Last 2 days to register for Online GST Certification course?

Fans idolises their superstars and superstars love their fans. And now, celebrities can actually turn this adulation to their advantage as 80% of the money they spend on their fans will be treated as expenses meant for promoting their profession and will not be taxed.

The dispute over taxing the money spent by actors on their followers came up before the Madras high court that was hearing an appeal by the income tax (I-T) department against a tribunal order that went in favour of Tamil actor Vijayakant. The actor is the founder of a political outfit, Desiya Mupokku Dravida Kazhagam (DMDK).

The actor claimed that he had spent Rs 20.19 lakh on his fan clubs in 2004-05 and the amount should be treated as expenses and not subjected to tax. Not agreeing to the argument, the I-T department said the spending had not been shown genuine as it was not produced with supporting vouchers or other forms of evidence.
Vijaykant challenged the contention before the commissioner of I-T (appeal) who granted that 80% of the amount can be treated as expenses. He added that such expenses were most important for the assessee (Vijayakanth) to maintain his popularity among his fans and were relevant to his profession. The income tax appellate tribunal also upheld his view.
The HC said it was a well known fact that popular artistes and celebrities promote their Rasigar Manrams (fan clubs) through which they promote their upcoming films. Tamil superstar Rajnikanth leads the list with the biggest fan following in the country followed by Amitabh Bachchan, SRK and Sachin Tendulkar.
“When a celebrity claims that a substantial amount is spent towards clothes and food at the time of the release of new films and for the maintenance of Rasigar Manrams, it cannot be said it is not part of his profession. The view of the commissioner of income tax (appeal), who found favour with the tribunal, could not be faulted with. We, therefore, do not find any question of law, to entertain this appeal,” said the HC, dismissing the appeal.
Income tax officials said this ruling was bound to have an effect on other fan clubs too. “Most of them will quote this to claim complete deductions while computing tax saying they have to sponsor their fan clubs to promote themselves,” a senior I-T official said.

UNRESOLVED QUESTIONS

The case raises interesting issues. For one thing, there is no way of keeping track of the expenses of the fan clubs. There is no particular basis for disallowing 20 per cent of the claim. Does it mean that such disallowance of 20 per cent does not relate to the profession? If a part could be disallowed, how, as a leading critic pointed out, does one arrive at the proportion to be disallowed?

Rasigar mandrams promote not merely the profession but also the political career of the stars, as can be seen from a study of film stars in public life, especially in Tamil Nadu.

Allowing rasigar mandram expenses can be interpreted as amounting to tax law being utilised for political purposes. This is something that the framers of the tax code could not have anticipated.

It is necessary that the attention of the judiciary should be drawn to the political aspect of such cases so that no attempt is made to drag the Income Tax Department into political controversies.

More Under Income Tax

Posted Under

Category : Income Tax (25317)
Type : Articles (14808)

Leave a Reply

Your email address will not be published. Required fields are marked *