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Mumbai ITAT: Multi-Property Tax Break Clarity
9 Sep
Summary
- Pre-April 2015 sales allowed Section 54 exemption for multiple properties.
- Expenditure to make a new house habitable is eligible for exemption.
- Deposits in CGAS are protected, taxed only if unutilized later.
The Mumbai Income Tax Appellate Tribunal (ITAT) recently issued a significant ruling concerning Section 54 capital gains tax exemption, particularly for property sales that occurred before April 1, 2015. This decision clarifies that under the law applicable to Assessment Year (AY) 2013-14, a taxpayer could indeed claim exemption for reinvesting capital gains into more than one residential property.
The tribunal found that expenditures necessary to make a newly purchased property habitable, such as essential civil and electrical work, are eligible for the Section 54 exemption. This decision overturned an Assessing Officer's disallowance of Rs. 20.44 lakh spent on renovations for a property at Raj Classic.
Furthermore, the ITAT confirmed that depositing unutilized capital gains into the Capital Gains Account Scheme (CGAS) is permissible. The exemption for the amount deposited in CGAS is protected under Section 54(2). Any unutilized portion of these funds would only be subject to taxation at a later stage if not used within the prescribed period.
This ruling offers relief to taxpayers with pending disputes for assessment years prior to 2015-16. It emphasizes the importance of proper documentation, including invoices and professional assessments, to substantiate claims for renovations that enhance habitability. The department cannot prematurely tax unutilized CGAS amounts.
