Income Tax Dept Moves SC Over Tarun Tahiliani Issue

Noted Fashion designer Tarun Tahiliani has moved the Supreme Court in relation to the issue of claiming tax exemption on his income from overseas. The dispute between Tahiliani and the Income Tax department can be traced back to the former’s earnings for the Financial Year 1999-2000. He had claimed deduction for the same period, the tax effect for which was Rs 25.80 lakhs. Under Section 80RR of the Income Tax Act,1961, an ‘artist’ can claim tax deduction on 75% of his/her total income earned abroad.
Income Tax Law: Is Dress Designer an Artist?
However, the Income tax department has argued that dress designers do not fall under the category of ‘artist’ for the purpose of tax exemption under the Income Tax Act, 1961. Such exemption is available only to a resident individual, who is an actor, artist, author, musician, playwright or sportsman. The idea behind this tax benefit is to encourage ‘artists’ to present their work overseas, not only to boost foreign exchange, but also as a contribution to greater understanding of Indian culture.
Last year, the Bombay High Court had upheld that Tarun Tahiliani is to be classified as an artist for the purpose of tax exemption. The tax authorities challenged the order, maintain that the word ‘artist’ in Section 80RR should be restricted to the sphere of fine arts. The celebrated designer, on the other hand, claimed that his work involves skill, imagination and visualization, and thus dress designing is a form of art that requires creativity while making a design. Tahiliani added that he has clearly mentioned in the reports that he has supplied only designs of garments to his client abroad. The fee received by him was for designing those sketches.