The Income Tax Department has moved the Madras High Court against a clean chit given to musician A.R. Rahman by the Income Tax Appellate Tribunal (ITAT) with respect to assessment of his declared income of ₹15.98 crore in assessment year 2011-12.
A Division Bench of Justices T.S. Sivagnanam and V. Bhavani Subbaroyan on Friday ordered notice to the music composer on the appeal preferred by the Principal Commissioner of Income Tax (Appeals) against ITAT’s September 18, 2019, order in favour of Mr. Rahman.
Mr. Rahman’s assessment for the said year was reopened under Section 148 of the Income Tax Act of 1961 on the ground that ₹3,47,77,200 received by him from U.K.-based Lebara Mobile and ₹54 lakh from Photon Kathas Production Pvt. Ltd. had escaped assessment.
The assessee stated that Lebara Mobile had paid not to him but to the A.R. Rahman Foundation (ARRF). He said ARRF was assessed for tax separately as an independent entity.
As quid pro quo, Mr. Rahman agreed to compose ringtones for the telecom company without charging any money for a period of three years.
The Assessment Officer accepted the explanation and closed the re-assessment proceedings on March 23, 2016. However, on February 13, 2018, the Principal Commissioner exercised his power of revision under Section 263 of the IT Act and issued a show cause notice to the composer seeking explanation as to why the re-assessment order should not be set aside.
Immediately, Mr. Rahman moved the ITAT, which held that the Principal Commissioner was “not justified” in exercising the power of revision.
Assailing the ITAT’s order before the High Court, T.R. Senthil Kumar, senior standing counsel for the I-T Department, said the Department would have had no objection if the composer had paid income tax for the amount in his individual capacity and then routed the money to ARRF. He said there was overwhelming evidence to prove that it was the composer’s professional income. According to the counsel, Lebara Mobile also sponsored the trips of Mr. Rahman to the U.K. Assessing the money at the hands of ARRF would not benefit revenue, since the Foundation was entitled to tax exemptions under 11 different heads, he said, and insisted on setting aside the ITAT’s order.
