This ‘gift’ is going to pinch Shah Rukh Khan rather hard. The income tax (I-T) department has decided that the actor will have to pay tax for his Rs17.84-crore Signature Villa at the Palm Jumeirah, Dubai.
He had shown it as a ‘gift’ from the developer in his I-T returns for 2008-09.The department has also initiated penalty proceedings against Khan for “furnishing inaccurate particulars and concealing income”.
In its December 27, 2010, demand notice, the I-T department says the villa received by Khan under the guise of “gift deed” from Nakheel Public Joint Stock Company (PJSC) is actually “consideration in return for lending his name to promote the company”.
Palm Islands is an artificial archipelago in Dubai. It consists of Palm Jebel Ali and Palm Deira. Signature Villas are themed residences built on the fronds of The Palm Jumeirah. In April 2009, Khan filed his returns declaring income of Rs126.31 crore for the assessment year 2008-09. He showed the sources of income as housing property, profession, capital gains and others.
The villa was shown as a gift received from Nakheel PJSC on September 16, 2007.
After scrutinising Khan’s returns, the department held that the villa was taxable. It, however, accepted Khan’s valuation of the villa at Rs17.84 crore. On November 26, 2010, the actor had replied to the department, saying the gift — Signature Villa — “does not constitute his income from business or profession as per the provisions of Section 28(IV)”.
An October 2010 letter from Nakheel PJSC was submitted to the department. It said Khan has not rendered professional service and his attendance at the annual day was in response to the friendship with His Excellency Sultan Ahmed Bin Sulayem, executive chairman, Nakheel PJSC.
Not satisfied with Khan’s reply, the department sent him a second demand notice on December 27, 2010, pointing out that Nakheel PJSC has been using Khan’s brand name to endorse its project since 2004. Khan has been charging huge amounts for other endorsements. But he has not shown any receipt for endorsing the Palm Project, the demand notice says.
The department bolstered its case with photographs of Khan performing at Nakheel’s annual day. These were retrieved from Nakheel’s website. It also attached an article showing Khan praising the Palm project. “The above material clearly indicates that the company (Nakheel PJSC) was keenly interested in using assessee’s (Khan) image and brand for publicity of its Palm Project, and the same has been used in perpetuity since 2004.”
The I-T notice also points out that “an arrangement of business or transaction without being reduced in writing and in good faith would under any circumstances be a business or transaction resulting in income/loss”. “And, therefore, merely absence of a document and resorting to colourable devices would not rescue the assessee (Khan) from the attraction of tax,” it concludes.
I love you shahrukh
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