Income Tax Rules – People living in the city have to pay property tax. But there is a lot of confusion in people’s minds about paying property tax. Suppose, if the husband has bought property in the name of the wife with his own money. So in such a situation the question is who among the two will have to pay the tax. Actually, while hearing a similar case recently, the Calcutta High Court has given a big decision. Let’s know in the news below –
The Delhi Bench of the Delhi Branch of the Income Tax Appellate Tribunal (ITAT) has held that if the extent of holding of the husband and wife is not mentioned in the registered sales deed of the house property, then both will be considered as having equal share in the property.
The Delhi Branch of the Income Tax Appellate Tribunal has said this in a case. Actually, the ITAT has given this decision in the case of Shivani Madan (taxpayer). The ITAT has upheld the taxation of Rs 9.8 lakh in her hands during the financial year 2014-15 (the year related to the case). 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 in the hands of the wife.
What is the case
In 2011, during a search conducted on a business group and then on taxpayers, the Income Tax Department found out that she had purchased a house property for Rs 3.5 crore in joint ownership with her husband. After this, questions started arising as to why the income from such house property was not disclosed in her IT-return. Shivani Madan had invested only Rs 20 lakh in the property, which is about 5.4 percent of the purchase price of the property.
In response to the IT notice, she disclosed her share ratio in the income from the house property. This approach was rejected at various stages of appeal. After this, the litigation reached the Delhi Branch of the Income Tax Appellate Tribunal (ITAT). In the ITAT, the husband put forward the point that there has been a practice of including the wife’s name in the sale deed. In this way, it is not right to tax 50 per cent of the house tax on the wife’s share. Various judicial decisions were also cited to strengthen this argument.
ITAT rejected the submissions
However, based on the facts of the case, the ITAT rejected these submissions. For example, the tax tribunal bench said that the Calcutta High Court had held that the income from the property should be taxed only in the name of the husband, as the wife was a housewife. The wife had no source of income and the entire investment was done by her. While in Madan’s case, she was a salaried person.
In fact, Madan was working with the business group that was searched. Tax experts say that adding wife’s name in house property is quite common. However, the builder and seller of the property should keep documentation of the exact holdings made by all co-owners, details of bank accounts from which payments have been made, previous tax returns etc. All these will come in handy in case of such litigation.