide in all manners like home video exhibitions, foreign exhibitions, theatrical and non-theatrical exhibitions and creation of foreign interactive computer, video games and other versions of the programme. Clause 16.5 of the agreement gave sole and absolute property rights of the programme to M/s EEL to exploit the same throughout universe. Thus, according to the learned counsel for the assessee, the income earned by the assessee squarely falls within the provisions of Section 80RR of the Act. The learned counsel for the assessee further reiterated that the ratio of the decision of the Tribunal in Harsha Bhogle (supra) does not apply to the facts of the present case because according to him Harsha Bhogle, who was merely a commentator on other's actions and was not an actor by himself or by his profession. The exercise of his profession in 'KBC is evidenced by various clauses of agreement entered into by M/s SIPL and EEL referred to above. The facts and circumstances of this case are not the same as the facts that were before the Tribunal in the case of Harsha Bhogle (supra) and, therefore, the Departmental authorities, it was contended by the learned counsel for the assessee, were not justified in roping the assessee with the ratio of the Tribunal decision in the case of Harsha Bhogle (supra). The AO's contention that for claiming deduction under Section 80RR the assessee has to go out of India and earn the income from outside India is totally misconceived. The source of income has to be from outside India. The assessee can earn in exercise of his profession even in India or outside India. The CBDT Circular No. 762, dt. 18th Feb., 1998 has clarified the position in para 41.2. He has also relied on the decisions of the Tribunal Delhi Bench in the case of Prem Prakash v. ITO (1992) 42 LTD 130 (Del) and in the case of Milind C. Shrivastava v. Jt. CIT (2005) 95 TTJ (Mumbai) 953 : (2005) 96 ITD 284 (Mumbai). Shri Harsha Bhogle was a commentator of somebody's action. The assessee is a greatest artist of the Indian film industry. The learned counsel for the assessee further contended that in 'KBC' programme, it was assessee's acting articulation, creative skills, dramatic performance, amusing capacity that stood out. In the case of Harsha Bhogle, who is only a TV commentator for cricket matches and to make his programme interesting, he collects information about the city in which the match is being played and passes the same to the audience through the media of TV. He was neither professing any profession or art in which the conception and execution were governed by imagination and tact nor he was skilful performer or entertainer. But in the case of the assessee, who is predominantly engaged and has mastery in the field of creative activity or an art called as acting. The assessee is the biggest actor and he symbolizes the whole Indian film industry. The role of the assessee was not of a quiz-master. The programme was full of entertainment. The participant was a great celebrity, the show became highly dramatic, amusing and entertaining solely due to assessee's skills as an artist's/actor's performance involved in it. Further the AO was not justified in rejecting the assessee's contention that the assessee is entitled to deduction under Section 80RR on the ground that the entire game show was shot in India in a studio in India provided by M/s SIPL, who acted as production house for the game show.
13. The learned counsel for the assessee has filed a paper book containing 275 pages mainly compiling the written submissions that were made by him before the AO and CIT(A) and the copies of the remand report submitted by the AO in the first appellate proceedings. The assessee has also enclosed a copy of the tripartite agreement which is the subject-matter of discussions in both the impugned orders. The assessee has also filed before us the copy of the order of the Tribunal rendered in the case of Harsha Bhogle v. AO (supra) and filed a comparative chart of Section 80RR which was prevalent in different assessment years along with the copies of the Finance Act which made the relevant amendments. The assessee has also filed the extract of the definition of 'artist/artiste' as found in Corpus Juris Secondum Dictionary, The Random House Dictionary, Webster's Third New International Dictionary and The Oxford English Dictionary and explained how the activities of the assessee satisfy the conditions laid down in Section 80RR.
14. The learned Departmental Representative, on the other hand, heavily relied on the order of the AO and the order of the CIT(A). According to him the facts of the case are similar to the facts of Harsha Bhogle (supra) and, therefore, the decision of the Tribunal in Harsha Bhogle's case (supra) applies to the case of the assessee. As a matter of fact, although the assessee is a well known artist but he has not derived the disputed income by way of performing his skills as an artist or as an actor. He just anchored KBC programme. No matter, it was successful because of Shri Amitabh Bachchan, it does not mean that whatever he receives is the income due to his acting or his performance as an artist. The performance as an artist or as an actor requires different sets of skill which were never used while anchoring the KBC programme. In KBC programme Shri Amitabh Bachchan is required to conduct pre-recorded and computer generated programme. In fact in the case of Harsha Bhogle, he is giving his own skills as a commentator on a live demonstration of game show whereas Shri Amitabh Bachchan is required to conduct the programme as set out by the quiz master. The submission made by the assessee according to the learned Departmental Representative, does not entitle for any claim of relief under Section 80RR of the Act.
