Section 27 of the Income-tax Act, 1961, deals with cases where a person, though not the legal owner, is deemed to be the owner of a property.
For the purpose of section 27, the following persons are deemed to be proprietors:
1. Transfer to Spouse (Section 27(i))
In case of transfer of house property by a man to his wife otherwise than for adequate consideration, the transferor is deemed to be the owner of the property transferred.
In terms of law: Commissioner of Income Tax vs. Mrs. Ayodhyakumari
Exceptions: If the transfer to a spouse is related to a separation agreement, the transferor is not considered to be the owner of the property.
2. Transfer to a minor child (Section 27(i))
In case of transfer of house property by a person to his or his minor child otherwise than for adequate consideration, the transferor is deemed to be the owner of the transferred house property.
Exceptions: If the transferee is a minor married daughter, the transferor is not treated as the owner.
Category: Where cash is transferred to a minor child/spouse and the transferor acquires property out of this cash, the transferor will not be treated as deemed owner. However, clubbing provisions will be attracted.
3. Holder of an inalienable property (Section 27(ii))
The holder of such property shall be deemed to be the sole owner of all the property comprising the estate.
After the enactment of the Hindu Succession Act, 1956, all properties constituted in an indivisible estate by custom have to be assessed in the status of a HUF. However, Article 27(ii) shall continue to apply to property unalienated by grant or agreement.
4. Member of a co-operative society (section 27(iii)).
A member of a co-operative society, company, or other association of persons to whom a building or part thereof is allotted or leased under a house building scheme of a society/company/association shall be deemed to be the owner of that building or part thereof, even though the co-operative society /Company/Association is the legal owner of that building.
In terms of law: Shri Shetty DG v. Income Tax Officer
5. Person in possession of a property (Section 27(iiia))
A person who is permitted to take or retain possession of a building or part thereof in partial performance of an agreement of the nature referred to in section 53A of the Transfer of Property Act shall be deemed to be the owner of the house property. This includes where:
- Possession of the property has been handed over to the buyer.
- The sale consideration is paid or promised to be paid by the buyer to the seller.
- The sale deed is not executed on behalf of the buyer, although some other documents such as power of attorney/agreement to sell/will etc. have been executed.
In all the above cases, the buyer will be deemed to be the owner of the property even if it is not registered in his name.
6. Person holding right in property for less than 12 years (Section 27(iiib))
If a person acquires any right in a building or part or part thereof by any transaction referred to in section 269UA(f), i.e., by transfer on lease for a period of less than 12 years, he shall be deemed to be the owner of the building or part thereof. be
Exceptions: If the person acquires any right by leasing from month to month or for a period exceeding one year, that person shall not be deemed to be the owner.
Conclusion: Section 27 of the Income Tax Act, 1961, plays an important role in determining ownership of property for tax purposes beyond mere legal title. By considering various relationships and possession situations, the Department ensures that tax liabilities reflect actual control and benefits derived from assets, preventing tax evasion through strategic asset transfers. Understanding these commissions helps taxpayers and professionals navigate the complexities of property-related tax implications, ensuring compliance and informed financial planning.
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