Ashish Joseph (BOMBAY TIMES; September 13, 2020)

The income tax department has moved the Madras High Court against Oscar-winning music composer A R Rahman, alleging that he had diverted a payment made to him by a UK company to the A R Rahman Foundation to evade tax payment.

WHAT’S THE INCOME TAX DEPARTMENT’S CONTENTION?
Senior standing counsel for the income tax department, T R Senthil Kumar explains, “He had entered into a three-year agreement with a UK-based company to compose ringtone for them, for which an amount of more than Rs. 3 crore was agreed to be paid. He said the amount could be sent to his foundation. For a trust, if it fulfills some conditions, all its income will be exempted from tax under Section 11 and 13 of the Income Tax Act 1961. By routing full money to the trust, he doesn’t want to pay tax. If the same amount had come directly to him, after paying the tax, he could have used the balance amount as he wished. That’s what the law says. The creation of music is with his individual skills.”

Senior standing counsel for the income tax department, T R Senthil Kumar, says, “It is in no way connected with the foundation, (though) he happens to be its managing trustee. So, when it is offered to the foundation, without the permission of the central government, it’s a violation under Foreign Contribution (Regulation) Act, 1976. This is the contention of the department — the income made under individual capacity shouldn’t be diverted to the foundation, and is to be assessed as taxable.”

THE COURSE OF THE CASE
Ask him why it took this long for the matter to come before the High Court, he says, “This comes under the assessment year 2011-12 and is the third level of appeal. The assessment takes two years to complete. Then, the first level of appeal is to the commissioner, second to the tribunal, third to the High Court, and the fourth to the Supreme Court. Normally, it takes this long. Now, the appeal has been admitted by the court and Rahman’s advocate has taken the notice on his behalf. In the next hearing, he will come back and explain Rahman’s version.” The next hearing in the case will be on November 18.

‘WILL OFFER FULL SUPPORT’
In a statement, Rahman’s management said, “The receipt of funds has already been offered to tax in the hands of the A R Rahman Foundation, which was appreciated by the Honorable Income Tax Appellate Tribunal, Chennai Bench, while it adjudicated the matter in favour of Mr A R Rahman. We will continue to offer our full support and cooperation. May justice prevail (sic).”

— With inputs from PTI