Cricket legend Sachin Tendulkar, in a creative way of using tax provisions, saved himself from paying income tax of Rs 58 lakh by classifying himself as an “actor” instead of a cricketer. The case, which was shared by Sujit Bangar, the founder of Taxbuddy.com, is a new kind of tax lesson for professionals and freelancers in creative domains.
The issue goes back to the year 2002-03 when Tendulkar got Rs 5.92 crore from foreign endorsement of brands like Pepsi, Visa, and ESPN. He did not record this income as a cricketer but rather as an actor which made him entitled to a 30% deduction under Section 80RR of the Income Tax Act, 1961. Section 80RR is the provision that permits writers, artists, actors, and performers to claim deductions on certain earnings.
The tax authorities at first rejected the claim on the ground that Tendulkar was mainly a cricketer and therefore endorsement earnings should be accounted for as income from other sources. In response, Tendulkar said that the modelling and advertising work he did for their creative use was actually his acting and hence he was an actor for tax purposes.
The Income Tax Appellate Tribunal (ITAT) eventually sided with Tendulkar after a long fight. It construed the word “actor” in a more general sense to cover any performance that requires skill, imagination, and aesthetic qualities, including advertisements. The tribunal also recognized that one can be a multi-professional and that is the case with Tendulkar, who is a cricketer as well as an actor.
Therefore, the ITAT gave the green light to the complete exemption of Rs 1.77 crore of foreign endorsement income under Section 80RR credited to Tendulkar. Bangar explained the court decision’s importance by saying that “the artistic performance, not cricket, was the basis of his claim.”
This situation exemplifies how the use of creative strategies in conjunction with legal provisions can lead to the law of tax optimization without overstepping the boundaries of the law.
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