Maintain document trail to establish who funded purchase

At the time of buying, make a formal declaration of beneficial interest

- SANJEEV SINHA

A recent ruling in the case of Smt Mita Chatterjee vs Income Tax Officer highlights how joint ownership of property can trigger unintended tax disputes.

Her husband sold a flat in Gurugram, bought another in Kolkata, claimed tax exemption, and made her the co-owner of the new flat. An assessing officer made a tax demand of ₹70.46 lakh on her. The Income Tax Appellate Tribunal (ITAT), Delhi Bench, quashed this addition, observing she was only a co-owner in name while her husband had funded the entire purchase. Cases like this underscore the need to proceed with caution when dealing with jointly owned assets.

Beyond property transactions

The issue is not limited to immovable property like a flat or land. “It can extend to financial assets such as mutual funds, fixed deposits, demat accounts, and bank deposits where joint holders are often added for convenience or succession planning,” says Aditya Bhattacharya, partner, King Stubb & Kasiva, Advocates and Attorneys.

Banks, mutual funds, sub-registrars, and other entities are required to report large transactions through the Statement of Financial Transactions (SFT). “These entries are automatically reflected in the Annual Information Statement (AIS) linked to each joint holder’s PAN. For jointly held assets, the same investment can appear in multiple tax profiles, even if only one person actually paid for it,” says Itesh Dodhi, director, Nangia & Co LLP.

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