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Last Updated : Mar 18, 2019 07:22 PM IST | Source: Moneycontrol.com

Fresh tax trouble for Shah Rukh Khan: I-T challenges relief over alleged benami property

The I-T mounted the challenge after the Adjudicating Authority dismissed the case and slammed the department for labelling a property acquired by Shah Rukh’s firm as ‘benami’

Tarun Sharma @talktotarun

The Income Tax Department has challenged an order providing relief to actor Shah Rukh Khan in a case in which he has been accused of owning a benami property, sources told Moneycontrol.

The I-T mounted the challenge after the Adjudicating Authority dismissed the case and slammed the department for labelling a property acquired by Shah Rukh’s firm as ‘benami’.

Shah Rukh is the first and most prominent case filed under the Benami Property Act after a stringent amendment in 2016 was made to crack down on use of benami property for tax evasion.

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Under this amendment, one could face imprisonment up to seven years and be liable to pay a fine up to 25 percent of the fair market value of the benami property. As per the anti-benami law, once proven, a benamidar (in whose name the benami property is standing) and beneficiary (who pays for the same) are prosecutable.

Case history

The property came under the I-T scanner after District Collector Vijay Suryavanshi had sought legal opinion on 87 farmhouses, which included a bungalow purportedly owned by the actor along the Alibaug seafront, for alleged Coastal Regulatory Zone (CRZ) violations.

While Maharashtra Tenancy and Agricultural Lands Act (MTAL) does not allow for transfer of agricultural land to non-agriculturists without permission of the district Collector or state government, Shah Rukh purchased the land in Alibaug for agricultural purposes but built a farmhouse instead.

In 2018, the I-T department had attached the actor’s farmhouse built on agricultural land and adjoining plots (bearing survey nos 188/A, 188/1B, 188/2, 188/3, 188/4, 187/1) in Alibaug worth around Rs 15 crore.

It termed the company, Deja Vu Farms Pvt, a benamidar, and the 53-year-old actor a beneficiary of a benami deal under the Prohibition of Benami Property Transaction Act.

“The said transaction falls under the definition of benami transaction as per Section 2(9) of the Prohibition of Benami Property Transactions Act, 1988, where Deja Vu Farms has acted as benamidar for the ultimate benefit of Khan. Thus, the actor is a beneficiary for the said transaction under the prescribed law,” the I-T investigation report submitted to Adjudicating Authority stated while seeking provisional attachment.

The Adjudicating Authority slammed the I-T department for issuing the order against Shah Rukh and the company-- in which he, his wife Gauri and in-laws are shareholders, saying a "commercial transaction entered into course of business by an independent entity cannot be coloured as benami transaction because it had sourced the funds from loans."

It rejected the tax department's allegation that the entire transaction was undertaken on the ‘desire and instruction’ of Khan and from ‘unsecured loans’ of about Rs 14.67 crore provided by him to the firm. The department had charged that as Shah Rukh was "not an agriculturist, he sought to purchase the land by forming Deja Vu Farms Pvt, a front entity and giving it colour of company engaged in agriculture."

I-T Department’s current stance

A source in the I-T department said it now has sufficient base to prove this transaction as benami and build a strong case against Shah Rukh.

“The law clears states that if somebody buys a property but not from their own capital, it falls under the Benami Property Act. This fact was ignored by the Adjudicating Authority. It interpreted the definition of what constitutes a benami property wrongly in this case," the source explained.

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First Published on Mar 18, 2019 01:15 pm
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