The department has alleged that the music composer routed his income of over Rs 3 crore through the AR Rahman Foundation to evade income tax.

Music composer AR Rahman wearing a black jacket, looking into the camera
Flix Income Tax Friday, September 11, 2020 - 11:56

The Income Tax Department on Friday moved the Madras High Court against music composer AR Rahman, accusing him of routing a portion of his income through his AR Rahman Foundation to evade income tax. The I-T Department challenged the Income Tax Appellate Tribunal’s September 2019 verdict setting aside the order of the Principal Commissioner of Income Tax in Chennai.

The Principal Commissioner of Income Tax in Chennai had alleged that the composer had diverted money to his foundation. The department has reportedly pegged the amount of income routed to about Rs 3 crore.

The Madras High Court on Friday sent a notice to AR Rahman to explain the charges levelled by the Income Tax Department. 

The case dates back to 2015 when the Income Tax Department had accused AR Rahman of evading tax, alleging that money he received from a UK-based mobile phone company, for composing a ringtone for them, had been transferred to the Foundation, which did not have a Foreign Contribution Regulation Act (FCRA) licence. The tax department had said that the amount of approximately Rs 3.47 crore was taxable income since the trust did not have permissions to receive foreign contributions, nor was the amount in the form of a donation. 

Rahman had moved the Income Tax Appellate Tribunal in Chennai against the I-T order, and the tribunal had then held that the government of India, had accorded “post facto approval” in respect of this contribution. “Therefore, there is nothing on the record suggesting that it is taxable in the hands of the assessee (Rahman),” the court held in September 2019.

The AR Rahman Foundation, a non-profit organisation, was founded in 2009 by the music composer and his family. According to the AR Rahman Foundation’s official website, it aims to help children from underprivileged backgrounds “through music, education and leadership building.”

In February this year, the Union government granted the AR Rahman Foundation the FCRA license allowing the non-profit to receive foreign funds. As per a Hindu report, AR Rahman Foundation has been registered for ‘cultural, social and educational purposes’ under the FCRA.  

This is not the first time Rahman has found himself in trouble over alleged non-payment of taxes. The Madras High Court had in February this year stayed an order by Commissioner of Goods and Service Tax and Central Excise, accusing the music composer of evading the tax to a tune of Rs 6.70 crore, from April 2013 and June 2017. The GST Council had accused the music composer of not paying the service tax on the payments that he had received for his work. 

The Academy award winning music director filed an affidavit in the court stating the Commissioner initiated action with the notion that producers are copyright owners of a song. However, composers are the copyright owners as per Section 13 (1) (a) of the Copyright Act 1957.

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