The Income-tax department moved to Madras High Court against musician AR Rahman for alleged tax evasion.

The allegation Rahman is that he has routed an income of over Rs 3 crore, through the AR Rahman Foundation (his charitable trust) to evade tax.

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The Income tax department has found discrepancies in Rahman’s tax filing for the year 2011-12. 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 court has sent a legal notice to Rahman seeking his response regarding the case filed by the Income Tax department.

According to the I-T department, Rahman had signed an agreement with UK-based Libra Mobilesto compose exclusive ringtones for the company. He was to be paid about Rs 3.47 crore for the contract in the 2011-12 assessment year. Rahman, however, directed to pay the amount directly to the foundation, senior lawyer T R Senthil Kumar, appearing for the department, told a bench of justices TS Sivagnanam and V Bhavani Subbaroyan.

This amounted to diversion of funds. The I-T department filed a case saying the foundation did not have a Foreign Contribution Regulation Act (FCRA) license at that time to receive payment from a foreign organisation.

In February this year, the Union government granted the AR Rahman Foundation the FCRA license, allowing the non-profit organisation to receive foreign funds. Since the contract was signed by Rahman, he should have first received the amount and then transferred it to the foundation.

Therefore, the amount should be considered as income taxable in his hands, it said. Rahman moved the appellate tribunal against the I-T department’s claim. The tribunal said the Centre had given “post facto approval” for the contribution.

Hence, the amount is not taxable. Rahman along with his family members founded AR Rahman Foundation in 2009 to “help children from underprivileged backgrounds through music, education and leadership building.” Rahman has had faced income tax related trouble in the past.

The Madras High Court 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.