Gujarish film promotion expenses by Hrithik Roshan disallowed. Amount paid to TV show Saregama contestants was not professional expenses

Gujarish film promotion expenses by Hrithik Roshan disallowed. Amount paid to TV show Saregama contestants voluntarily was not connected to his profession-ITAT

ABCAUS Case Law Citation:
ABCAUS 1078 (2016) (12) ITAT

Assessment Year:

Brief Facts of the Case:
In the present case, both the appellant assessee (Hrithik Roshan) and the Income Tax Department were in cross appeals against the order of CIT(A).

During the assessment proceedings, the Assessing Officer (AO) while verifying the return of income noticed that the assessee had claimed expenditure of Rs. 7 lakh for promotion of feature film “Gujarish”. On further verification, the assessee explained that the amounts were paid to seven contestants of a television show namely “Saregama” for promoting his brand, he being the main lead artist of the film. The Assessing Officer, however, did not find any merit in the submissions of the assessee.

The AO was of the view that all the expenditures relating to making of a film, its promotion, etc., is the responsibility of the producer and not the actor. Therefore, the assessee not being the producer of the film, there is no necessity for him to incur such expenditure.  Accordingly, he disallowed deduction claim of Rs.  5.60 lakh as the assessee suo–motu had disallowed 1/5th of the expenditure in the computation.

Being aggrieved with such disallowance, the assessee preferred appeal before the first appellate authority (FAA). The Commissioner (Appeals), however sustained the disallowance made by the Assessing Officer

Contentions of the Assessee:
It was submitted that though the assessee in terms of the contract with the producer was not required to incur such expenditure, however, for promoting his brand and the movie, the success of which would also enhance the brand value of the assessee, the expenditure was incurred for encouraging the participants of the television show. Therefore it was contended that as the expenditure incurred is integrally connected with the assessee’s profession as an actor it should be allowed.

Observations made by the Tribunal:
The Tribunal observed that the assessee is neither the producer nor the financer of the film “Gujarish”. He had only acted in the film for a remuneration / fee. Therefore, it was neither his responsibility nor obligation to incur expenditure for promotion of the film.

The ITAT further noted that the assessee had fairly accepted that the terms of the contract did not require the assessee to incur such expenditure and there was nothing on record to also suggest that there was any contract with the T.V. channel to incur such expenditure.

Therefore, the Tribunal opined that if as an observer of the TV show, assessee decided to give some cash gifts to the participants for encouraging them, it was a voluntary and spontaneous act of the assessee and had nothing to do with the promotion of the feature film or in any way connected to his profession. Thus, the expenditure claimed, was not related to assessee’s business or profession.

Held:
The disallowance of the expenditure was upheld. However the appeal of the assessee was partly allowed for the other ground related to estimation of Annual Let out Value (ALV) of the house property