Question And Answer
Subject: Whether clubbing provision is applicable when the property is purchased in the name of wife however the cost was borne by the Husband?
Querist: Laxmi Rawat
Answered by:
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Date: May 16, 2021
Query asked by Laxmi Rawat

Property is taken in the name of wife but cost borne by husband,the property is rented and proceeds credited to wife accounts….in whose hand will it be taxable….whether clubbing provisions will be applicable

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Yes, as per section 64(1)(iv) of the Income-tax Act, 1961 If an Individual transfers any asset to his/her spouse without adequate consideration; then the income from such asset would be clubbed with the income of the individual who has transferred the asset.
Therefore, the rental income will be taxable in the hands of the husband.
Note :
In CIT v. M.S.S Rajan (2001) 252 ITR 126 (Mad) (HC) the Court held that , Property Transferred to wife. Wife is getting rental income. Rental income is includable in the hands of husband. Wife depositing the rental income in fixed deposit and earning interest. Interest income cannot be clubbed in the hands of the husband.
Dr .K .Shivaram Senior Advocate

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