Outlook Business Desk
The Income Tax Appellate Tribunal (ITAT) in Mumbai ruled that the women is eligible for a Rs 1.3 crore long-term capital gains (LTCG) tax exemption under Section 54, even though the case involved using proceeds from sale of two houses to purchase a joint property.
The case involves a woman who bought a property in Mumbai for Rs 36.5 lakh in December 2004 and later sold it for Rs 1.9 crore on November 22, 2011. The woman sought a long-term capital gains (LTCG) tax exemption of Rs 1.3 crore under Section 54 for the sale of the property.
The income tax department rejected the exemption, saying that both the husband and wife used the sale proceeds from two different properties to claim benefits under Section 54 for buying a single house, which goes against the rules of that section.
The woman first filed an appeal against the tax demand order in the National Faceless Appeal Centre, which was dismissed in May 2024. She later filed an appeal against this order in the Income Tax Appellate Tribunal (ITAT) Mumbai.
The Income-tax Appellate Tribunal (ITAT) held that joint ownership by a husband and wife does not invalidate individual claims under Section 54, and said that capital gains will be calculated separately for each owner based on their contribution and the shares of the property, for the purpose of claiming tax benefits.
The tribunal's order is subject to the condition that Assessing Officer needs to verify whether double Section 54 deduction has been claimed by the husband wife duo or not.
This ruling underscores that exemption under Section 54 can be claimed by the co-owners for their proportion of capital gains by reinvestment of their proportion of sale proceeds.
Joint ownership does not disqualify individual Section 54 claims, provided each taxpayer fulfils the necessary legal conditions and proper verification is conducted.