Sen's harassment payout not taxable: Tribunal

The Income Tax Appellate Tribunal (ITAT) passed an order in favour of Sushmita Sen, ruling the Rs 95 lakh that the actor received from beverages maker Coca Cola for settling a sexual harassment complaint would not be classified as an 'income'.

According to a November 14 order, the tribunal accepted the actor's contention that the sum is a "capital gain" and not an income which attracts tax. It also did away with a penalty of Rs 31.35 lakh that was slapped on her for concealment of this "income".

The case pertains to a Rs 1.50 crore contract between Coca Cola and Sen which was ended prematurely in 2003. The former Miss Universe had received a sum of Rs 1.45 crore from Coca Cola as the final settlement.

In her tax filings, the actor showed only Rs 50 lakh as "income" and the rest as extra receipts which are capital gains in nature.

"The only logical deduction was that the company accepted the contention of the assessee of the alleged sexual harassment and paid the compensation to avoid negative publicity/embarrassment which would have jeopardized the business of the company world over," the order said.

"The additional compensation was not towards the service rendered and did not arise out of the contractual terms," it adds.

Giving more details, the order said Sen alleged the termination was done for "collateral and illegal purpose of punishing the assessee for resisting attempts of sexual harassment" by an employee of CCIL (Coca Cola India).

Accepting Sen's contention, the tribunal said the final settlement of Rs 1.45 crore was "not a simple settlement of commercial claims" and only Rs 50 lakh was the 'income' due to her from the beverage maker.

"The said compensation did not accrue/arise out of exercise of profession by the assessee and could not be construed to be the income of the assessee or profits and gains of profession...we have no hesitation in deleting the impugned addition of Rs 95 lakh," it said.