Co-Owner Of Property Not Receiving Income From It Not Liable To Pay Tax On Income From Such Property: Delhi High Court

The Delhi High Court has held that where a property is held jointly but only one co-owner reaps the benefit of income from such property, the other co-owner cannot be held liable to pay tax merely by virtue of co-ownership.A division bench of Justices Yashwant Varma and Harish Vaidyanathan Shankar observed, “the [Income Tax] 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. In our considered opinion, the question of taxability would necessarily have to be answered bearing in mind the individual who had in fact obtained benefits from the property.”In the case at hand, a couple jointly held a property in Delhi's Saket area. The wife (appellant) was held liable to pay tax on income from the said property. However, she contested this, claiming that she had merely contributed a sum while purchasing the property and that the property is essentially owned by her spouse.This explanation was not accepted by the Assessing Officer, who proceeded to hold 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 Income Tax Act, 1961.The AO held that the income from house property would be liable to be pegged at ₹19,60,000/- and 50% thereof being assessed in the hands of the appellant. CIT(A) and ITAT affirmed the view, thus leading to this appeal.At the outset, the High Court held that the Income Tax Act seeks to tax income derived from house property as distinct from an interest (title) in property.It relied on Commissioner of Income Tax, Bombay v. Podar Cement Pvt. Ltd. and Others where the Supreme Court had held that the focus for the purposes of taxation would be to understand, identify and discern as to who was in receipt of income.In this light, the High Court observed, “We find that both the Tribunal as well as the authorities below have proceeded merely on the assumption that since the appellant was a signatory to the instrument, the income would be deemed to arise in her hands to the extent of 50%,” and allowed the wife's appeal.Appearance: Ms. Hasneeta Matta, Mr. Prateek Kumar & Ms. Ankita, Advs for Appellant; Mr. Sunil Kumar Agarwal, SSC with Mr. Shivansh B Pandya, Mr. Viplav Acharya, Ms. Priya Sarkar & Mr. Utkarsh Tiwari, Advs for RespondentCase title: Smt. Shivani Madan v. Pr. Commissioner Of Income Tax, Delhi-01 & Anr.Citation: 2025 LiveLaw (Del) 113Case no.: ITA 573/2023Click here to read order

Co-Owner Of Property Not Receiving Income From It Not Liable To Pay Tax On Income From Such Property: Delhi High Court

Kapil Dhyani