Section 54 Allows Habitable-House Costs and Multiple Houses: ITAT Mumbai

Vivek Juneja Vs ACIT (ITAT Mumbai)

Section 54—Expenses to Make New House Habitable, Investment in Multiple Houses and CGAS Deposit Allowed: Mumbai ITAT

Summary: In an important decision concerning the scope of exemption under section 54, the Mumbai Bench of the Income-tax Appellate Tribunal has held that expenditure incurred on civil and electrical works necessary to make a newly purchased house habitable qualifies for deduction. The Tribunal further held that, under section 54 as it stood prior to AY 2015-16, exemption could be claimed for investment in more than one residential house. It also clarified that an amount validly deposited in the Capital Gains Accounts Scheme (CGAS) cannot be taxed prematurely in the original assessment year merely because it is subsequently not fully utilised.

The decision was rendered in Vivek Juneja v. ACIT, ITA No. 8512/Mum/2025, order dated 29 May 2026, relating to AY 2013-14.

Facts of the case

The assessee and his mother jointly owned an immovable property. Upon its sale, the assessee received ₹23.76 crore as his 50% share in the sale consideration. He declared long-term capital gain and claimed deductions under sections 54 and 54EC.

The assessee purchased a residential flat in the building known as “Raj Classic” for ₹4.90 crore. At the time of purchase, the flat was not in a habitable condition. The assessee therefore incurred ₹40.44 lakh on various civil and electrical works required to make it suitable for occupation.