Film Ramanand Sagar made in 1976 in I-T trouble

Forty-one years after its release, Ramanand Sagar’s superhit 'Charas', one of the first Bollywood movies to talk about drug menace, has landed Sagar’s kin into tax trouble. The reason being an anomaly in disclosing the amount received as guarantee money while selling the Mumbai distribution rights for the movie.
The Bombay High Court’s division bench of Justices SC Dharmadhikari and PD Naik upheld a penalty amounting to more than Rs 6 lakh on the late Sagar’s heirs.

The anomaly came up in the income-tax returns filed by Sagar’s company in the financial years 1976-77, regarding money received by him as minimum guarantee amount for the distribution of the Dharmendra-Hema Malini starrer in Mumbai territory from one Prakash Pictures.
While Sagar divided the amount into two different heads, allegedly to avoid tax liability, Prakash Pictures showed the entire amount under one head cost of acquiring the movie in its Income-Tax return for the year. The Income-Tax Department said Sagar received Rs 13.7 lakh from Prakash Pictures, but disclosed only Rs 3.9 lakh as he had previous losses to be adjusted against this income. The taxmen said had he disclosed the entire income at one go under the same head, he would have had to pay substantial money towards tax.
Sagar’s lawyers argued that he did not disclose everything under one head at the same time as he wasn’t sure if the movie will make enough money. The lawyer further said even if the initial tax return submitted by Sagar was incorrect, he had rectified it after receiving the first notice by the assessing officer.
The HC, however, said Sagar “should have been candid and honest” in disclosing the amount he received from Prakash Pictures.