The Madras High Court on Friday issued
notice to music composer AR Rahman on a petition filed by the Income Tax
department alleging that he used a foundation in which he is the managing
trustee as a conduit to evade tax and routed Rs 3 crore plus income to it,
reported news agency PTI.

According to
senior standing counsel for the Income Tax department, Rahman received an income of Rs 3.47 crore in connection with an agreement made with the
UK-based Libra Mobiles.

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The contract was to compose exclusive ringtones for the company and the term of the contract was for three years.

A division bench of justices TS
Sivagnanam and V Bhavani Subbaroyan recorded the submissions made by the IT
department and issued notice to the music composer.

As per the
contract, Rahman instructed the company to pay his remuneration directly to the
foundation managed by him, the department said.

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.

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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 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 petition
said the order of the appellate tribunal is “erroneous in law” and
opposed to facts and circumstances of the case.

In a statement
to PTI, Rahman’s management quoted the tribunal’s ruling in the musician’s

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receipt of funds in the current matter 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,” the statement read.