15. We have carefully considered the rival submissions and have gone through the materials available on record as also the discussions in the two impugned orders. Before embarking upon the details, we feel it is better to start with Section 80RR of the Act (sic) the deduction as it exists after the amendment by the Finance Act, 2000, which reads as under:
Where the gross total income of an individual resident in India, being an author, playwright, artist [musician, actor or sportsman (including an athlete)] includes any income derived by him in the exercise of his profession from the Government of a foreign State or any person not resident in India, there shall be allowed in computing the total income of the individual, a deduction from such income of an amount equal to-
(i) sixty per cent of such income for an assessment year beginning on the 1st day of April, 2001;
(ii) forty-five per cent of such income for an assessment year beginning on the 1st day of April, 2002;
(iii) thirty per cent of such income for an assessment year beginning on the 1st day of April, 2003;
(iv) fifteen per cent of such income for an assessment year beginning on the 1st day of April, 2004, as is brought into India by, or on behalf of, the assessee in convertible foreign exchange within a period of six months from the end of the previous year or within such further period as the competent authority may allow in this behalf and no deduction shall be allowed in respect of the assessment year beginning on the 1st day of April, 2005 and any subsequent assessment year:
Provided that no deduction under this section shall be allowed unless the assessee furnishes a certificate in the prescribed form, along with the return of income, certifying that the deduction has been correctly claimed in accordance with the provisions of this section.
Explanation-For the purposes of this section, the expression, 'competent authority' means the RBI or such other authority as is authorized under any law for the time being in force for regulating payments and dealings in foreign exchange.
The conditions stipulated in the above section are:
(a) The individual must be a resident in India.
(b) He should be an author, playwright, artist, musician and actor or sportsman (including an athlete).
(c) The income should be derved by him in the exercise of his profession.
(d) The income should be received from the Government of a foreign State or any person not resident in India.
If all the four conditions are satisfied, an amount equal to twenty-five per cent of such income so received or brought it into India by the assessee in convertible foreign exchange within a period of six months from the end of the previous year or within such further period as the competent authority may allow, is deductible from such gross total income. The assessee shall furnish a certificate in the prescribed form certifying the correctness of the claim. The assessee is a resident individual in India and received from a person non-resident in India or the assessee has admittedly satisfied the above two conditions. Now the only question is that the author can be said as actor or sportsman or an athlete and whether the disputed income can be said to be derived in the exercise of his profession. The intention of this section, how the legislature intended to give the benefit over the years can be better understood by getting into the legislative history of the provisions of Section 80RR. For the first time by the Finance Act, 1969 (14 of 1969) the provision of Section 80RR was inserted. The provisions as inserted and the purpose of insertion as explained by the Board Circular No. 22 of 1969 are reproduced for the sake of understanding what went into the minds of the legislature in granting the relief which was not there till the asst. yr. 1969-70.
80RR. Deduction in respect of professional income torn foreign sources in certain cases-Where the gross total income of an individual resident in India, being an author, playwright, artist, musician or actor, includes any income derived by him in the exercise of his profession from the Government of a foreign State or any person not resident in India and such income is received in, or brought into India by him or on his behalf in accordance with the Foreign Exchange Regulation Act, 1947 (7 of 1947) and any rules made thereunder, there shall be allowed a deduction from such income of an amount equal to twenty-five per cent of the income so received or brought, in computing the total income of the individual.
In the section as originally inserted, the exemption was available only to authors, playwrights, artists, musicians and actors. The purpose of this insertion was elaborated in the undermentioned circular:
Exemption from tax of authors, playwrights, artists, musicians and actors on 25 per cent of the income derived by them from foreign sources in exercise of their profession and received in India in foreign exchange.
