Diversion of income by overriding title applied to programme receipts; only the balance was taxable, while section 80RR relief failed.

Receipts from the television programme were treated as partly diverted at source under a valid pre-existing contractual arrangement and accepted arbitration award, so 70 per cent was not assessable in the assessee's hands and only the balance was taxable. The tribunal noted that the 1995 agreements were genuine and operative, and that the assessee remained bound to account for the relevant share to the company. The claim for deduction under section 80RR was not pressed and the prescribed form was not furnished, so no deduction was allowed on that issue.

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Issues: (i) Whether the receipts from the television programme "Kaun Banega Crorepati" were wholly taxable in the assessee's hands or, to the extent of 70 per cent, stood diverted to the company under the earlier agreements and the arbitration award. (ii) Whether the assessee was entitled to deduction under section 80RR.

Issue (i): Whether the receipts from the television programme "Kaun Banega Crorepati" were wholly taxable in the assessee's hands or, to the extent of 70 per cent, stood diverted to the company under the earlier agreements and the arbitration award.

Analysis: The agreements of 1995 were held to be genuine and acted upon, and the dispute between the assessee and the company arose from their terms governing the assessee's professional engagements. The arbitration clause in the agreement validly enabled reference of the dispute, and the award was accepted by both parties. On the facts, the Court treated the arrangement as one where the assessee remained bound by his pre-existing contractual obligation to account for the relevant part of the receipts to the company. The receipt was therefore not viewed as wholly belonging to the assessee for tax purposes in the year under appeal.

Conclusion: The 70 per cent portion was treated as diverted at source by overriding title, and only the balance was taxable in the assessee's hands; the issue was decided in favour of the assessee.

Issue (ii): Whether the assessee was entitled to deduction under section 80RR.

Analysis: The deduction claim was not pressed at the hearing and the required Form No. 10H was not furnished. No substantive adjudication on the merits of the claim was therefore warranted.

Conclusion: The deduction under section 80RR was not allowed; this issue was decided against the assessee.

Final Conclusion: The appeal succeeded only on the principal taxability issue relating to diversion of receipts from the programme, while the claim for deduction under section 80RR failed.

Ratio Decidendi: Where a valid pre-existing contractual obligation, subsequently reflected in an accepted arbitration award, diverts income at source before it accrues to the taxpayer, the amount so diverted is not assessable as the taxpayer's income.

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