Neha Karan Motwani Vs ITO (ITAT Mumbai)
ITAT: Rejects Revenue’s Allegation of Colorable Device; upholds Section 54F Exemption on Property Purchased from Spouse
Summary: The Mumbai ITAT in Neha Karan Motwani Vs ITO allowed the assessee’s claim for exemption under Section 54F of the Income-tax Act and rejected the Revenue’s allegation that purchase of a residential property from her husband was a colourable device for tax avoidance. For AY 2021-22, the assessee had disclosed long-term capital gains of Rs. 8.31 crore and claimed Section 54F exemption of Rs. 6.91 crore on purchase of a residential flat from her husband’s proprietorship concern for Rs. 7.50 crore. The Assessing Officer denied the exemption on the ground that the husband had set off short-term capital gains from the sale against business losses, treating the transaction as a family arrangement intended to avoid tax. The Tribunal noted that the property was sold to the assessee in June 2021, whereas the husband’s business losses arose only on 31.03.2022 and therefore could neither have accrued nor been anticipated when the transaction took place. It held that the transaction was genuine, undertaken within the framework of law, and could not be branded a colourable device merely because it involved spouses. Relying on Nidhi Siddharth Kejriwal, Kavita Manoj Damani and related precedents, the ITAT directed deletion of the Rs. 6,91,52,369 disallowance.
