HRA Exemption for Rent Paid to Spouse Allowed by ITAT

The Income Tax Appellate Tribunal Delhi (ITAT Delhi) in the matter of Abhay Kumar Mittal Vs. DCIT has ruled out that House Rent Allowance (HRA) exemption for rent paid to spouse is allowed.

The Appellant, Abhay Kumar Mittal filed the appeal against the order of ld. CIT(A)-21 while dismissing the assessee’s claim for a deduction for rental payments, it was held by the Assessing Officer that the rental income earned by Mrs. Shivani Mittal, the W/o the assessee is liable to be clubbed in the hands of the assessee since it is proved that the investment to have purchased the property was in fact was made without having any independent source of income. Accordingly Assessing Officer clubbed the rental income of Rs.5,34,000/- after allowing deduction u/s 24A @ 30% (Rs. 1,60,200/-) in the hands of the assessee and addition of Rs. 3,73,800/- was made in the hands of the assessee.

It was explained by the assessee that the property was worth Rs.1.15.Crore was claimed to be purchased by the assessee’s wife for which amount of Rs.87.50 lacs was funded by the assessee himself and the remaining amount was claimed to have been invested out of her own sources i.e. maturity of FD amounting to Rs.33.25 lacs. However, it was noticed by the Assessing Officer that the assessee’s wife, in fact, had no independent source of income to make the investment in the FDR’s and the major share of Rs. 87.50 lacs was also funded by the assessee.

The Appellant Tribunal rule out that “We find that the assessee’s wife who has low returned income but received loan from the assessee and she has repaid the loan from the redemption of mutual funds and liquidation of fixed deposits. There is no bar on the part of the assessee to extend loan from his known sources of income to his wife. Simi larly, there is no bar on the assessee’s wife to repay the loan from her own mutual funds and fixed deposits. The assessee has paid house rent and the recipient, the assessee’s wife has declared the same under the head “income from house property” in her returns which has been accepted by the revenue. The copy of which has been placed before us. The house has been registered in the name of Smt. Shivani Bansal. The ld. CIT(A)’s observation that the assessee has got meager income hence he cannot afford to purchase a house cannot be accepted as the sources for purchase of the house in the hands of Smt. Shivani Bansal are proved rather never doubted. The ld. CIT(A)’s contention that the husband cannot pay rent to the wife is devoid of any legal implication supporting any such contention. Hence, keeping in view the entire facts of the case, we hereby al low the appeal of the assessee.”

The Judgment was made by A. D. Jain and Dr. B. R. R. Kumar.

The Petittioner Abhay Kumar Mittal is represented by Sh. Rajesh Mahana, Adv. and the Respondent DCIT represented by Sh. Sanjay Kumar, Sr. DR.

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