2010 (6) TMI 53 - HC - Income Tax

Design Fees Deduction u/s 80RR - The deduction was claimed in respect of the design fees received by the assessee from persons not resident in India in convertible foreign exchange. The Assessing Officer rejected the claim of the assessee holding that the assessee was not an author or a playwright artist musician actor or sportsman and hence did not fall within one of the categories to whom a deduction can be allowed CIT confirmed the order of AO and disallowed the deduction ITAT allowed the deduction u/s 80RR Held that - Simply stated an artist is a person who engages in an activity which is an art. Artists as we understand them use skill and imagination in the creation of aesthetic objects and experiences. Drawing painting sculpture acting dancing writing film making photography and music all involve imagination talent and skill in the creation of works which have an aesthetic value. A designer uses the process of design and her work requires a distinct and significant element of creativity. The canvass of design is diverse and includes graphic design and fashion design. An artist as part of his or her creative work seeks to arrange elements in a manner that would affect human senses and emotions. Design in a certain sense can be construed to be a rigorous form of art or art which has a clearly defined purpose. Though the field of designing may be regarded as a rigorous facet of art creativity imagination and visualization are the core of design. Dress designing has assumed significance in the age in which we live influenced as it is by the media and entertainment. As a dress designer the assessee must bring to his work a high degree of imagination creativity and skill. The fact that designing involves skill and even technical expertise does not detract from the fact that the designer must visualize and imagine. A designer is an artist. Deduction u/s 80RR allowed

Summary

Issues:
1. Whether a dress designer is entitled to a deduction under Section 80RR of the Income Tax Act, 1961.

Detailed Analysis:
The judgment by the Bombay High Court involved appeals pertaining to Assessment Years 1999-2000, 2000-01, and 2001-02, focusing on the eligibility of a dress designer for a deduction under Section 80RR. The primary issue revolved around interpreting the term "artist" under the Income Tax Act, specifically whether a dress designer falls within this category. The appeals were admitted based on the substantial question of law regarding the eligibility of a dress designer for the deduction under Section 80RR.

The Assessing Officer initially rejected the claim of the assessee, stating that a dress designer does not fall under the defined categories eligible for the deduction. However, the Income Tax Appellate Tribunal allowed the appeal for the Assessment Year 2001-02 and subsequently for the other years, leading to the Revenue appealing under Section 260A. The crux of the matter was whether the term "artist" in Section 80RR should be narrowly interpreted to include only those in the field of fine arts or if it should encompass broader creative fields like design.

Both parties presented their arguments before the Court. The Revenue contended that the term "artist" should be limited to fine arts, emphasizing the promotion of Indian culture abroad through the provision. Conversely, the assessee's counsel argued that the term should be broadly construed, focusing on the creativity, skill, and imagination involved in dress designing as qualifying characteristics of an artist.

Section 80RR was analyzed in detail, outlining the conditions for the deduction, including the types of professionals eligible and the income sources required for the deduction. The legislative intent behind introducing Section 80RR was discussed, highlighting the encouragement of various creative professionals to showcase their talents internationally.

The Court delved into the definition of "artist" from various sources like legal dictionaries and previous judicial interpretations. It was established that an artist engages in activities that involve skill, imagination, and the creation of works with aesthetic value. The judgment emphasized that designers, including dress designers, exhibit a high degree of creativity, skill, and visualization in their work, qualifying them as artists under Section 80RR.

Drawing on relevant legal precedents, the Court affirmed that the element of creativity, talent, and a sense of perception are crucial in defining an individual as an artist. The Tribunal's decision to classify the dress designer as an artist for the purposes of Section 80RR was upheld, leading to the dismissal of the appeals in favor of the assessee. The judgment concluded by emphasizing the artistic nature of design work and the eligibility of a dress designer for the deduction under Section 80RR.