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Income tax

Ravinder Singh Malhan (ARTICLE) (70 Points)

14 February 2010

Dear All,
I have the following query pertaining to the Income Tax Law :

There is a show on Sony Entertainment TV Channel called 'Lift Karade.' They call one celebrity on the show and have 3 of their fans (selected through unknown criteria) compete with each other in order to win a meet with their superstar. While the winner among 3 gets to meet their superstar, they are also given a Gold Medal as a token of appreciation with the celebrity's autograph embossed on it. Also, they provide some monetary help usually amounting to near Rs. 10 Lakhs to some needy person selected by the production team from a city nominated by the celebrity. I have got the following taxability concerns :
a) What will be the taxability of the received amount in the hands of that needy person?
b) Will the amount be allowed to the production house as a deduction in calculating the taxable income?
c) Will the gold medal received by the winner fan taxed as gift?

Hope to receive your views on the same.

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16 Replies

RAKESH (Almost CA) (2199 Points)
Replied 14 February 2010

nice questions. even i m interested in answer.

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Max Payne (employed) (2569 Points)
Replied 14 February 2010

Hello ravinder,

To me,

1. Receipt by NEEDY PERSON, Gift - income from other source taxable u/s 56.

2. Deduction will be allowed u/s 37, since it is incurred entirely for the business purpose and is required for business

3. Income to fan, will be winning defined in section 2(24)(ix), futher explained by explanation 2 to that sub-clause, taxable u/s 115BB, without basic exemption limit.

Kashyap Joshi (Proprietor ) (260 Points)
Replied 14 February 2010

Dear G.K. pls clarify further on Ans. No 3.

Amir (Learner) (4016 Points)
Replied 14 February 2010

Dear Kashyap,

G.K. Bhai is rite "Gold Medal" received by the winner on TV Show will be taxable u/s 115BB @ 30% Flat (Without any exemption limit) as Income from Other Sources

Hareesh H Sharma (Cleared IPCC..now article) (894 Points)
Replied 14 February 2010

Yup GK is perfectly right to me too...

@ Kashyap winnings from card games and other games of any sort which is covered in 115BB includes any game show, entertainment prog on TV or electronic mode, in which ppl compete to win prizes or any other similar game...

@ Ravinder since its a 115BB income no expenses, chap VI deduction or basic exem can be claimed from it and it cant be set off or carried forward too...

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Kashyap Joshi (Proprietor ) (260 Points)
Replied 15 February 2010

Thank u friends, I wasnt aware of that. But how do u value the gold medal (an object) in monetary terms ?

Amir (Learner) (4016 Points)
Replied 15 February 2010

Dear Kashyap,

Ok lets try n get the answer from u only.........

Suppose I won a "Motor Cycle" in a contest then what would be it's value for Income Tax Purposes - "The amount which the organiser of contest spent on it"

Similarly in case of "Gold medal" the value would be the amount spent by the organisers.......

CA Pranjal Joshi (CA) (331 Points)
Replied 15 February 2010

Hi,

Generally in such cases, gift given to needy is made "tax free" in his hands. i.e. the organisers / sponsorers etc. pays the tax to govt & amount net of tax is given without reducing the amount of gift. i.e. if Rs. 10 lacs is to be given then co will consider Rs. 10 lacs as after tax amount and will proportionately pay the tax to govt so that needy will receive Rs. 10 lacs actually.

CA Ankit Totla (Practicing Chartered Accountant) (469 Points)
Replied 15 February 2010

1) the tax authority is not concerned with needy or not needy... if the family recieves gift frm the show.. it is to b charged under INCEOM FROM OTHER SOURCES

2) it is an allowable expense as the show is expending the money to get higher TRP i.e. earning frm the show.. so an allowable expense u/s 37

3)gift in kind is not taxable... so the medal is exempted..!!

Hareesh H Sharma (Cleared IPCC..now article) (894 Points)
Replied 15 February 2010

@ Ankit i guess the medal will be converted into monetory terms and taxed as Amir said...cos this is a prize covered US 115 BB..so it wont be exempted according to me

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CA Ankit Totla (Practicing Chartered Accountant) (469 Points)
Replied 16 February 2010

sec 115BB covers price money recd frm tv game shows and crosswords or any income recd frm gambling... here thr is no winning... but this is juss a symbol of appreciation recd for the gratitude shown and charity done.... this is not a prize money or winning.... so i guess it is not taxable....

if the medal is sold sold... thn capital gains would b attracted...!!!!

Amitkumar Joshi (CA Final) (30 Points)
Replied 16 February 2010

agreed with ankit.

Kashyap Joshi (Proprietor ) (260 Points)
Replied 16 February 2010

Friends, gifts in kind are taxable.

Kindly go thru the following :-

No.402/92/2006-MC (21 of 2009)

Government of India / Ministry of Finance

Department of Revenue

Central Board of Direct Taxes

***

New Delhi dated the 30th September 2009

The Income Tax Act 1961 (the Act) has been amended with effect from 1st October 2009

to provide that any gift-in-kind, being an immovable property or any other property, the value of

which exceeds Rs.50,000 (rupees fifty thousand), will become taxable in the hands of the donee,

being an individual or a Hindu Undivided Family (HUF), as income from other sources under

clause (vii) of sub-section 2 of section 56 of the Act. Therefore, any such person who receives a

gift of any such property on or after 1st October 2009 must pay the income tax due on the value

of the gift and disclose the taxable value of such property in the return of income for assessment

year 2010-11 and subsequent years.

The following types of gifts will, however, not be subject to tax, i.e. gifts (a) from a

person who is a relative; (b) on the occasion of marriage of the individual; (c) under a will or by

way of inheritance; (d) in contemplation of death of the donor; (e) from any local authority as

defined in the Explanation to section 10(20) of the Act; (f) from any fund or trust established

under section 10(23C) of the Act; (g) from any trust or institution registered under section 12AA

of the Act.

Relative is defined in the Act as (i) spouse; (ii) brother or sister; (iii) brother or sister of

the spouse; (iv) brother or sister of either of the parents; (v) any lineal ascendant or descendant;

(vi) spouse of any of the relative at clauses (ii) to (v); of the individual. Gifts received from

these relatives will not be subject to tax.

Earlier cash gifts exceeding Rs.25,000 were subject to tax with effect from 1st April

2004. Later the Act was amended with effect from 1st April 2006 to tax all cash gifts having

aggregate value exceeding Rs.50,000. Cash gifts also enjoy exemptions as is available for giftsin-

kind.

Amir (Learner) (4016 Points)
Replied 16 February 2010

Dear Ankit & Amit Kumar,

In the present case the gold medal cannot be said as Gift........

Gift is something which is done gratituously & without any consideration may be beacuse of natual love & affection or otherwise, whereas the gold medal in the question requires some contest to be played on part of the winner...

It will still be taxable u/s 115BB even if Gift in kind are not taxable.......

Further Sec 155BB says that " Where the total income of an assessee includes any income by way of winnings..........."

Plz note the word is "INCOME" & not any "SUM / MONEY"

Income may even be in kind - Income may be received in kind as well as in cash and the receipt of an equivalent of cash may be a receipt of income. The essence of the matter is that there must be an actually realized or realisable profit or loss. Receipt of a new and substituted security is not enough - Raja Raghunandan Prasad Singh v. CIT [1933] 1 ITR 113 (PC)/CIT v. Central India Industries Ltd. [1971] 82 ITR 555 (SC)/Seth Kishori Lal Babulal v. CIT [1963] 49 ITR 502 (All.).

Yes, Capital Gain will also be computed as & when winner sells this medal....

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