Following an appeal by income tax (I-T) authorities, the Bombay high court will decide whether Rs18 crore paid by Amitabh Bachchan Corporation Limited, to the actor and his wife Jaya Bachchan counts as capital or revenue expenditure. According to the appeal filed by the I-T commissioner it is a capital expenditure and hence taxable. The appeal, first submitted in 2006, challenges an income tax appellate tribunal order that held it was revenue expenditure.
The I-T counsel told a division bench of justice DY Chandrachud and justice MS Sanklecha that the company had acquired a brand by making this payment. "It is a new means of access to income. This payment is hence capital expenditure," the appeal states. The appeal added that by acquiring the brand, the company enabled the management to conduct business while leaving fixed income untouched.HC has recently admitted the petition.
ABCL had filed returns in 1995 showing a loss of Rs17,74,85,826, on the grounds that the money paid was according to the agreement entered into by the company with Bachchan and his wife. Of this amount, Rs15 crore was paid to the actor and Rs3 crore to his wife. The actors had allowed the company to use their names for various purposes and agreed to make themselves available to the company for a period of 120 days in a year, for 10 years.
The assessing officer held that the company had acquired a brand by making this payment.
ABCL had then approached the commissioner of income tax, appeals, who held that the expenditure was capital.