TaxTMI 
TaxTMI 
2017 (8) TMI 921
X X X X Extracts X X X X
X X X X Extracts X X X X
....n by Ld. Counsel for assessee [AR] during proceedings before us and hence, the same is dismissed in limine. Therefore, the only effective grounds are ground numbers 1 & 2 which reads as follows:- 1. The learned CIT (Appeals) was not justified in confirming the action of the learned Asst. CIT in taxing the value of the Signature Villa at Dubai received by the appellant as a gift, as the income of the appellant. The reasons given in this regard both by the learned CIT (Appeals) and the learned Asst. CIT are incorrect, unjustified and unwarranted. 2. The learned CIT(Appeals) and the learned Asst. CIT have erred in holding that the gift was received by the appellant for utilizing his brand image and for the stage performance given by the appellant. The said finding is incorrect and is based entirely on conjectures and surmises. 3.1 Briefly stated, the assessee, being resident individual and a film actor by profession, was assessed u/s 143(3) for impugned AY vide Assessing Officer's order dated 27/12/2010 at Rs. 144.17 crores after certain adjustments / disallowances as against returned income of Rs. 126.31 crores filed by the assessee on 30/09/2008 which was subsequently revis....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ct legal identity as separate from its directors and therefore, could not have any emotions / sentiments like natural love and affection and therefore, incapable of making the said gift which was purportedly said to have been made by the Sultan, being mere Executive Director of the company. 3.5 The Ld. AO, after perusing the letter of Sultan dated 16/12/2004 expressing intention to donate the said villa came to conclusion that the said company was keen to use assessee's brand image / brand potential for the publicity of the Palm Project in lieu of the gift. The whole issue was encapsulated by Ld. AO in Para No. 6 of the Assessment order in the following manner:- "6. Thus, the sum-total of the entire issue is encapsulated hereunder: The assessee is a renowned film artist with worldwide fan following, who has been earning income from acting in fiIms, brand endorsements and stage performances. During the financial year under consideration, the assessee has shown that he has received a gift of Signature Villa at Dubai, and shown that this is not chargeable to tax. But, the fact that the assesse has been used as brand ambassador by the donor company Nakheel PJSC for the project si....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ncome Tax Act, 1961. Such income could only be excluded if it was specifically and expressly excluded by any provision of the act. The position is thus, this alleged gift was received by the assesse in the course of his profession and was given to him for the purpose of the same. Thus, in view of all these facts, the monetary value of the Signature Villa shown by the assesse in his Wealth Tax Return for A.Y. 2009-10 at Rs. 17,84,95,000/- is taxed as a professional receipt within the meaning of the provision of section 28(iv) of Income Tax Act, 1961. The value of the Signature Villa declared by the assesse in his Wealth Tax Return for A.Y. 2009-10 is apparently an estimated value not backed by any valuation report. If this is considered as the basis for adopting the value of the property, which is the scaled down value on account of worldwide economic recession and economic meltdown of UAE markets, the apparent and inherent value of the said property for the year under consideration, when the economy of UAE was buoyant, then the value of the said property would be still higher. However the conservative value of Rs. 17,84,95,000/- as given by the assesse is adopted as the monetary....
X X X X Extracts X X X X
X X X X Extracts X X X X
....orsement / advertisement for the donor. 4.2 Regarding presence at Annual Day, the assessee contended that the same was at the request of the Sultan out of personal courtesy / friendship and the assessee did not make any stage performance or undertook any advertisement rather he merely addressed the employees of the company which on no account could tantamount to advertisement for donor. The attention was also drawn to the fact that the assessee during the relevant time was charging only Rs. 1 Crores for similar stage performance and therefore, the receipt of the Villa of such a high value could not be said to be against any sort of advertisement or brand endorsement. 4.3 The attention was further drawn to the letter issued by Nakheel PJSC dated 17/10/2010 to support the contention that no performance was undertaken by the assessee at the Annual Day Celebration in 2007. Further, the assessee received gift way back in 2004 and to finalize the location etc. visited Sales / Office Center of the donor only twice in the year 2004 & 2005 but nevertheless, the transaction being gift in nature, could not be added to the income of the assessee. 4.4 Without prejudice, the assessee al....