New Delhi, May 14: Now it can be told with some authority that Sachin Tendulkar and Sunil Gavaskar are not “artists” when they appear in ads or in the commentary box.

But it has taken the venerable Comptroller and Auditor General of India to tell the income-tax department what must be one of the worst-kept national secrets.

A CAG report today revealed that the tax department has been giving unfair exemption to foreign exchange earned by the two cricketing greats. The tax waiver runs into around Rs 3.6 crore in the case of Sachin and over Rs 80 lakh for Gavaskar.

Such exemption can be given only if the earnings are from international sports. But foreign income from endorsements — at the centre of a storm after the Indian debacle at the World Cup — and commentary assignments is not entitled to tax deduction under Section 80 RR of the Income-Tax Act.

Sachin and Sunny were not available for comment. Tax advisers said big earners do not usually go through each and every entry on their tax returns papers. The experts said it is the responsibility of their chartered accountants to ensure that income from endorsements and other heads is not passed off as that from international sporting events.

However, retired officials familiar with such cases said tax authorities usually interview assessees as part of the scrutiny if the exemption sought runs into lakhs of rupees. It is not clear whether the department sought clarifications from Sachin and Sunny or their tax consultants.

Besides, the tax rules specifically mention that “no deduction can be allowed unless the assessee furnishes a certificate… that the deduction has been correctly claimed…”.

In the report tabled in Parliament today, the CAG has pulled up tax officials for allowing the exemption.

However, the tax department, which usually does not shower such generosity on ordinary assessees, has tried to defend its action by saying that the exemption was given to the two as “artists”. The tax law does club a “musician, actor or sportsman” in the same bracket as an artist.

But the CAG has overruled the argument, pointing out that Sachin “has received this income in the capacity of a model which cannot be construed as an artist under Section 80 RR”.

The CAG found that the “incorrect allowance of deduction” was allowed for six years from 1998 to 2005. However, for one year (2003-04), the exemption was not allowed by an assessing officer who decided to go strictly by the book.

The tax department finally relented and said that Sachin’s assessment for 2000-01, 2001-02 and 2002-03 has been reopened and that for 2004-05 has been selected for scrutiny.

CAB tax leak

The report said 3,273 sports associations in different states were “required to be examined and brought under the tax net”.

It has found that the Cricket Association of Bengal has not been filing income-tax returns regularly. Scrutiny of the CAB assessment records for 1991-92 and 1993-94 has revealed some discrepancies. The report put the tax leak on this account at Rs 2.99 crore.