Compensation for sexual harassment not taxable : IT Tribunal on Sushmita Sen case

This ruling was delivered by the quasi-judicial body while hearing the tax-related case of actor Sushmita Sen.

The actor had received Rs. 95 lakh as part of the settlement with the beverage company, Coca-Cola in 2003-04. She had alleged sexual harassment by one of the company’s employees. The Tribunal had marked the compensation as a “capital receipt” for Sushmita Sen and thus could not be taxed like an income.

The actor, who has played roles in blockbuster Bollywood movies like Main Hoon Na and was crowned Miss Universe in 1994 at the age of 18, had entered into a promotional deal with Coca-Cola worth Rs 1.5 crore. However, the contract ended prematurely and she got Rs 1.45 crore from Coca-Cola as the final settlement for sexual harassment allegations.

But the actor only showed Rs 50 lakh as income and the rest as capital gains.

Concurring with this, the Tribunal stated, “The only logical deduction was that the company accepted the contention of the assessee of the alleged sexual harassment and paid the compensation to avoid negative publicity/embarrassment which would have jeopardised the business of the company world over. The additional compensation was not towards the service rendered and did not arise out of the contractual terms.”