[Opinion] Implication of Property Held Jointly in the Name of Spouse for Social Purpose Under Income Tax

Mukesh Kohli – [2025] 171 taxmann.com 456 (Article)

We all professionals many times face questions relating to taxability of income from house property held jointly, capital gain from sale of jointly held house property or other property held jointly, allow ability of deduction u/s 54/54 F in case of purchase of House property jointly in the name of spouse for social purpose and deduction of TDS u/s 194IA/195 of the Income Tax Act on purchase of house property jointly when spouse makes no payment.

Let us try to analysis the provisions of Income Tax to get the answers of the above said questions.

i. Taxability of income from House Property when property is purchased jointly in the name of spouse for social purpose only?

Analysis: First of all we will see the Section 22 and 27 of the Income Tax Act, 1961 and Section 45 of the Transfer of Property Act which are as under :-

Income from house property.

The annual value of property consisting of any buildings or lands appurtenant thereto of which the assessee is the owner, other than such portions of such property as he may occupy for the purposes of any business or profession carried on by him the profits of which are chargeable to income-tax, shall be chargeable to income-tax under the head “Income from house property”.

“Owner of house property”, “annual charge”, etc., defined.

For the purposes of sections 22 to 26—

i. an individual who transfers otherwise than for adequate consideration any house property to his or her spouse, not being a transfer in connection with an agreement to live apart, or to a minor child not being a married daughter, shall be deemed to be the owner of the house property so transferred;

ii. the holder of an impartible estate shall be deemed to be the individual owner of all the properties comprised in the estate;

iii. a member of a co-operative society, company or other association of persons to whom a building or part thereof is allotted or leased under a house building scheme of the society, company or association, as the case may be, shall be deemed to be the owner of that building or part thereof;

iiia. a person who is allowed to take or retain possession of any building or part thereof in part performance of a contract of the nature referred to in 10 section 53A of the Transfer of Property Act, 1882 (4 of 1882), shall be deemed to be the owner of that building or part thereof;

iiib. a person who acquires any rights (excluding any rights by way of a lease from month to month or for a period not exceeding one year) in or with respect to any building or part thereof, by virtue of any such transaction as is referred to in clause (f) of section 269UA shall be deemed to be the owner of that building or part thereof;]

iv. Taxes levied by a local authority in respect of any property shall be deemed to include service taxes levied by the local authority in respect of the property.

Section 45 of Transfer of Property Act

The language of s. 45 of the Transfer of Property Act is very clear and provides that where immovable property is transferred for a consideration to two or more persons and such consideration is paid out of funds belonging to them in common, they are entitled to interest in such property identical as nearly as may be with the interest to which they were respectively entitled in the fund. If such consideration is paid out of separate funds belonging to them respectively then such persons will be entitled to interest in such property in proportion to the shares of the consideration which they respectively advanced. The last requirement of section is that in the absence of evidence as to the interest in the funds to which they were respectively entitled or as to the shares which they respectively advanced such persons shall be presumed to be equally interested in the property. The third requirement is the exception to rule. The first two conditions of s. 45 of the Transfer of Property Act clearly specifies that in the absence of contract to the contrary, the persons will be entitled to the share in the property according to their shares in the consideration which they have invested or advanced out of common fund or separate fund. If no evidence is available, then all such persons will be presumed to be equally interested in the property.

Even in the case of Asstt. CIT v. C.K.Malik [2004] 89 ITD 249 (ALL) the Hon’ble ITAT held that The first two conditions of section 45 of the Transfer of Property Act clearly specify that in the absence of contract to the contrary, the persons will be entitled to the share in the property according to their shares in the consideration which they have invested or advanced out of common fund or separate fund. If no evidence is available, then all such persons will be presumed to be equally interested in the property.

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