The Income Tax Appellate Tribunal (ITAT), has recently upheld the proceedings for re-opening of assessment by the income tax department against former Indian Cricket Team Captain Krishnamachari Srikanth.
The former Captain, the assessee is now engaged in the business of Modelling, Cricket Commentary, Journalism, and Consulting & BPCL Dealership. During the relevant year, the Assessing Officer noticed that he has sold shares held in his name, minor children, and wife, during the impugned year under consideration and has not offered Rs. 4.25 Crs. from the sale proceeds of the shares claimed it to be payment towards overriding garnishee attachment on the shares by Indian Bank.
Diving deeply into the facts of the case, the Tribunal observed that the assessee entered into a non-compete agreement with the Pentamedia Group of Concerns, of the entire shareholding of the said company ‘Kris Srikanth Sports Entertainment Private Limited’ agreeing not to compete for a period of six years with the said company ‘Kris Srikanth Sports Entertainment Private Limited’ for a non compete fee of Rs. 7.50 crores.
“This disclosure also did not specify that minor sons of the assessee who were holding 99% of the shareholding of ‘Kris Srikanth Sports Entertainment Private Limited’ were never guarantor of the loan availed by said ‘Aditya Leather Exports Private Limited’ from ‘Indian Bank’ nor they were Directors of Aditya Leather Exports Private Limited and he being the natural guardian of minor sons were under a duty under the law relating to Minors and Guardianship as are applicable in India to protect the interest of Minor sons who in fact were the holder of the share capital of ‘Kris Srikanth Sports Entertainment Private Limited’ which was a subject matter of transfer,” the Tribunal observed.
However, this non-competent fee of Rs. 7.50 crores were exempt from tax being capital receipt, the Tribunal added.
Concluding the 85-page order, the Tribunal upheld the re-assessment proceedings and held that the payments made to Indian Bank by the assessee to the tune of Rs. 4.25 crores was merely an application of income.
“In any case for completeness, we hold that the assessee was not entitled to deduction by way of diversion by overriding title as there was no charge held by ‘Indian Bank’ and there was merely a compromise entered into by the assessee with Indian Bank voluntarily to pay defaulted loans availed by said ‘Aditya Leather Exports Private Limited’. Thus, the payment to Indian Bank was merely an application of income and that too of an exempt income,” the Tribunal said.
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