Seeta Nayyar Vs ACIT (ITAT Mumbai)
This appeal challenged the order dated 26.08.2025 passed by the National Faceless Appeal Centre (NFAC) for Assessment Year 2015–16. The issues concerned (i) disallowance of indexed cost of acquisition and (ii) denial of deduction under Section 54 of the Income Tax Act, 1961.
The assessee, a resident individual, filed her return declaring income of Rs. 8,03,360/-. She reported long-term capital gain of Rs. 3,37,93,219/- and claimed deduction under Section 54 amounting to Rs. 4,40,49,819/-. The assessee and her husband owned a residential property on land measuring 500 sq. yds at Maharani Baug, New Delhi. On 16.10.2012, they entered into a redevelopment agreement with a builder, under which the existing residential house was to be demolished and a new building comprising ground plus three floors was to be constructed at the builder’s cost. In lieu of construction, the builder was to receive the first floor along with 22.5% undivided share in the land. The assessee and her husband were to receive three floors and retain 77.5% undivided share in the land, along with Rs. 2.5 crore.
The Assessing Officer held that since only 22.5% of the land was transferred to the developer, indexed cost of acquisition should be restricted to that extent. Further, the claim under Section 54 was denied on the ground that deduction is available only for one residential house, whereas the assessee received multiple floors. The resulting long-term capital gain of Rs. 3,55,61,609/- was added. The first appellate authority upheld the additions.
