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Relief for Sushmita Sen: Not liable to pay tax on compensation received from Coca Cola

In 2003-04, Sushmita Sen received compensation of Rs 95 lakh from Coca Cola as she alleged that a person from the company had sexually harassed her.

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In a major relief to Bollywood actor Sushmita Sen, the Income Tax Appella Tribunal (ITAT) has said that she is not liable to pay tax on a compensation received feom Coca Cola in a sexual harrasment case. 

In 2003-04, Sushmita Sen received compensation of Rs 95 lakh from Coca Cola as she alleged that a person from the company had sexually harassed her. 

The ITAT held that the compensation Sen got did not fall under the “income” category but was rather a “capital receipt”. Hence, it is not taxable. The body also set aside the penalty of Rs 35 lakh imposed on her for concealment of income - she had not shown Rs 95 lakh as part of her income to I-T.

The former Miss Universe received Rs 1.45 crore as part of the settlement from Coca-Cola India. She offered Rs 50 lakh for income tax, which is the sum she was entitled to get in case of premature termination of the contract. She maintained that the remaining Rs 95 lakh was a compensation and hence, not taxable.

The balance amount of Rs.95 Lacs is stated to be received for loss of reputation etc. under the circumstances as discussed by us in the preceding paragraphs and therefore, being capital in nature, claimed to be not taxable. The factual matrix leads us to believe so in view of the fact that the contract did not envisage any additional payment over and above the amount of Rs.150 Lacs to the assessee. The perusal of documents leads us to believe that the said compensation did not accrue / arise out of exercise of profession by the assessee and could not be construed to be the income of the assessee or profits and gains of profession within the meaning of Section 2(24) and Section 28 of the Income Tax Act, 1961. The compensation could not be termed as any benefit, perquisites arising to the assessee out of the exercise of profession,” the Tribunal said.

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