The court found that the AO view that the property would be liable to be viewed as being jointly owned in equal share by the appellant and her spouse and thus taxed in accordance with Section 23(1)(a) of the Act is not proper.
Delhi HC : Husband and Wife Cannot be Taxed Equally for Income earned out of Wife’s Sole Property
The Delhi High Court while setting aside the demand under section 23 of the Income Tax Act, 1961 , held that the husband and wife cannot be taxed equally for the income generated from the property solely owned by Wife. It was found that it cannot be considered as jointly owned.
Smt. Shivani Madan, the assessee challenged the order of the Income Tax Appellate Tribunal dated 05 January 2023 pertaining to Assessment Year 2015-16 and which has in essence affirmed the view that had been taken by the Assessing Officer as well as the Commissioner of Income Tax (Appeals) .
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The issue arose out of a search which was conducted and an assessment under Section 153A of the Income Tax Act, 1961 which ensued. The Tribunal has found that the property situate at J-278, Saket, New Delhi, was in the joint ownership of the appellant and her husband and had been acquired on 08 March 2011.
In the course of assessment, the appellant before us was placed on notice to answer a query as to why income from the said property be not charged to tax in her hand under the head of ‘income from house property’. The appellant appears to have asserted that the property is essentially owned by the spouse and that her name appears in the instrument solely for and in light of a contribution of INR 20,00,000/-, which was paid by her in A.Y. 2011-12.
The AO rejected the explanation of assessee and held that the property would be liable to be viewed as being jointly owned in equal share by the appellant and her spouse and thus taxed in accordance with Section 23(1)(a) of the Act. The AO proceeded further to thus compute the annual letting value and held that the income from house property would be liable to be pegged at INR 19,60,000/- and 50% thereof being assessed in the hands of the appellant. The aforesaid order came to be affirmed by the CIT(A).
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The division bench of Justice Yashwant Varma And Justice Harish Vaidyanathan Shankar observed that the Act fails to raise any presumption in law, of income necessarily arising or being liable to be assessed in the hands of an individual merely because it be a signatory to an instrument of conveyance.
While allowing the appeal , the court viewed that the question of taxability would necessarily have to be answered bearing in mind the individual who had in fact obtained benefits from the property. The court set aside the order of the Tribunal.
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