Case Overview: The Income Tax Appellate Tribunal (ITAT) in Delhi allowed renowned cricketer Kapil Dev to claim exemption on a Rs. 1.5 crore one-time benefit granted to him by the BCCI in 2013. This benefit was in recognition of his services to cricket.
Tribunal’s Rationale: The ITAT bench, comprising M. Balaganesh (Accountant Member) and MS Madhumita Roy (Judicial Member), stated that the right amount of tax should be collected from the right person in accordance with the law. They cited Article 265 of the Constitution, which mandates that no tax can be collected without an authority of law. They emphasized that if a statute provides a specific exemption for a particular receipt, it cannot be taxed merely because the assessee offered it erroneously in their income return.
Legal Basis for Exemption: The exemption was allowed under Section 56(2)(vii) of the Income Tax Act, 1961, which deals with gifts received by an individual or entity.
Initial Tax Filing: Kapil Dev initially filed his return of income for the assessment year 2013-14, declaring a taxable income of Rs 4,66,28,830/-. He later filed a revised return declaring a taxable income of Rs 4,26,28,830/-, which included the Rs. 1.5 crore benefit.
Subsequent Advice and Appeal: Kapil Dev was later advised that the one-time benefit was exempt under Section 56(2)(vii) of the Income Tax Act. He approached the Commissioner of Income Tax (Appeals) seeking exemption of tax on this income, but his appeal was dismissed as being time-barred.
Department’s Opposition: Before the ITAT, the Department opposed Kapil Dev’s case, arguing that a valid claim could only be entertained if it was included in the return filed by the assessee.
Tribunal’s Consideration of Delay: The ITAT noted that Kapil Dev had filed an affidavit explaining the reasons for the delay and had shown “sufficient cause” for the late claim.
Final Decision: The Tribunal concluded that income should be determined in accordance with the provisions of the Act. They held that the revenue cannot take advantage of the assessee’s ignorance while determining taxable income. Based on this, they granted Kapil Dev relief.
ITAT Delhi – Kapil Dev Nikhanj v. ACIT [ITA No. 1770/Del/2023]
