Nidhi Siddharth Kejriwal Vs DCIT (ITAT Mumbai)
Mumbai ITAT Allows Section 54F Deduction on Purchase of House from In-Laws – Genuine Family Transaction Cannot Be Branded a Colourable Device
Mumbai ITAT allowed the assessee’s claim of exemption under Section 54F, holding that the mere purchase of a residential house from close relatives does not make the transaction a colourable device or sham.
The assessee had earned long-term capital gains from the sale of unlisted shares and invested the proceeds in purchasing a residential flat from her father-in-law and mother-in-law. The Assessing Officer denied the exemption alleging that the transaction was an artificial arrangement devised solely to avoid tax, pointing to factors such as common family residence, the father-in-law signing the sale deed as both seller and attorney for the purchaser, and the sellers ultimately paying little or no capital gains tax.
The Tribunal found that the Revenue had not disputed the genuineness of the sale of shares or the purchase of the flat. The purchase was evidenced by a registered sale deed, payment of stamp duty, confirmation from the developer, transfer of maintenance and electricity records, and other supporting documents. There is no prohibition in the Income-tax Act against purchasing a residential property from a relative.
