The Income Tax Appellate Tribunal has passed an order in favour of Sushmita Sen ruling that the actor is not liable to pay tax on the compensation she received from Coca Cola for settling a sexual harassment complaint, PTI reported on Monday. The amount of Rs 95 lakh would not be classified as “income”, said the authority that adjudicates income tax disputes.

The tribunal also dismissed an earlier penalty of Rs 31.35 lakh imposed on Sen for having concealed this amount. In an order passed on November 14, the tribunal accepted the actor’s contention that the amount is a “capital gain” and not income, which attracts tax.

A contract between the beverage company and Sen, worth Rs 1.5 crore, had ended prematurely in 2003 after the actor accused one of the company’s employees of sexual harassment against one of the company’s employees. As final settlement, she was paid Rs 1.45 crore. In her tax filing, Sen showed Rs 50 lakh as “income” and the rest as extra receipts, which are capital gains in nature.

Sen had claimed that the contract was ended to punish her “for resisting attempts of sexual harassment”.

“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 or embarrassment, which would have jeopardised the business of the company world over,” said the order. “The additional compensation was not towards the service rendered and did not arise out of the contractual terms.”

The tribunal ruled that the final settlement of Rs 1.45 crore was “not a simple settlement of commercial claims” and only Rs 50 lakh would be considered as “income”.

“The said compensation did not accrue/arise out of exercise of profession by the assessee and could not be construed to be the income of the assessee or profits and gains of profession...we have no hesitation in deleting the impugned addition of Rs 95 lakh,” it said.