The Adjudicating Authority (AA) has slammed the Income-Tax Department, for issuing an attachment order in February 2018, against actor Shah Rukh Khan and a company in which he, his wife Gauri Khan and in-laws are shareholders, over a property in the scenic beach town of Alibaug in Maharashtra. “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,” the authority noted.
A division bench of the AA, comprising D Singhai (chairperson) and member (law) Tushar V Shah, exonerated Khan and said: “We have come to the conclusion that the named properties, i.e., agriculture land at village Thal, taluka Alibaug bearing survey nos 188/A, 188/1B, 188/2, 188/3, 188/4, 187/1 and structure thereon are not a benami property and hence, the attachment made thereof by the investigating officer is revoked hereby.”
The tax department had attached the farmhouse and plot, built on an agricultural land, in Alibaug, worth about Rs 15 crores and had called the company – Ms Deja Vu Farms Pvt Ltd – a benamidar (in whose name the benami property is standing) and the 53-year-old actor as a beneficiary (who pays money consideration) of a benami deal, booked under the Prohibition of Benami Property Transaction Act. The 1988 enacted law was implemented by the Modi government from November 2016, saying it was aimed to crack down against black money and stash holders.
The AA bench also rapped the probe officer of the I-T Department in Mumbai, for seemingly relying on ‘some press report/online articles’ that Khan acquired the property for his benefit, which it said was ‘incorrect and impermissible in law’.
“There is no basis to conclude that the property acquired by Deja Vu Farms Pvt Ltd is held for immediate or future benefit, direct or indirect, of Shah Rukh Khan,” the order, issued on January 23, said. The Authority rejected the I-T Department’s allegation that the entire transaction of purchasing the land parcels in Alibaug and construction of a luxury farm house on it, was done on the ‘desire and instruction’ of Khan and from ‘unsecured loans’ of about Rs 14.67 crores provided by him to the firm.
The I-T Department had also charged that as Khan was ‘not an agriculturist, he sought to purchase the land by forming Ms Deja Vu Farms Pvt Ltd, a front entity and giving it colour of company engaged in agriculture’. The department had also said in its order that a person, Moreshwar Rajaram Ajgaonkar, was a ‘front’ for Khan, as the actor used the former’s credentials of being an agriculturist, to purchase the land by making a representation under the said category before the additional collector of Raigad, the district under which Alibaug falls. It had also charged that the company was incorporated ‘on the instructions’ of Khan, as he was interested in purchasing a property in Alibaug for the construction of a farmhouse. The taxman had said in its complaint that the objective of the firm (Deja Vu) was stated to undertake agricultural activity on the land and the Raigad district state government gave permission to purchase the land with a ‘condition’ that it will be put to use within three years, for the purpose of farming.
The AA also found as ‘justified’, the contention of Khan and his company that a private firm can borrow funds even from its shareholders and that there has been no concealment of the loan given by the actor which has been disclosed by the former in its annual returns for the last several years. The Authority said that it was ‘beyond doubt’ that the Alibaug property was acquired and held by the company in its own right and independent of any other person. “There is nothing to raise the inference or presumption in law that the property owned by a company, can be said to be held for the benefit of its shareholder,” the Authority ruled, absolving Khan of the criminal charges under the stringent law.
As per the anti-benami law, once proven, a benamidar (in whose name a benami property is standing) and the beneficiary (who pays money consideration) are prosecutable and may face rigorous imprisonment of up to seven years, besides being liable to pay fine of up to 25 per cent of the fair market value of the benami property.