Rajani Shivaji Ghadge Vs ITO (ITAT Mumbai)
Sale of Inherited Flat Treated as Long-Term Capital Asset; Section 54 Exemption Allowed: ITAT Mumbai Grants Full Relief
The Mumbai Bench of the ITAT allowed the assessee’s appeal for AY 2016-17 and granted complete relief on capital gains arising from sale of a residential flat.
The Assessing Officer had taxed the entire consideration of ₹51.48 lakh as short-term capital gains in reassessment proceedings. The CIT(A), after admitting additional evidence and considering the remand report, restricted the taxable amount to ₹10 lakh, being the assessee’s actual share in the sale proceeds, but still treated the gain as short-term and denied exemption under section 54.
On further appeal, the Tribunal noted that the building was completed in 2010 (supported by occupation certificate) and the flat was sold on 17.02.2016. Since the holding period exceeded 36 months, the asset clearly qualified as a long-term capital asset. The ITAT held that the CIT(A) erred in not recording a specific finding on this aspect.
The Tribunal further held that the assessee’s claim for exemption under section 54, though raised for the first time before the CIT(A), was a purely legal claim supported by verified facts on record. As the AO had already confirmed in the remand report that the assessee had purchased another residential property for ₹15 lakh, denial of exemption was unjustified.
Accordingly, the ITAT directed the AO to treat the gain on ₹10 lakh as long-term capital gain and allow exemption under section 54 in full. The appeal was allowed.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
