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Indian Tax Man Questions Dubai Gift

by Lorys Charalambous, Tax-News.com, Cyprus

12 January 2011


Bollywood actor Shah Rukh Khan is contesting a demand from the Indian tax office to pay tax on a luxury villa in Dubai that was given to him in 2008. The villa at the Palm Jumeirah, valued at INR178.4m (USD3.9m), was a gift from the Nakhhel Public Joint Stock Company, as payment, the tax office believes, for endorsing the company.

For the assessment year 2008-09, Khan had, in April 2009, filed returns declaring income of INR1.26bn (USD28m). He said his income was from property, profession, capital gains and other sources. Khan put down that the villa was a gift given by Nakheel PJPC on September 16, 2007, however the tax office assessed that the villa was taxable and accordingly a notice was issued to Khan.

The actor sent a reply on November 26, 2010, stating that the gift did not constitute his income from business or profession. Nakheel also wrote to the tax office stating that Khan had not provided any professional services, and that the actor had attended a company function as a gesture of friendship towards Sultan Ahmed Bin Sulayem, Nakheel PJSC's executive chairman.

The tax office was not, however, convinced, and on December 27 issued another letter stating that Nakheel had been using Khan’s name to endorse the Palm Project since 2004 on its website and in other official media. Also, while Khan would normally charge huge amounts for this sort of work, there were no receipts for this particular endorsement.

TAGS: individuals | tax | business | India | entertainers | Dubai

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