Media gurus world over believe that "Reality TV shows" are the order of the day. Be it game or quiz shows, situational shows, or sensational, dramatic, humorous events; reality shows have set aside the never-ending saga of melodramatic soaps and are undoubtedly here to stay.
In India too reality TV has gained a significant foothold, and shows like Indian Idol, Kaun Banega Crorepati, Big Boss, and numerous other dance and talent hunt related reality shows utilize sensationalism to attract viewers, thereby generating vast amounts of advertising revenues.
Colossal sums of money are involved in such reality shows, stupendous amounts of prize money to the winners of the challenge, as well as monies paid to the anchors/judges participating in such shows. Taxation therefore, becomes an imperative angle to analyze.
The Tax Regime
Prior to analyzing the incidence of income-tax associated with the award of prize money to the winners of such shows, it becomes essential to fathom the concept of "income" itself. Sub-clause (ix) of Section 2(24) of the Indian Income Tax Act, 1961 (hereinafter referred to as "the IT Act") deems as income any winnings from lotteries, crossword puzzles, races including horse races, card games and other games of any sort or from gambling or betting of any form or nature whatsoever. It is essential to note that this sub-clause is not confined to mere betting or gambling activities and also includes within its ambit winnings/earnings received from non-gambling activities. Reliance in this regard can be placed on an important judgment rendered by the Hon'ble Supreme Court in CIT v. Karthikeyan 1 , wherein it was held that the term "income" also includes monies received from non-gambling or non-betting activities.
Further, clause (ii) of the Explanation to Section 2(24)(ix) of the IT Act clearly states that, "card game and other game of any sort" includes any game show, an entertainment programme on television or electronic mode, in which people compete to win prizes or any other similar game.
The word "income" is of widest amplitude and must be given its natural and grammatical meaning, therefore, in light of the above, the earnings of the winners appearing on such reality shows can be said to bear the character of income, and accordingly become liable to tax.
Once it is established that the winnings in the hands of the participants appearing on reality shows can be classified as income, it then becomes imperative, to characterize this income under the specific heads as laid down in the IT Act, in order to determine its taxability.
Unquestionably, the winnings from reality shows cannot be categorized under the specific heads of income like salaries, income from house property, capital gains, etc . ; consequently, such income is assessed under the head "Income from other sources" as per Section 56 of the IT Act. Therefore, the casual and non-recurring income derived by the winners of such reality contests, from the aforesaid sources, shall be chargeable to tax in terms of Section 115BB of the IT Act, at a flat rate of 30% on the gross winnings (without deduction of any allowance or expenditure), and such tax shall be deducted at source.
Before the popular reality show Kaun Banega Crorepati was launched, the winner of contests such as these bagged the entire prize money and paid the taxes at a later stage. But as per the current provisions of the law, all game show prizes, exceeding five thousand rupees, carry a tax of 30%, and that too deducted at source under Section 194B of the IT Act.
Therefore, concisely, in a reality show, when an assessee enters the contest to win it, and a prize is distributed in return for his skill and endurance, such award qualifies as a winning from "other games of any sort" and thus becomes eligible to tax at source.
An additional facet of reality TV, caught up in the throes of controversies, is the taxability of income received by the judges/anchors of such shows. In this regard, the case which created most upheaval was the case of Amitabh Bachchan v . DCIT and Ors. 2 , wherein the assessee, a film star, anchored a TV show where his skills as an actor were required. In lieu of this, it was held that since he was working as an "artist", the amount he received from foreign source for anchoring was eligible for relief from tax under Section 80RR of the IT Act. The Hon'ble Bombay High Court also allowed the assessee's plea that he was performing in his capacity as an "artist" and was thus eligible for exemption under the aforesaid section of the IT Act. It has however, been challenged by the Income Tax Department that the benefits of Section 80RR are available to only those artists who earn by performing outside the country or receive payment from foreign agencies. Since Kaun Banega Crorepati was produced by Star India Ltd. (an Indian firm), and the assessee was acting as an anchor and cannot be termed as an "artist", the tax rebate available to Amitabh Bachchan would stand vitiated.
In the case of Harsha Achyut Bhogle v . ITO 3 , the Hon'ble Mumbai Income Tax Appellate Tribunal also affirmed this view when it was pronounced that the assessee being a presenter, commentator and compere of a TV show was not an "artist" and hence his income from anchoring TV programmes was not entitled to deduction under Section 80RR of the IT Act.
Taking into consideration all of the above, it can without doubt be deduced that even more controversial than the scandalous spate of events forming part of reality TV, are the tax implications arising thereof. There is lack of clarity as to whether the tax regime adopted in case of reality shows follows the intention of the legislature, and as reality shows continue to gain popularity it becomes imperative to probe into such issue.
Therefore, it can safely be concluded that as reality shows rise and begin to dominate programming, the only true winner that emerges from such shows is the "villainous taxman".