The Bombay High Court on Wednesday admitted an appeal filed by the Income Tax (IT) department against actor Shah Rukh Khan for the tax deductions allowed on his income earned as the brand ambassador for Swiss luxury watch company Omega.

The IT department had challenged an order of the Income Tax Apellete Tribunal (ITAT) passed in December 2008 allowing a tax exemption to Khan under section 80RR of the IT Act.

The section 80RR, refers to Indian authors, playwrights, artists, musicians, sportsmen and actors who receive income from foreign parties for their work. In such cases, under section 80RR 75% of the total income obtained from the foreign government is exempted from tax.

The Bollywood superstar had declared an income of close to Rs20 crore in the assessment year of 2002-03. This included the Rs29 lakh that he stated he had earned as Omega's brand ambassador. The tax liability on that income, according to the IT department, was Rs4.05 lakh.

The IT department had contested the decision of the ITAT stating that the tribunal did not examine whether Khan's income from Omega qualifies as "professional income," and instead of allowing the appeal filed by the actor against the IT department, the assessing officer should have been allowed to probe whether the Rs29 lakh that Omega paid Khan qualified for an exemption under section 80RR.

The actor had contended that modelling for various brands was a part of his profession as an actor and the income received thereby was his professional income.

In June, HC had admitted another appeal filed by the department against Khan where he had sought deductions under section 80RR on Rs19.43 lakh earned in 1998-99 from Jeanne Arthes Perfume for fragrances named after him.

The appeal will come before the court for final hearing in due course.

Exempt or not
The IT department had challenged an order of the Income Tax Apellete Tribunal (ITAT) passed in December 2008 allowing a tax exemption to Khan under section 80RR of the IT Act. The section 80RR, refers to Indian authors, playwrights, artists, musicians, sportsmen and actors who receive income from foreign parties for their work. In such cases, under section 80RR, 75% of the total income obtained from the foreign government is exempted from tax.