If a wife is a doctor and has resources including returned income and tax-free income to invest in a house, the rent paid to her by her husband cannot be clubbed with his income under section 64. Additionally, the husband cannot be denied House Rent Allowance (HRA) exemption on the basis of rent so paid. In a recent case, Abhay Kumar Mittal v. DCIT (08.02.2022), the court ruled that if the wife has low returned income but receives a loan from her husband and repays it from the redemption of mutual funds and liquidation of fixed deposits, it does not violate any law. The husband is allowed to extend a loan from his known sources of income to his wife, and there is no restriction on the wife to repay the loan from her own mutual funds and fixed deposits.
In the case discussed, the assessee paid house rent to his wife, who declared it as “income from house property” in her returns, which was accepted by the revenue. The house was registered in the name of Smt. Shivani Bansal. The ld. CIT(A) observed that the assessee had meager income, so he could not afford to purchase a house, which cannot be accepted as the sources for purchase of the house in the hands of Smt. Shivani Bansal are proved and never doubted. The ld. CIT(A) also claimed that the husband cannot pay rent to the wife, which is devoid of any legal implication supporting any such contention.
Therefore, based on the entire facts of the case, the court allowed the appeal of the assessee. This ruling emphasizes that if a wife has her sources of income and can invest in a house, any rent paid to her by her husband cannot be clubbed with his income under section 64. Moreover, a husband can provide a loan to his wife from his known sources of income, and there is no legal bar for the wife to repay the loan from her own mutual funds and fixed deposits. Thus, this ruling provides significant relief to taxpayers who are also property owners and/or investors
[Abhay Kumar Mittal v. DCIT 08.02.2022 (ITAT Delhi)]