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Income Tax Rules: If the house is registered in the wife's name, then know who will have to pay tax...

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The Delhi Bench of the Delhi Branch of the Income Tax Appellate Tribunal (ITAT) has held that, if the extent of holding of a husband and wife in a house property is not mentioned in the registered sale deed, then both will have equal rights in the property. Will be treated as a share. The Delhi Branch of the Income Tax Appellate Tribunal has said this in a case. ITAT has given this decision in the case of Shivani Madan (Taxpayers). ITAT has upheld taxation of Rs 9.8 lakh in its hands during the financial year 2014-15 (the year relevant to the suit). In effect this property was vacant. In such a situation, 50 percent of the notional rent calculated under the provisions of the Income Tax Act was taxable on the wife's behalf.

What is the matter

In 2011, during a search conducted on a business group and subsequent taxpayers, the Income Tax Department found the purchase of a house property in joint ownership with her husband for Rs 3.5 crore. After this, questions started being raised as to why the income from such house property had not been disclosed in his IT return. Shivani Madan had invested only Rs 20 lakh in the property, which is approximately 5.4% of the purchase price of the property.

In response to the IT notice, he disclosed his share ratio in the income from house property. This approach was rejected at various stages of the appeal. The litigation then reached the Delhi Branch of the Income Tax Appellate Tribunal (ITAT). In ITAT, the husband maintained that it has been the practice to include the wife's name in the sale deed. In this way, imposing 50 percent of the house tax on the wife's share is not right. Various judicial decisions were also cited to strengthen this argument.

ITAT rejected the submission

However, based on the facts of this case, the ITAT rejected these submissions. For example, the Tax Tribunal Bench noted that the Calcutta High Court had held that property income should be taxed in the name of the husband only because the wife was a housewife. The wife had no source of income and the entire investment was made by her. Whereas in Madan's case, she was a salaried person.

Madan was working with the business group which was searched. Tax experts say that it is quite common for the wife's name to be added to the house property. However, the builder and seller of the property must maintain documentation of the exact holding on behalf of all the co-owners, details of the bank accounts from which payments have been made, previous tax returns, etc. All these will be useful in case of such litigation.

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