The Finance Act, 1969 has inserted a new Section 80RR in the IT Act w.e.f. 1st April, 1970, under which a resident individual being an author, playwright, artist, musician or actor who derives income in the exercise of his profession from foreign sources and receives such income in India or brings it into India in foreign exchange, will be entitled to deduct 25 per cent of the income so received or brought in computing his total income. This provision is designed to encourage successful authors, playwrights, artists, musicians and actors in our country to project their activities outside India with a view to contributing to greater understanding of our country and its culture abroad and also augmenting our foreign exchange resources. Some of the professional activities coming within the scope of this section are : publication outside India of a book produced by the author, contribution of articles to foreign journals and magazines, exhibition of paintings, sculptures and other works of art in foreign countries, giving of music concerts to foreign audiences and acting in dramatic performances, cinematography films and television programmes in foreign countries.
By the Finance (No. 2) Act, 1980 (44 of 1980) w.e.f. 1980 substituted the words "musician, actor or sportsman (including athlete)" for the words "musician or actor". The scope and extent of this change was explained by the Board in its Circular No. 281, dt. 22nd Sept., 1980 as under:
Extension of the benefit of deduction in respect of professional income from foreign sources to sportsmen and athletes-Sec. 80RR 23.1 Under Section 80RR, a resident individual being an author, playwright, artist, musician or actor, who derives income in the exercise of his profession from foreign sources and receives such income in India or brings it into India in foreign exchange is entitled to deduct 25 per cent of the income so received or brought into India in computing his total income. This provision is designed to encourage authors, playwrights, artists, musicians and actors in our country to project their activities outside India with a view to contributing to greater understanding of our country and its culture abroad and also for augmenting our foreign exchange resources. With a view to encouraging our sportsmen and athletes to compete in international events, the Finance Act has amended Section 80RR to include them in the category of persons entitled to the benefit of that section.
23.2 This amendment has come into force w.e.f. 1st April, 1980 and will accordingly apply in relation to the asst. yr. 1980-81 and subsequent years.
Although there were amendments in Section 80RR by the Finance Act, 1990, Finance (No. 2) Act, 1996, Finance Act, 1999, Finance Act, 2000, they were all in relation to quantum of deductions or in relation to the regulatory provisions relating to bringing convertible foreign exchange within certain periods into India which we feel may not relevant. There were questions raised whether the term "artist" would include photographers and TV news, film cameramen were examined by the Board and following Circular No. 31, dt. 25th Oct., 1969 was issued.
1. Section 80RR of IT Act, 1961-Interpretation of the term 'artist' Sec. 80RR was inserted in the IT Act, 1961 through the Finance Act, 1969, and will have effect from 1st April, 1970. Under this section, a resident individual, being an author, playwright, artist, musician or actor who derives income, in exercise of his profession, from foreign sources and receives such income in India and brings it into the country in foreign exchange in accordance with the Foreign Exchange Regulation Act, 1947, is entitled to deduct 25 per cent of the income so received or brought, in the computation of his total income.
2. In this connection, the Board had occasion to examine whether the term 'artist' includes photographers and TV news film cameramen. It has been decided that photographers and TV cameramen can be regarded as artists for the purposes of Section 80RR of the IT Act, 1961.
Again, certain clarifications were issued in relation to the categories of "artist" that are eligible for deduction under Section 80RR, which are of some importance and read as under [(1994) 116 CTR (St) 13 : (1994) 205 ITR (St) 329]:
Clarification regarding scope and application of the provisions of Section 80RR of the IT Act, 1961 Sec. 80RR of the IT Act, 1961 provides that an individual resident in India, being an author, playwright, artist, musician, actor or sportsman (including an athlete) who derives income in exercise of his profession from the Government of a foreign State or any person not resident in India shall be entitled to a deduction from his income of (i) 50 per cent of such income, or (ii) 75 per cent of such income as is brought into India in accordance with the Foreign Exchange Regulation Act, 1973 and rules made thereunder, whichever is higher.
2. By Circular No. 31, dt. 25th Oct., 1969, the Board clarified that photographers and TV cameramen can be regarded as artists for the purposes of Section 80RR of the Act. A question has been raised whether a person, who receives payment for film which has been produced, directed or scripted by him would be entitled to deduction under Section 80RR of the Act. The Board has examined the matter and is of the view that a script writer can be regarded as 'playwright' and similarly 'director' can be treated as an 'artist' for the purposes of Section 80RR of the Act. However, a producer would not be entitled to deduction under Section 80RR of the Act, because he does not fall under any of the categories mentioned in the said section.
