The moot question which is of a vital importance for any Divorce Lawyer while settling the issues between the husband and wife during the mutual consent divorce procedure is the issue of share in the properties which were bought in the name of the wife but the entire money was routed through the husband from his known source of income. This situation occurs when the properties are bought in the name of wife because of several tax benefits which are attached to a situation when a female is buying a property in her name. But can the wife then claim the entire property to be hers only to the total exclusion of the husband? In a straight forward way, the answer is no she cannot if it is proved that the intention of the person paying the money was not for the benefit of the wife but for himself and the payment is traceable through the known sources of income. If the Husband is able to prove that he paid the money which was earned through known source of income to his wife for purchasing the property in her name but did not have the motive to give the benefit of the same to the wife, the husband as per the law would still be considered to be the de jure owner of the property and this transaction is also not hit by the Benami Act as explained below.

LEGAL SCENARIO

The reason for the above conclusion is the provisions provided under the Prohibition of Benami Property Transactions Act, 1988 whereby it is provided as an exception in the definition of the “Benami Transactions” under Section 2(9) (A) (b) that “the property is held for the immediate or future benefit, direct or indirect, of the person who has provided the consideration except when the property is held by….. (iii) any person being an individual in the name of his spouse or in the name of any child of such individual and the consideration for such property has been provided or paid out of the known sources of the individual” (quoted from the Act). So, considering the above exception provided under the definition, it is to be proved that it was not for the benefit of the wife but for the benefit of the husband paying for the property that the property when bought was registered in the name of wife and the reason this was done was to avoid the stamp duty etc. In the new amended Benami Act, District Court at Delhi in the case of Jagan Singh Gahlot v. Rajbala & Ors decided on 16.05.2020 held that “it is legally permissible for a person to purchase an immovable property in the name of his spouse/child from his known sources, and in which position, the property purchased will not be a benami property but the property will be of the de jure owner/plaintiff and not of the de facto owner (in whose name title deeds exist)”. Further Delhi High Court as well have also voiced their view in the case of Manoj Arora versus Mamta Arora in the year 2018 that “The existence of the properties in the name of the wife will fall as an exception to the prohibited benami transaction, as it is legally permissible for a person to purchase an immovable property in the name of his spouse from his known sources”. Thus, once the source is proved, the transaction would not be a benami transaction and the husband would be the rightful owner of the properties purchased in the name of the wife and during the divorce settlement, the wife may not be able to claim any right in such properties held in her name by the husband.

TRANSACTION FOR INCOME TAX BENEFIT

Another aspect where the husband can claim himself to be the owner is the situation where if in filling the income tax returns, the husband has declared income from such property held in the name of the wife, then in such cases as well, the ownership would go to the person paying for the sale and not the person on whose name the sale is done when there is a fiduciary relationship established between the Parties. In such cases, a divorce lawyer while settling the disputes between a husband and wife during the divorce proceedings will go through the ITR’s filed by both the parties to check this aspect as to the ownership of the property in order to settle it amicably or as per the share contributed by each spouse.

CONCLUSION

A reading of the above is suggestible that when you are discussing your settlement issues with your divorce lawyer and exploring the possibilities of settling the shares of each party in the properties held by them jointly or solely in the name of the wife, it is incumbent for the parties to disclose the source of payment and the percentage of payment made by each party for an effective settlement to take place avoiding any future complications.