FEBRUARY 09, 2022

I dedicate this issue to Lata Mangeshkar and her tryst with the tax department. Tax is certainly not music - even for the nightingale.

It started in the first year of Indian Independence. In Lata Mangeshkar vs Union of India and Ors. on 7 November, 1958 - 1959 36 ITR 527 Bom, the High Court observed,

On 11th February, 1952, the assessee, who is a singer by profession, submitted her return of income in respect of the assessment years 1948-49, 1949-50 and 1950-51. That was her first return and was made after the close of the assessment year 1950-51. She submitted her return for the assessment year 1951-52 on 9th October, 1952. That also was after the close of the assessment year 1951-52. The assessments for the years 1948-49 to 1950-51 were completed on 5th March, 1952, and the assessment for the year 1951-52 was completed on 11th September, 1953. The second respondent is the Income-tax Officer and the third respondent is the Commissioner of Income-tax, Bombay. On 27th February, 1956, the second respondent issued a notice on the assessee alleging that the petitioner had not submitted an estimate of her total income and had also failed to pay advance tax. He called upon the petitioner by that notice to show cause why an order under section 35 should not be passed on her levying penal interest in respect of these years. Ultimately, the Income-tax Officer passed three orders, two of them on 3 rd March, 1956, and one on 20th March, 1956.

There being no appeal under the statute against an order made under section 35, the assessee preferred revision applications to the third respondent, which applications were dismissed by him on 3rd January, 1958. The assessee thereupon preferred a petition to the High court asking for a writ of certiorari.

The High Court observed:

1. It is the duty of the court to see as far as possible in interpreting the provisions of income-tax law that the various provisions read harmoniously. Courts have never pronounced that they have always succeeded in doing so and in this case the effort of learned counsel for the assessee has been to show that if we accept the construction strongly pressed for our acceptance on behalf of the Revenue, the result will be illogical.

2. It has been stated over and over again that the court must look merely at the express language of the law-maker if it is clear or the necessary intendment to be gathered from such express language of the enactment. Apart from that, there is no room for intendment in a taxing statute. The matter must depend on the language of the section and construction of any provision of a taxing statute cannot be controlled by the consequences that may follow where the language is clear and capable of only one meaning.

And she lost the case with costs, even though another great artist, Palkhiwala was her lawyer.

In Additional Commissioner of Income-Tax, Bombay City-I Vs Miss Lata Mangeshkar - 2003-TIOL-482-HC-MUM-IT, the High Court observed -

The assessee, who is an acknowledged play-back singer, submitted her returns of income for the assessment years 1962-63, 1963-64 and 1964-65, disclosing professional receipts of Rs. 1,43,650, Rs. 1,38,251 and Rs. 1,19,850, respectively. The returns were principally based upon the diaries which were maintained by the assessee in which proper entries were made in respect of receipts received by her for the professional work done by her as a play-back singer. From the diaries, M/s. Ghanekar & Co., a firm of chartered accountants, used to write regular accounts. The assessee had produced confirmatory letters from all the producers regarding the correctness of payments shown to have been made by them. The Income-tax Officer came across a sort of a ledger maintained by the firm known as Vasu Films of Madras containing certain entries, which had been seized by the income-tax authorities from the premises of that firm at Madras, and relying on those entries he took the view that the assessee must have concealed her real income by not showing certain payments for which no receipts were passed by her and he made the additions of Rs. 60,550, Rs. 75,000 and Rs. 75,000 to the income returned in each of the three assessment years respectively. For drawing the inference that she must have received income without passing receipts the Income-tax Officer relied upon the two entries which appeared on one page of that ledger of Vasu Films, which read as follows:

In the statements recorded of one N. Vasudev Menon, the managing partner of Vasu Films, and one C. S. Kumar, the firm's Bombay manager, the entries were explained by them by stating that the letter "W" put against the figures mentioned in the entries represented payment in "white" while the letter "B" put against some items indicated payment in "black". The assessee was given an opportunity to cross-examine these persons. The Income-tax Officer accepted the entries as showing that payments had been received by the assessee for which receipts had not been passed by her and these payments were outside the books of account and he also relied upon the statements made by these two persons. The Appellate Assistant Commissioner confirmed the additions made by the Income-tax Officer. Before the Tribunal it was contended on behalf of the assessee that the entire evidence on which the lower authorities had relied merely created suspicion that the assessee might have accepted the payments in "black" but it did not take the place of proof.