16. One of the grounds which the AO has to make out is in regard to the difference between the phrases "received in" and "brought into". According to the AO the term "brought into" as used in the provision signifies a more active form when someone goes out of India and earns income and then in any channels brings in the results of his services. In contrast to this, the phrase "received in" shows a passive state where the person while still in India receives the money. Identical issue came up for consideration in the case of Nadeem Akhtar Saifee v. Jt. CIT (2005) 1 SOT 268 (Mumbai), in which the assessee was an individual who derived professional income from work of music direction of films. He claimed deduction under Section 80RR on the royalty income. The questions arose the royalty income that was received thereafter for the usage of his copyrights by others would not partake the character of income derived from the exercise of the profession and that the royalty income having not generated from the usage of copyrights of the assessee's music, the deduction was not allowable on the royalty receipts. It has been held by the aforesaid decision that it is not necessary for the assessee to render a physical service outside India which is a requisite condition laid down under Section 80RR of the Act. Under Section 80RR, professional income can be derived by exercising profession in India, but it should be from foreign source. In the light of this decision again the same issue was examined by the AO in Milind C. Shrivastava v. Jt. CIT (supra). In that case the assessee was a music director who received certain amount by way of advance for shows to be performed abroad. Shows were cancelled by organizers as per the terms and conditions of the agreement, assessee forfeited aforesaid advances. The issue that arose was whether the assessee was entitled to deduction under Section 80RR on the amounts forfeited in respect of the shows which were cancelled by the organizers as per the terms and conditions of the agreement. The Tribunal held that the assessee was entitled for deduction under Section 80RR. According to the Tribunal, the income received by the assessee by way of advance directly flew from the exercise of his profession. The assessee in the aforesaid case observed that the language used by the legislature in Section 80RR is to be liberally interpreted. If any income is derived by the assessee in the exercise of carrying on his profession, the assessee would be eligible for deduction under Section 80RR. In the opinion of the Tribunal although the show was cancelled and the performance did not take place, the advance forfeited still bears the character of income which is eligible for deduction under Section 80RR of the Act. In the case before us, there is no dispute that the assessee is one of the finest actors in the Indian cinema and the Department also accepts that the assessee while conducting the KBC programme is engaged in the creative skill and field of acting and has given his performance as an artist, in the ordinary course of his profession as an actor. The CIT(A) was of the opinion that though the appellant is one of the finest actors of Indian cinema but that would not change the role of the assessee in the KBC programme as an anchor. Since the assessee was conducting the programme, it was his responsibility to make the show interesting and to that extent he might have used his acting skill but the role expected of him in the KBC programme was that of an anchor or a host. The assessee had definitely hosted/anchored a quiz type programme/game show called KBG, which was associated with prize money. The programme was totally computerized game show and the assessee has used his skill as an anchor or an artist for the purpose of making the show itself interesting. In other words, the assessee claims that his role as an actor or an anchor in conducting the KBC programme cannot be ignored and the assessee claims that the income received from the non-resident for conducting the above programme as an anchor is till an income derived by him in exercise of his profession as an artist or as an actor. According to him it is very difficult to exclude his great qualities as an actor or an artist from making the programme a successful one as compared to programmes conducted on the same lines. After all the word "actor" or "artist" has no restrictive function as made out by the Department. The assessee has mainly relied upon the definition of an "artist" in various dictionaries. In Corpus Juris Secondum Vol. 6A as under:
"Artist"-A person of special skill or ability in any field, one who is highly accomplished, especially one versed in the liberal arts. Also one who professes and practices one of the fine arts.
The term "artist" may refer to one skilled in trade or art; and has been held broad enough to include architects and a surveyor.
The term has been held not to include a dancing instructor, a neon sign maker, a barber, cook, dressmaker, milliner, or tailor.
Random House Dictionary of the English language defined the artist as under:
"Artist"-1. One who produces works in any of the arts that are primarily subject to aesthetic criteria. 2. A person who practices one of the fine arts especially a painter or sculptor. 3. One whose trade or profession requires a knowledge of design, drawing, painting, etc., a commercial artist. 4. A person who works in one of the performing arts, as an actor, musician, or singer, a public performer, a mime artist, an artist of the dance. 5. One who exhibits exceptional skill in his work. 6. One who is expert at trickery or deceit : He is an artist with cards. 7. Obs an artisan.
