Shah Rukh Khan (King Khan), a famous actor of Bollywood, had given a loan of Rs. 2,28,88,530.00 to his wife Gauri Khan in A.Y. 2006-07. Gauri Khan has purchased, out of the said loan, a residential property and jewellery. The A.O. has accepted the Wealth Tax Return filed by Shah Rukh Khan passing an order U/s. 16(3) of Wealth Tax Act. But the Audit party has raised a querry u/s. 17 of Act on 15-03-2011 to club the valuation of residential property of Rs. 1,65,95,000.00 and jewellery of Rs. 70,00,658.00 purchased by Gauri Khan. In assessment order, A.O. has also pointed out that the assessee could purchase the said wealth in his own name but he deliberately avoided the same. Thus, it was indirect transfer of assets within the meaning of provision of section 4(1)(a)(i) of Act and the said amount was clubbed in the taxable wealth of Shah Rukh Khan. The same has also been affirmed by CIT (A).
The Tribunal held that cash loan was not mentioned in section 4(1)(a)(i) at all. Definition of assets as given in section 2(ea) of the act does not include cash loan or advances, whether interest bearing or interest free.
Contention of the revenue that interest free loan was given to acquire asset and therefore u/s. 4(1)(a)(i), assets had been transferred. On this, the ITAT had remarked “we are not agreeing with the AO because there is no transfer of assets, rather an asset has been purchased in the form of residential house, after taking interest free loans”.
As regards the argument of revenue as “why a person shall lend money to his wife to purchase house and jewellery or not purchased in his own name remained unexplained”. Against this the Tribunal stated “we are not satisfied with these observations, because this is their family matter and the decision for the purchase of property, that is, in whose name, is upto them and not the revenue”.
The Tribunal also pointed out that clubbing in husband’s wealth cannot be done, where wife earn income and file her own return. Moreover, if she is paying loan amount (Rs. 4,50,400.00 upto A.Y. 2008-09, out of loan taken of Rs. 2,28,88,530.00….. !!!!!), the clubbing does not make sense.
Is it tax planning, tax avoidance or tax evasion ?????
(Author: CA KAUSHIK JAGAD, B.Com., F.C.A., Bhavnagar. Email : email@example.com)