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Income Tax department ordered Priyanka Chopra to pay pending tax demands over 4 years

Actor Priyanka Chopra has been hit by a spate of tax demands over a four-year period, starting with orders to pay up on a luxury watch and a luxury sedan which she claimed were gifted to her. 

The Income-tax Appellate Tribunal (ITAT) shot down Chopra’s explanation that an LVMH-TAG watch worth Rs 40 lakh was a gift to her from the company selling it and not part of her professional income. A similar reasoning by her regarding a Toyota Prius car, valued at Rs 27 lakh, has also been refuted by the ITAT.

The value of both items was treated as taxable perquisites in the hands of Chopra, under section 28(iv) of the Income-tax (I-T) Act. This section treats as taxable, ‘the value of any benefit or perquisite (whether convertible into money or not), arising from business or exercise of the profession.’ These are just two of the issues decided by ITAT in a series of orders, passed on January 16 this year, covering four years from the financial year 2006-07 onwards.

Some issues, such as addition to her taxable income for notional rent from her penthouse or a gift of jewellery worth Rs 17.06 lakh from the production house, Red Chillies Entertainment, have been remitted back to the I-T officials for a fresh relook, as the ITAT agreed that the additions were not based on any incriminating material seized during the search operations.

Also Read: Rising Income Inequality: 1 percent population in India holds 73 percent wealth of the country

During assessment for the financial year 2007-08, the I-T official verified the endorsement agreement entered into by the actor with the luxury brand LVMH-TAG Watches. He noted that apart from fees of Rs 1.40 crore for modeling and promotional activities over a two-year period, Chopra was also gifted a watch worth Rs 40 lakh.

The actress contended that it was a gift received from the company out of love, affection, and respect towards her and cannot be a taxable receipt in her hands. The I-T official disagreed and in his order held: “A company, is an artificial person and therefore does not have any emotional feeling of love and affection which is the cardinal factors for treating any transaction as the gift.”

He treated the value of the watch as a prerequisite under section 28(iv) which would be subject to tax. This action of the I-T official was upheld by the Commissioner (Appeals), which is the first level of appeals, prompting Chopra to approach the ITAT, which rejected her argument. In addition, the ITAT observed that the actor has not been able to produce evidence that the value of the watch was much less. Thus, Rs 40 lakh would be a taxable perquisite.

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