The Tribunal after appreciating all the pieces of evidence that were relied upon by the department in support of its case came to the conclusion that the evidence was not sufficient to prove even a single instance where the assessee could be said to have received money in "black" for which she did not pass a receipt. The other evidence was of a general character suggesting that the practice of receiving part remuneration in black was prevalent among cine stars which was of no avail to prove any specific instance against the assessee. The only specific evidence which required scrutiny was that furnished by the two entries and the statements of N. Vasudev Menon and C. S. Kumar. On a scrutiny of the two entries as well as the evidence of the two witnesses, the Tribunal took the view that even that evidence did not carry the department's case any further and in that view of the matter the Tribunal deleted the additions by the Income-tax Officer.

The department was before the High Court against the Tribunal order.

The High Court observed -

In our view, the question has been framed by the department so as to give it a colour of a question of law, for, in our view, having regard to the manner in which the Tribunal has dealt with the said entries, it cannot be said that the Tribunal has ignored the entries in the ledger of Vasu Films relating to the so-called payments made by the firm to the assessee. In fact, the Tribunal has discussed these entries appearing in the ledger of Vasu Films and has given substantial reasons as to why it was not inclined to accept the entries as reliable entries for accepting the case of the department. Inter alia, it pointed out that the ledger containing the said entries had not been produced before it, that no corresponding entries were there in the day-book of the relevant period and that Vasu Films did not rely on this ledger in the course of its own assessment proceedings but for its own assessment proceedings different set of books had been relied upon as genuine set of books. As regards the evidence of the two witnesses on which reliance was placed by the department, the Tribunal has pointed out that so far as N. Vasudev Menon was concerned, he had no personal knowledge of the actual payments made to the assessee and, therefore, his evidence could not carry the case of the department any further and so far as the Bombay manager, C. S. Kumar, was concerned it came to the conclusion that though he purported to say that he had made the payments in "black" to the assessee--payments corresponding to the entries to be found in the ledger--his evidence suffered from serious infirmities, which have been pointed out by the Tribunal in its reasons. It pointed out that as the Bombay manager he used to receive amounts from Madras from out of which he used to make disbursements in Bombay but he maintained no account in respect of the same which made it difficult to rely on his evidence. The other serious infirmities in his evidence are to be found in paragraph 7 of the Tribunal's order. Mr. Joshi for the department had also mainly relied upon this evidence and did not press the other evidence which was of a general character. However, having regard to the reasons which have been given by the Tribunal for disbelieving the two witnesses and for rejecting the entries that were found in the ledger of Vasu Films, we feel that the conclusion reached by the Tribunal purely rests on the appreciation of evidence and no questions of law arise.

This time, she won with costs.

2009-TIOL-309-ITAT-MUM - Ms Lata Mangeshkar Vs Asst Commissioner of Income Tax

A search and seizure action was carried on. The Assessing Officer received information from DCIT requesting for initiating of proceedings u/s 158BD. Statements were recorded at the time of search on 16.08.99 & 27.08.2001. The payments recorded at page 4 were in cash and made to various film artists which were not recorded in books of account. The Assessing Officer was not satisfied with the assessee's explanation and made addition of Rs.3.00 lakhs which has been confirmed by CIT(A).

The Tribunal deleted the addition of Rs.3.00 lakh. 

A tribute or tax ?

An Income Tax Assessing Officer in his order observed,

The assessee is a world famous singer of India. Hardly any place will be there in India, where her enchanting voice has not reached and is not being heard. Her admirers will have to be counted in lakhs. There is therefore almost an ever-lasting demand for playing of record of songs sung by her. Hers is perhaps the only example where the law of diminishing returns in economics has been badly suffered. The assessee is entitled to receive royalty on the records of her songs sold in a year. By virtue of her excellence in the field, this income is more or less of assured nature. To go on having this income year after year is definitely a valuable right in possession of the assessee. Whatever is valuable will form the wealth of the assessee for the W.T. assessment purpose. The assessee's right to get royalty income on the sale of her records is also, therefore, taxable in her hands .

You can't really sing your way through the tax department. And even taxmen can pay rich tributes, while collecting taxes!

Lata Mangeshkar had kar (tax) in her name itself.

Until Next Week