Wife co-owner? Pay tax on 50% property income : ITAT
Mumbai, Feb 21, 2023
The Delhi bench of the Income Tax Appellate Tribunal (ITAT) has held that, if a registered sale deed did not specify the extent of holding of a husband and wife in a house property, then both would be held as owning an equal share in it.
Ruling in the case of Shivani Madan (the taxpayer), the ITAT consequently upheld a taxation of Rs 9.8 lakh in her hands during the financial year 2014-15 (the year pertaining to the litigation).
As this property was vacant, 50% of the notional rent computed under the provisions of the Income Tax (I-T) Act was held taxable in the wife's hands.
An earlier search conducted on a business group and consequently on the taxpayer had revealed purchase of a house property in 2011 for Rs 3.5 crore in joint ownership with her husband. This led to queries on why the income from such house property was not disclosed in her I-T returns.
Madan had invested only Rs 20 lakh, which is around 5.4% of the purchase price of the property.
In response to the I-T notice, she disclosed house property income in proportion to her share. In the various stages of appeal, this approach was rejected.
When the litigation reached the ITAT, she submitted that it is customary to include the wife's name in the sale deed, thus taxing 50% of the house property income in her hands was not justified. Various judicial decisions were also referred to for strengthening this argument.
However, based on the facts of the case, the ITAT rejected these submissions. For instance, the tax tribunal bench noted that the Calcutta high court had held income from property should be taxed only in the name of the husband, as the wife was a housewife, with no independent source of income and the entire investment was made by the husband. Whereas in the case of Madan, she was a salary earner (incidentally employed with the business group on which the search was conducted). Tax experts point out that it is quite common for the name of the wife to be added to a house property.
However, documentation of the exact share contributed by each co-owner to the builder/seller of the property, details of bank accounts from which payments have been made, past tax returns et al would come in handy in case of tax litigation.
[The Times of India]