ITAT Delhi cites equal Ownership when sale deed does not specify extent of holding

The Delhi bench of the Income Tax Appellate Tribunal (ITAT) has ruled that both a husband and wife would be considered to own an equal portion of a residential property if a registered sale document did not identify their respective ownership interests.

The ITAT upheld a taxation of Rs 9.8 lakh in Shivani Madan’s hands for the financial year 2014–15 after ruling in her case (the year pertaining to the litigation). Due to the unoccupied nature of the property, 50% of the notional rent calculated in accordance with the Income Tax Act’s requirements was held to be taxable in the wife’s hands.

An prior investigation into a business organisation and, as a result, the taxpayer had turned up the acquisition of a home for Rs 3.5 crore in 2011 that she had jointly owned with her husband. This raised questions about why her I-T forms did not reveal the revenue from such a house property.

Madan had only contributed Rs. 20 lakh, or around 5.4% of the property’s purchasing price. She disclosed her share of the residential property revenue in response to the I-T notification. This strategy was turned down throughout the appeal’s various phases. She argued that because it is common to put the wife’s name in the sale deed when a case is brought before the ITAT that taxing 50% of the house property income in her possession was not appropriate. Also, a number of court rulings were used to support this claim.

On the basis of the case’s facts, the ITAT, however, dismissed these submissions. The tax tribunal panel, for instance, noted that the Calcutta high court had ruled that property income could only be taxed in the name of the husband because the wife was a homemaker with no other source of income and the husband made the entire investment. Madan, on the other hand, was a paid employee (incidentally employed with the business group on which the search was conducted).

Tax professionals point out that adding the wife’s name to a residential property is extremely typical. In the event of a tax dispute, evidence of the precise share that each co-owner gave to the property’s builder or seller, information about the bank accounts from which payments have been made, previous tax returns, etc., would be helpful.

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