The Mumbai bench of the Income-Tax Appellate Tribunal (ITAT) has allowed a sum of Rs 11.35 crore advanced by actor Jackie Shroff to his wife Ayesha and her production house to be treated as a business loss. As there was no hope of recovery of these advances, during the financial year 2008-09, the actor wrote off the outstanding loan amount in his books. The ITAT disagreed with the lower tax authorities that such advances were personal in nature and should not be allowed as a deduction.

Jackie acted as a real-life hero by advancing loans to Ayesha and to Quest Films, which was her proprietary concern. In addition, he acted in both the films being produced by her. However, ‘Boom’, a multi-starrer movie, was unduly delayed escalating production costs and it also flopped at the box office. The other film ‘Sandhya’ could not be launched owing to legal and technical issues and financial constraints. These two events led to the production house being shut down. In addition to his initial financial backing, the actor also had to help Ayesha repay her external loans.

For the financial year 2008-09, Jackie had declared a business loss in his tax return. However, during re-assessment, the income-tax (I-T) officer added back the loan amount written off by him and sought to tax Rs 10.55 crore which was with him. According to the officer, Jackie was only a professional actor and not in the business of giving loans and advances. The officer viewed that the money advanced by the actor to his wife was exclusively personal in nature. In the absence of any business nexus, the loans written off should not be allowed as a deduction.

The commissioner (appeals) had held in favour of the actor, this led to the I-T officer filing an appeal with the ITAT. “Jackie Shroff was a superstar in 1994-99. However, after his career started lagging...he only played side roles. It is common for film stars to start home productions to promote themselves. Some succeed, some don’t. For instance, Salman Khan made a successful comeback with his home production,” the commissioner (appeals) had observed. The ITAT agreed that Jackie’s arguments that he financed these movies to boost his career carried weight.

The ITAT also accepted the observations of the commissioner (appeals) that had the actor not financed his wife to repay her borrowings, external lenders could have launched criminal proceedings against her. Even Jackie, who had stood as a personal guarantor, would have been implicated. This would have impacted the careers of both Jackie and his son Tiger, who was then aspiring to be an actor.

The ITAT, in its order dated December 31, 2018, held that merely because the loans were advanced to his wife or her proprietary concern cannot be the only criteria for holding them to be personal in nature. As there was no possibility of recovery of these loans in the near future, the write-off should be treated as a business loss. #casansaar (Source - PTI, Times of India)