CHENNAI: A division bench of the Madras High Court on Friday issued a notice to music composer AR Rahman in a case filed by the Income Tax department alleging that he routed income of over Rs 3 crore through the A R Rahman Foundation, a charitable trust managed by him, to evade tax.
The Income Tax Department moved the Madras High Court challenging the Income Tax Appellate Tribunal, Chennai, verdict that set aside the order of the Principal Commissioner of Income Tax in Chennai.
According to senior standing counsel for the Income Tax department T R Senthil Kumar, in the assessment year 2011-12, Rahman received income to the tune of Rs 3.47 crore in connection with an agreement made with the UK based Libra Mobiles.
The contract was to compose exclusive ringtones for the company and the term of the contract was for three years. As per the contract, Rahman instructed the company to pay his remuneration directly to the foundation managed by him, the department said.
The allegation is that the money had been transferred to the Foundation, which did not have a Foreign Contribution Regulation Act (FCRA) licence then.
“The taxable income must be received by Rahman and after due deduction of tax, it can be transferred to the trust. But the same cannot be routed through the trust as income to the charitable trust is exempted under the Income Tax Act,” the counsel said.
According to the petition filed by the Income Tax department, Rahman after receiving the IT notice had moved the Income Tax Appellate Tribunal in Chennai and the tribunal in September 2019 had then held that the government of India had accorded “post facto approval” with respect to this contribution. The tribunal ruled in favour of Rahman finding that the amount was not taxable.
The division bench of justices TS Sivagnanam and V Bhavani Subbaroyan recorded the submissions made by the IT department and issued a notice to the music composer.