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Rules From Mumbai Income-Tax Appellate Tribunal, Property Co-ownership Doesn't Mean Joint I-T Liability

Posted on September 30 2020


Recently, the Mumbai Income-Tax Appellate Tribunal(ITAT) has made a rule that if the spouse has not invested in a property and is solely a co-holder, then on sale of such property, she cannot be liable to tax on capital gains.

The ITAT order will help many taxpayers as most of the married couples are increasingly going for property registration in joint names, even though only one of them is the investor.

Anil Harish who is an advocate specializing in real estate said that co-holding of property is popular. Often the name of a spouse, for example, wife is added to provide a sense of comfort, to make sure security of consecution on the death of the partner or any other reason such as expediting voting in a general body meeting of the housing society.

The ITAT heard about a case of a medical professional, Vandana Bhulchandani, gave the order on Wednesday.
An income-tax (I-T) officer, based on information in his possession, esteemed that Bhulchandani in her I-T return for the financial year 2008-09 did not disclose the capital gains which rose from the Rs. 2.12 crore sale of a property in Parel, which is jointly held with her husband.

She had informed the I-T officer that the entire investment and the property were reflected in his books of accounts from the date of purchasing the property till the date of selling the property. The officer had also noticed that Bhulchandani's husband did not acquire any I-T compulsion on the capital gains rising from the sale; the husband had set off the short-term capital gains rising from the Parel property sale against the short-term capital losses acquired by him on the sale of the shares. Under the I-T Act, the short-term capital losses can be set off against the capital gains arising in the same financial year and only the surplus, if there is any then it is taxable.
But the I-T officer declared that the entire arrangement was done just to avoid tax payment and Bhulchandani was held liable for 50% of the total short-term capital gains which arose from the property sale and added Rs 45.38 lakh to her taxable income. As per the I-T slab rates, short-term capital gains are taxed which depend on an individual’s income varies between 10% and 30% in addition to the applicable surcharge and cess.
Bhulchandani appealed to the income tax commissioner, who directed cancelled the addition. Then the I-T officer filed an appeal before the ITAT. But the tribunal took into observation that the husband had bought the property, which was duly reflected in his books of accounts, and also had disclosed all the details of the sale in his I-T return and hence, removed the appeal.

Anil Harish said that the ITAT order is clear and correct. It will provide clarity in cases of any co-holding of the property, where the spouse did not made any fiscal investment.
Tax Assist is a professional income tax consultancy in India for both corporate houses and individual tax payers; the latter comprising Salaried Individuals, Seafarers, Professionals and Non Resident Indians.
With the help of Tax Assist and its team of income tax professionals, taxpayers can minimize their Income Tax liability, maximize their net income and create opportunities to save for current and future needs while maintaining proper accounting standards and income tax returns which are compliant with the Law.


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