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

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.