House Property

Querist : Anonymous (Querist) 04 August 2011 This query is : Resolved
Mr.Raju is having house property and availed loan from the bank for construction of said property. In the year 2008, 1st. floor & 2nd floor of the said property was let out to a educational institution for hostal.He has been filing IT returns by showing house property income and claiming deduction U/s-24 (Interest on HBL)and also claiming deduction U/S-80C (repayment towards principal).
Now ground floor of the said building was let out to his wife Rima , who sub-leted the said ground floor to a Bank.
What will be income tax treatment of Mr. Raju and his wife Rima. Please advise me.

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adv. rajeev ( rajoo ) (Expert) 04 August 2011
It is an income from house property to both.

Advocate Rajkumarlaxman (Expert) 04 August 2011
i agree to our expert it is an income for both

prabhakar singh (Expert) 04 August 2011
i too agree, its an income from house property in hands of both spouses.

Vineet (Expert) 04 August 2011
1. The income from renting of ground floor in the hands of Raju is Income from House Property. But Subletting income in hands of his wife is income from other sources.

2. A word of caution, the transaction between Raju and his spouse may be held as a sham transaction and entire differential income earned by Raju's wife may be clubbed with income of Raju.

A V Vishal (Expert) 04 August 2011
As rightly pointed by Vineet, it is only a sham transaction in order to evade taxes, the A.O has powers to pierce the veil to bring the true nature of the transaction. If such planning is only a colorable device then the income from sub-letting will be treated as income of the husband and clubbed and taxed.

girish shringi (Expert) 04 August 2011
One has to go through the complete detail of the income of spouse,if her income is above taxable than and then only the question of tax arises.
However it could not be understood where does the difference of deduction comes in the case of the question because if both the persons are having the income above taxable limit same case happened to be as far as deduction has concern.
Girish Shringi
(Advocate)

soumitra basu (Expert) 05 August 2011
The income from rent in the hands of the husband is income from house property. But in the hand of the wife the same shall be treated as income from other sources.
Every citizen is right to plan his affairs within the frame work of law and I do not think there is any scope to clubing the income of the wife in the hand of the wife. In this respect I may refer to the judgment of the Hon'ble Apex Court in the case of Azadi Bachao Andolon Committee.

Nagesh Rudrakanthwar (Expert) 06 August 2011
The income from rent in the hands of husband is income from house property but where as the rent received by wife is comes under the income from other sources, as far as your case is concern it will comes under clubbing provision of income Tax & your wife could not avail any deduction under this transaction. (Here i have assumed that your income exceed the taxable limit.)

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