Tuesday, April 7, 2015

Cash award received by editor for excellence in journalism is tax-free as it is a capital receipt

Rs. 1 lakh received by the assessee as an award from B.D. Goenka Trust for excellence in Journalism would be a capital receipt and, hence, not taxable.

: a)Appellant-assessee was editor-in-chief of a reputed English magazine and derived income from salary, interest, dividend and property.

b)He claimed exemption of Rs.1 lakh received by him as an award fromB.D. Goenka Trust for excellence in Journalism.

c)The Assessing Officer (‘AO’) disallowed claim for exemption on the ground that it didn't satisfy conditions of section 10(17A) which exempts from tax awards instituted by Central/State Govt in public interest.

d)On appeal, the CIT(A) allowed claim of assesseebut same was reversed by ITAT. Aggreived-assessee filed the instant appeal before High Court.

The High Court held in favour of assessee as under:

1)The primary reason of giving award in the assessee’s case was not directly related to the carrying on of vocation as a journalist or publisher.The award for excellence in Journalism was directly linked with the personal achievements and personality of the assessee. Further, payment in the instant case was not of a periodical or repetitive nature.

2)The paymenthad been made by a third person andnot made by an employer, who was not concerned with the activities or associated with the "vocation" of the appellant.

3)It being a payment of a personal nature, should be treated as capital payment, being akin to or like a gift, which does not have any element of quid pro quo. The impugned prize money was paid to the assessee on a voluntary basis and was purely gratis. 4)Hence, cash award of one lakh received from B.D. Goenka Trust for Excellence in Journalism would be a capital receipt and would not be taxable under Income Tax Act. - AROONPURIE V. COMMISSIONER OF INCOME-TAX [2015] 56 taxmann.com 80 (Delhi)