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SC notice to Kamal Haasan in income tax matter
23rd Nov 2007 10.00 IST
By Agencies

The Supreme Court has issued a notice to noted film-actor-director Kamal Haasan who claimed income tax deductions in a matter related to transfer of overseas telecast rights of his film "Kuruthi Punal."

A bench headed by Justice Ashok Bhan Thursday sought response from the actor on a petition filed by the income tax department and tagged the matter with a similar petition of AA Nadiadwala pending before it.

The Income Tax Appellate Tribunal and the Madras High Court while ruling in favour of Haasan had observed that transfer of telecast rights can be described as an article or thing within the meaning of "goods" and "merchandise."

The Tribunal also held that Beta cam tape, which had incorporeal rights, would fall under "goods" for the purposes of claiming deductions under Section 80 HHC of the Income Tax Act.

While challenging the High Court judgment that allowed deductions of Rs 54.50 lakh to Haasan, Additional Solicitor General Vikas Singh said the actor was not entitled to deductions as there was only transfer of rights of telecast and no export of goods or merchandise had taken place.

"Section 80 HHC is applicable only for profits derived from export of goods and merchandise and cannot apply to transaction of the assessee who has not exported any goods or merchandise," the department said.

Treating the transfer of the right to telecast film "Kuruthi Punal" as a sale of goods was wrong because what was transferred was simply the right to exhibit the film and not goods, Singh contended, adding "the decision of the High Court is not correct because there was a transfer of exploitation rights for a fixed period which do not amount to sale."

According to the department, for the purposes of claiming deduction under the Act there should be transfer of goods or merchandise from India to a foreign country.

The High Court had failed to take into consideration that fact that the assessee had only leased the rights of the film to a party abroad for a limited period and there was no actual sale of goods or merchandise, it added.

The assessee had claimed that he had exported video and film rights along with the print and the export of rights and print containing the picture would come within the definition of goods having commercial value.

The authorities had refused the actor's claim stating that the prints without rights of exploitation had no value. "It is the right to exploitation of prints which is actually valuable and for which the consideration is arising out of transfer of the rights of exploitation," it added.

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