The Income Tax Appellate Tribunal (ITAT) in Delhi has ruled that if a sale deed doesn’t specify the percentage of a husband and wife’s ownership in a house property, then both spouses will be considered equal owners. The ruling was made in the case of Shivani Madan, which has resulted in her requiring to pay Rs 9.8 lakh in taxes for the 2014-15 financial year. Although it is common practice to include a wife’s name in the sale deed of a property, the court felt in her case, being a salaried individual, she was liable to pay for her share of the property.
The Income Tax Appellate Tribunal (ITAT) in Delhi has ruled that if a sale deed doesn’t specify the percentage of a husband and wife’s ownership in a house property, then both spouses will be considered equal owners. The ruling was made in the case of Shivani Madan, and as a result, she was required to pay Rs 9.8 lakh in taxes for the 2014-15 financial year.
Previously, a search was carried out on a business group and subsequently on the taxpayer which showed that in 2011, they had jointly purchased a house property worth Rs 3.5 crore with the taxpayer’s husband. This raised questions as to why the income generated from this property was not disclosed in the taxpayer’s income tax returns.
It was found that the taxpayer had only invested Rs 20 lakh, which was approximately 5.4% of the property’s purchase price. In response to the income tax notice, the taxpayer revealed the income from the property in proportion to her share. However, this approach was rejected during various stages of appeal.
When the matter reached the ITAT, the taxpayer argued that it was a common practice to include the wife’s name in the sale deed, and therefore, taxing 50% of the house property income in her hands was not justifiable. The taxpayer also referred to previous judicial decisions that strengthened her argument.
The ITAT, however, did not accept these arguments based on the facts of the case. For instance, the tax tribunal bench referred to a previous ruling by the Calcutta high court, which held that income from a property should only be taxed in the husband’s name if the wife is a housewife with no independent source of income and if the entire investment was made by the husband. In the case of Madan, she was a salary earner, and tax experts note that it is common for the wife’s name to be included in the sale deed of a house property.
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