Websters Third New International Dictionary defines the word 'artist' as under:
1a. One who professes and practices an art in which conception and execution are governed by imagination and taste. b. A person skilled in one of the fine arts; especially painter. 2a. A performer of music in public (as a singer, pianist, or conductor). b. A theatrical performer.
The Oxford English Dictionary, Second Edn., defines 'artist' in the following manner:
Artist : One skilled in the 'liberal' or learned arts.
1. One who is master of the liberal arts; a master of arts, learned man, philosopher.
2. One who pursues some practical science, a scientific man, man of science, savant.
3. Specifically : a. A professor of the healing art, a medical practitioner, physician surgeon.
b. A professor of magic arts or occult sciences; an astrologer or alchemist; later a chemist.
One skilled in the useful arts
4. One who follows any pursuit or employment in which skill or proficiency is preamble by study or practice hence a. A skilled performer, a proficient, a connoisseur.
b. A practical man, as opposed to a theorist.
5. A follower of a manual art; an artificer, mechanic, craftsman, artisan.
6. In this sense now influenced by and applied to : One who practices a manual art in which there is much room for display of taste; one who makes his craft a 'fine art'.
III. One who pursues an art which has as its aim to please.
7. One who cultivates one of the fine arts, in which the object is mainly to gratify the aesthetic emotions by perfection of execution, whether in creation or representation.
8. a. One skilled in music.
b. One skilled in dramatic art; hence extended to any public performer.
c. Now especially : One who practices the arts of design; one who seeks to express the beautiful in visible form. In this sense sometimes taken to include sculptors, engravers and architects; but popularly, and in the most usual current acceptation of the word, restricted to : One who cultivates the art of painting as a profession.
IV. One who practices artifice.
9. One who practices artifice, stratagem, or cunning contrivance; a schemer, contriver.
10. Usu. preceded by a defining word : a person, 'chap', 'fellow' also one devoted to or unusually proficient in something reprehensible.
17. 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 TV news film cameramen as also a director of a film or a script writer. The various meanings assigned to the term 'artist' by different standard dictionaries clearly show that the term "artist" is a term which has wide meaning not merely restricted to the meaning of fine arts but encompasses within its scope, a skilled performer. We also accept the contention of the assessee that certain obligations attached to Shri Amitabh Bachchan under various agreements which are part of the record clearly demand from him exhibition of skill as an artist if not as an actor. A photographer just takes the photos of the image already existing in the nature and does nothing creative except the way and method the photography is taken but that makes the difference and he is known as an artist. Similarly, a person who is performing in the KBC programme cannot be considered performing only as an anchor and does not use his skills as an artist imposing certain questions and creating interest in the programme. The success of the KBC programme compared to other similar programmes clearly shows some distinctive features that created interest in the programme that was hosted by the assessee. The difference between KBC programme and rest of other programmes is mainly, in our opinion, the usage of the skills of Shri Amitabh Bachchan, as an actor or an artist. In our opinion, the assessee has derived the disputed income as an artist within the wider meaning ascribed to it as extracted above and also in the light of the relevant clauses of agreement which require him to exhibit such skills. Some portion of the income is definitely due to his backing of excellence as an actor too. It is very difficult to segregate Shri Amitabh Bachchan, as an assessee, from being an actor, in any work what he does. In our opinion, the provisions of deductions are mainly beneficial provisions and have to be construed in a manner that achieves the intention of the legislature as made in the circular from time to time and also the legislative amendments that are made to the sections in order to widen the scope of the persons falling under the relevant section. In the case of Harsha Bhogle (supra) the Tribunal went into the objects and intention of Section 80RR of the Act and it was observed in para 23 at p. 737 that Harsha Bhogle mainly performed on television and such activities were not making any contribution to the greater understanding of our country and its culture abroad although it was augmenting the foreign exchange resources of our country but that is not enough to claim tax deduction under Section 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 Section 80RR of the Act. We, therefore, direct the AO to grant relief of deduction under Section 80RR of the Act.
18. In the result, the appeal filed by the assessee is partly allowed while the appeal filed by the Revenue is dismissed.