Aishwarya Rai

Actress Aishwarya Rai has got tax relief for earnings from the UK and the US. The Income-Tax Appellate Tribunal (ITAT), Mumbai, has allowed the actress to take
credit for the tax already paid in these countries.

The income tax department had wanted to tax the income she had received from the UK and the US, without giving allowance for the tax she had already paid. The income sought to be taxed was Rs 16.24 crore that Ms Rai had earned by performing in the UK and the US. The department raised a tax demand of Rs 77 lakh for the assessment year 2004-05, without allowing credit for over Rs 49 lakh she had paid as tax in those two countries.

The tax officer’s refusal to give credit for the tax paid abroad was on the ground that her foreign income was not offered for taxation under the Income-Tax Act. Ms Rai moved the first appellate body – Commissioner of Income Tax (Appeals) – against this decision. She was allowed to take credit for over Rs 49 lakh tax paid in the UK and the US. The department did not agree with the CIT(A)’s decision and appealed before the ITAT, the second appellate body on tax matters.

A division bench of the tribunal comprising KC Singhal and RS Syal pointed out that the Double Taxation Avoidance Agreement (DTAA) India has signed with the UK and the US have provisions for avoiding double taxation of the same income. The treaties also stipulate that between the provisions of domestic tax law and the DTAA, the provisions applicable to the tax payer should be the ones that are more beneficial to the tax payer, the bench said.

The tribunal accepted Ms Rai’s contention and held that she is entitled to the credit of the tax paid in the UK and the USA. This is not the first time the income tax department has disputed the claims of Ms Rai. The department had moved the Bombay High Court in October last against an ITAT decision that granted relief on the £50,000 she had received along with the Miss World title in 1994.