The reason decoded between this case is that AR Rahman signed a 3 crore deal with a US based company. Once the deal was finished the composer had the money transferred to his trust’s account. According to section 11 and 13v of Income Tax Act 1961 Trust’s income is exempted from tax. So since this 3 crore was tranferredto his trust’s foundation he didn’t have to pay the tax. Thus senior standing counsel for the income tax department, TR Senthil Kumar said to TOI that this is an violation under Foreign Contribution (Regulation) Act, 1976, as it involves fund from overseas.
The Times of India quoted TR Senthil Kumar as saying, “He had entered into a three-year agreement with a company in the UK to compose ringtone for them, for which, an amount of over ` 3 crore was agreed to be paid. But he had said that the amount could be sent to his foundation. For a trust, if it fulfills some conditions, all its income would be exempted from tax under Section 11 and 13 of the Income Tax Act 1961. By routing the full money to the trust, he does not want to pay tax.”
The case dates back to 2015 when the Income Tax Department had accused AR Rahman of evading tax, and now the Madras High Court on Friday sent a notice to AR Rahman to explain the charges levelled by the Income Tax Department.
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.”