Superstar Shah Rukh Khan has got a big victory in a case related to income tax. The Income Tax Appellate Tribunal (ITAT) has stayed the order of re-assessment proceedings initiated by the Income Tax Department for the financial year 2011-12.
The case is related to the tax credit paid in the UK on the earnings of the film Ra.One. According to the agreement between Shah Rukh and Red Chillies Entertainment, 70% of the film was to be shot in the UK. Therefore, 70% of the income was considered abroad, which was to be taxed in the UK. This also included with-holding tax.
Shahrukh had declared an income of Rs 83.42 crore from the film. The tax officer rejected his claim of tax credit paid in the UK. The income was reassessed as Rs 84.17 crore.
Shahrukh had claimed foreign tax credit in his original I-T return, which was rejected by the IT officer. ITAT held that reassessment after a period of 4 years was not legally justified.
The bench declared the re-assessment process invalid
The ITAT bench of Sandeep Singh Karhail and Girish Aggarwal, in its order, declared the re-assessment process invalid. The tribunal said that the assessment officer could not provide any new concrete evidence for reassessment after the 4-year rule.
The ITAT bench concluded that the re-assessment proceedings were legally wrong on more than one ground. It was not in accordance with the provisions of Section 147. Therefore, it was quashed. The tribunal did not find any evidence against Shahrukh.
The IT officer rejected the claim of foreign tax credit
Shahrukh’s payment was made through Winford Production, a UK company. Tax officials argued that this payment arrangement caused a loss of revenue to India. The IT officer had rejected Shahrukh’s claim of foreign tax credit.
An Indian citizen has to pay tax in India on his global income. There is a provision for foreign tax credit in tax treaties. This allows Indian citizens to deduct the tax paid abroad from their Indian tax liability. This helps in avoiding paying tax twice on the same income.
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