Deemed ownership u/s 269ua(f)

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ajithkumar p.c (Querist)
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16 December 2014 An individual leased his property for a period exceeding 12 month to his wife, and wife indeed entered a lease agreement with a bank for monthly lease of Rs.50,000/-.

In this case whether income is assessebile in the hands of husband or wife.

Is deemed ownership is hold good in this transaction.

Please resolve

HIREN

HIREN (Expert)
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17 December 2014 Your question is not clear. I think, there should be 12 years but you have written 12 months.

For Husband wife transaction, there are deeming provisions refer Clause iv of Section 64 of Income Tax Act read with clause i of Section 27 of Income Tax Act.

Which hols that if Husband transfers directly or indirectly assets to spouse of such Individual otherwise than for adequete consideration or in connection with an agreement to live apart then Income arises will be taxable in the hands of Husband.

ajithkumar p.c

ajithkumar p.c (Querist)
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17 December 2014 sorry it is 12 years lease.

Is lease come under the purview of transfer?. Whether lease refer to Sec.269UA(f) will not sustain over Sec.64 or 27?

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Asha Kanta Sharma

Asha Kanta Sharma

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20 July 2024 In the scenario you've described, where an individual leases his property to his wife, and the wife subsequently leases it to a bank:

1. **Assessment of Rental Income**:
- **Ownership and Income**: As per income tax laws in India, rental income from property is taxable in the hands of the legal owner of the property. However, if the property is transferred to a spouse without adequate consideration, the income from such property can be clubbed with the income of the transferor spouse (husband in this case) under Section 64 of the Income Tax Act, 1961.
- **Clubbing Provisions**: Section 64 applies when assets, including property, are transferred by an individual to his or her spouse without adequate consideration. In such cases, any income arising from such transferred assets, including rental income, is clubbed with the income of the transferor spouse.

2. **Deemed Ownership Under Section 269UA(f)**:
- **Definition**: Section 269UA(f) defines "transfer" for the purposes of computing capital gains under the Income Tax Act. It includes any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in Section 53A of the Transfer of Property Act, 1882. Lease agreements are generally considered within the ambit of "transfer" under this provision.
- **Applicability**: While Section 269UA(f) deals primarily with the definition of "transfer" for the computation of capital gains, its application in the context of rental income would depend on whether it satisfies the conditions of transfer as defined under this section.

3. **Lease and Transfer**:
- **Nature of Lease**: A lease is considered a transfer of the right to use the property for a certain period. It does not transfer ownership outright but grants possessory rights.
- **Income Tax vs. Transfer Provisions**: Section 269UA(f) primarily applies to capital gains and does not necessarily override the specific provisions of Section 64 or Section 27 (which deals with deemed ownership for house property). These sections deal with income tax aspects related to rental income and ownership of property respectively.

4. **Conclusion**:
- **Taxation of Rental Income**: The rental income derived from the property leased by the wife to the bank would typically be assessed in the hands of the legal owner of the property, which is the husband in this case. If the property was transferred to the wife without adequate consideration, the rental income could be clubbed with the income of the husband as per Section 64.
- **Deemed Ownership**: While Section 269UA(f) defines "transfer" broadly for the purpose of capital gains tax, its application to rental income for the purposes of deemed ownership under Section 27 or clubbing provisions under Section 64 would depend on specific facts and circumstances of the case.

Given the complexity of such transactions, especially involving intra-family arrangements, it's advisable to consult with a tax professional or chartered accountant who can provide specific advice tailored to your situation and ensure compliance with applicable tax laws.