Another Win #MeToo | Sushmita Sen | ITAT Judgement


When the #MeToo Movement hit India, it opened up a Pandora’s box. So many brave women (in even some cases men) came out and shared their scandalous experiences. #MeToo wasn’t just limited to the entertainment industry, this storm engulfed finance, and the political sector as well.

Then how can the Income Tax Department stay far behind from the #MeToo storm? Before you think of something scandalous, let us clear the air. We are talking about the recently pronounced judgement of ITAT in Sushmita Sen’s case. Still got no clue? No worries when we are here. Let’s take a brief stroll in the park over the case.


What Happened?

In the year 2003-04, the ex-Miss Universe signed a commercial contract with Coca-Cola India Pvt Ltd. The contract was to lend her services as a brand ambassador for ₹1.50 crores. However, in the same year, Sushmita Sen ended the contract citing sexual harassment as the reason by one of the company’s employee. With the aim to settle the issue, the cola giant in September 2003 gave Sushmita Sen compensation of ₹1.45 crores.


What is the Taxation Issue?

While filing Income Tax Return for FY 03-04 (in AY 04-05), Sushmita Sen declared only ₹50 Lac as income and according to her balance ₹95 Lac was capital receipt not chargeable to tax. The Assessing Officer has added Rs. 95 Lac as her income and imposed the penalty for not disclosing ₹95 Lac.

The matter went further to the CIT which decided in the favour of income tax department. As a result, Sushmita Sen appealed to the Income Tax Appellate Tribunal (ITAT).


What ITAT said?

Very recently i.e. on 14th November, the ITAT held in its order that compensation received by Sushmita Sen was in the nature of capital receipt. Hence, not taxable.

Supporting the order, ITAT said, the assessee had taken due caution and declared ₹50 Lac as income from the profession (which was the actual balance amount due to her as per the original contract). The remaining amount of ₹95 Lac was paid by Coca-Cola to protect its goodwill from a possible sexual harassment case. Hence such amount is extraordinary in nature which is not earned by the assessee in regular business/ profession. With this, the ITAT also ordered to set-aside the penalty of ₹35 Lacs imposed by the department.


Conclusion

One thing which this case definitely implies that no matter what type of income you’ve earned, ITD has an eye over it. But having said that, this judgment is very positive as any form of harassment at the workplace is intolerable.

Although a small win but we’d like give a huge applause to all the warriors who are fighting and supporting #MeToo Movement.

Author


Team Tax2Win