The Delhi bench of the Income Tax Appellate Tribunal ( ITAT ) has held that IT Act does not prohibit claiming HRA exemption on the rent paid to one’s spouse.
Abhay Kumar Mittal, the appellant, filed the appeal against the order of Assessing Officer (AO) while denying the claim of deduction of the rental amount paid to the assessee, observed 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 purchase the property was in fact made without having any independent source of income. Accordingly AO clubbed the rental income of Rs .5 ,34,000/- after allowing deduction u/s 24A @ 30% (Rs.1,60,200/-) and addition of Rs. 3,73,800/- was made in the hands of the assessee.
The assessee explains the capacity of the assessee’s wife to purchase the property giving details of sources of funds for the same. It was explained by the assessee that the property is worth Rs.1.15.Crore was claimed to be purchased by the assessee’s wife for which amount of Rs.87 .50 lakhs were 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 lakhs. It was further submitted by the assessee that the Income Tax Act does not prohibit claiming HRA exemption on the rent paid to one’s spouse, that assessee’s wife is a qualified medical practitioner and she has returned the loan extended to her by the assessee from the liquidation of mutual funds and fixed deposits.
The Coram of Shri. A. D. Jain, Vice-President, and Dr. B. R. R. Kumar, Accountant Member while allowing the appeal held that “There is no bar on the part of the assessee to extend the loan from his known sources of income to his wife. Similarly, 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. CIT(A)’s observation that the assessee has got meager income hence she 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”.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan AdFree. Follow us on Telegram for quick updates.