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e official website of the said company. It is also a fact that the appellant has not shown any receipts with regard to this endorsement in his books of accounts. The said company was keenly Interested in using the appellant's image and brand for publicity of its Palm Project, and the same has been used in perpetuity since 2004. The appellant never objected to the news of actor's visit being put on the company's official website. The appellant's interest in having a house in this project was deciphered by the ld.AO from the appellant's visit to the sales centre of the company. There is merit In the Ld. AO'S observation that the donor being a company and an artificial entity, cannot be believed to have behavioral sentiments such as courtesy or gratitude. Without natural love and affection, no person would part away with his belongings permanently in favour of any unknown / little known person. The Id. AO has fairly succeeded in interlinking the activity of endorsement of brand with receipt of gift in this case, which is particularly accentuated by the letter dated 16.12.2004 reproduced in the assessment order at page15. This letter includes the following sentence"....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the whole genesis of the gift and the assessee, while accepting the same sought RBI permission since the Villa was situated in Dubai. The permission of the RBI came in the year 2007 after due consultation / permission of Ministry of Finance & Ministry of Home Affairs. Pursuant to the offer of said letter, the assessee visited sales office of the donor twice in 2004 & 2005 to finalize the location etc. of the Villa since the project was being developed over huge area and the property which was to be gifted was to be identified in specie. Thereafter, when the permission was received from the Government Agency, the gift deed was executed by the donor in his favor. Since, the ownership of the property was vested in the Nakheel PJSC which was nothing but under exclusive control of Sultan & which was common in Dubai, the gift deed was executed by Nakheel who, in the meanwhile was converted into Public Joint stock Company. The assessee attended the Annual Day celebrations of the Nakheel in the year 2007 at the request of the Sultan and merely addressed the employees of the company and did not undertake any stage appearance or performance which tantamount to brand endorsement or advertisem....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed in the obscure portion of the website was not justified to tax the value of the gifted Villa in the hands of the assessee. 5.4 The Ld. AR further contended that the gift was offered pursuant to wishes of the Sultan who was Executive Director of the donor company. However, as per the prevailing practice / custom in Dubai, the company is under exclusive domain of Sultan and only Sultan has the exclusive control over the affairs of the company and nobody could question the action of Sultan. Since the ownership of the villa was vested in the company, the gift deed was executed by the company only at the behest of Sultan and to fulfill his desire to gift a Villa to the assessee vide letter dated 16/12/2004. However, the same were part and parcel of the same transaction solely aimed at fulfilling the wishes of the Sultan. The Ld. AR also contended that the whole burden of proving the adverse inference was on revenue and which revenue has failed to discharge and therefore, no additions could be made merely on the basis of doubts , conjectures or surmises. 6.1 Per contra, the Ld. Departmental representative [DR] supported the stand taken by the lower authorities and contended that....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e gift is Sultan's letter dated 16/12/2004 which has been reproduced in assessment order at Page No.14. The same is executed on the letterhead of Nakheel by HE Sultan Ahmed Bin Sulayem and the gift is accepted by the assessee. A perusal of the same shows that the Villa has been given 'as a token of our appreciation......'. It further states that '.....we will discuss the location of the villa and further details of the gift in due consideration with you.' Pursuant to the same, the assessee, through Chartered Accountant R.M.Ajgaonkar, sought permission of RBI vide letter dated 20/12/2004 as placed on Page No. 12 of the paper book. Thereafter, after a series of correspondence between assessee / assessee's representatives and RBI, the permission has finally been given to the assessee vide RBI letter dated 20/04/2007 which is placed on Page No. 23 of the paper book. Thereafter, deed of gift has been executed in assessee's favor on 16/09/2007 which is reproduced on Page Nos. 2 to 4 of the assessment order. Clause (e) of the said gift deed states that 'the donor is desirous of transferring by way of gift to donee who is celebrity from India and also a celebrity in Dubai U.A.E., in order ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ift. 7.5 The above conclusions are further supported by the fact that the gift was offered to the assessee in the year 2004, whereas, the Annual Day took place in the year 2007 and therefore the assessee was under no obligation to attend the same and undertake any sort of brand endorsements for donor company. This is further fortified by the letter of Nakheel dated 17/12/2010 where Nakheel has stated that: "This is to further state that we have invited Mr. Shah Rukh Khan as one of the guest of honors at the occasion of Nakheel Day held on [2nd September, 2007] in Dubai. Nakheel Day is a non-commercial internal staff event of the company. He graced the occasion as a gesture of goodwill and friendship with HE Sultan Ahmed bin Sulayem where his presence at this function was gratis." The said letter gives strength to contention that presence of the assessee at the Annual Day was mere goodwill gesture and the event was internal staff event of the company. 7.6 So far as the capacity of the corporate entity to make a gift and execution of gift deed is concerned, we find that the argument that the corporate has separate legal entity as distinct from its members / directors, may....