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Economic Times
2 hours ago
- Business
- Economic Times
Wife pays no income tax after selling two houses for Rs 6 crore gifted by her husband, wins case in ITAT Mumbai; here's how it happened
ET Online (Representative image) No income tax for wife who sold two flats for Rs 6 crore (5.98) bought originally by husband for Rs 51 lakh total, rules Mumbai ITAT A wife managed to win an income tax case in ITAT Mumbai, even after selling two house properties gifted by her husband in Mumbai for Rs 6 crore without paying any income tax. These properties were originally bought in 2002 for Rs 34 lakh and Rs 17 lakh each, and she sold them in 2020 for Rs 6 crore. According to income tax rules, she made a long term capital gain (LTCG) of just over Rs 4 crore after factoring in indexation (inflation). However, despite this LTCG of Rs 4 crore, she didn't owe any income tax because she reinvested the money to buy her husband's Lodha house property, also located in Mumbai, by claiming Section 54 benefits. As strange as it may seem, all of her transactions were completely legal, and she even paid the full stamp duty required for these deals. The Income Tax Assessing Officer (AO) said in this case since the husband is the deemed owner of the said property, as per income tax clubbing provisions, the capital gain earned on sale of property counts as the income of her husband. 'One cannot claim exemption under Section 54 on purchase of one's own property.' Apart from this, the AO also raised six objections as to why this lady should be liable for income tax on the sale of her Rs 6 crore property. One of the objections relates to the money used to pay for the flats. The AO analysed the bank account statement of the husband-wife duo and noticed that the wife received Rs 70 lakh on March 12, 2021 from a company in which she and her husband both are employed as directors. On the same date, she transferred the Rs 70 lakh to her husband's bank account. And then again on the same date, her husband transferred back the Rs 70 lakh to the company's bank account where they are both AO observed: 'The same rotation was followed for another payment of Rs 3 crore or 3,00,00,000 (Rs 1.5 crore each) on the same day that is 12.03.2021. Hence, it is seen that the payment of Rs 3.7 crore was moved from the company and reached the company through the wife and husband in a single day. This is nothing but rotation of money just to evade tax. There's no actual transfer of money, no right to use the property changed, only title of the property has changed. In view of the above, it is nothing but a colourable device used to evade tax.' The Income Tax Appellate Tribunal (ITAT) Mumbai rejected the objections of the Income Tax Assessing Officer (AO) and confirmed that the wife in this case is not required to pay any income tax on the capital gains of Rs 4 crore since she claimed Section 54 tax exemption by purchasing another house from her husband. Regarding the rotation of money, the ITAT Mumbai's judge said that the AO only focused on the transactions on March 12, 2021, when most of the purchase consideration has been discharged. The transactions prior to that date were not considered, where the assessee (wife) had initially parked the money in fixed deposits/with the company and then, received it back, which was used to pay the husband for buying the house apartment built by Lodha Developers. Also read: MahaRERA orders Lodha Developers to issue full refund of booking money after homebuyer's bank loan application got rejected Check out what else the ITAT Mumbai had to say and how the wife managed to win her case where she had to pay no income tax despite having Rs 4 crore in capital gains from sale of the property in Mumbai. How did this income tax case start? According to the judgement order of ITAT Mumbai dated June 9, 2025, here's the timeline of events: March 14, 2002: The wife purchased two flats in Hiranandani Gardens, Powai, Mumbai, for Rs 34 lakh (34,51,000) and Rs 17 lakh (17,40,00). She claimed to have purchase these properties in the joint name with her husband. The wife purchased two flats in Hiranandani Gardens, Powai, Mumbai, for Rs 34 lakh (34,51,000) and Rs 17 lakh (17,40,00). She claimed to have purchase these properties in the joint name with her husband. March 27, 2015: Husband purchased another house property in Lodha Estrella solely in his own name. Husband purchased another house property in Lodha Estrella solely in his own name. April 1, 2017: Her husband through a legal gift deed, gifted the wife his share of 50% in the said properties in Hiranandani Gardens, Powai, Mumbai. Her husband through a legal gift deed, gifted the wife his share of 50% in the said properties in Hiranandani Gardens, Powai, Mumbai. January 9, 2020: The wife sold the two house properties located in Hiranandani Gardens for Rs 5.98 crore (5,98,00,000). She calculated her long term capital gains as Rs 4 crore (4,21,83,273) and claimed Section 54 tax exemption benefits in respect of purchase of another immovable house property from her husband of Rs 3.85 crore (3,85,00,000). The wife sold the two house properties located in Hiranandani Gardens for Rs 5.98 crore (5,98,00,000). She calculated her long term capital gains as Rs 4 crore (4,21,83,273) and claimed Section 54 tax exemption benefits in respect of purchase of another immovable house property from her husband of Rs 3.85 crore (3,85,00,000). March 18, 2021: The wife used the money she got from the sale of the two Hiranandani Gardens house properties (2020) to buy her own husband's Lodha properties which had he purchased in 2015. She claimed Section 54 long term capital gains tax exemption for this purpose. What did ITAT Mumbai say? A total of six grounds were raised by the Income Tax Assessing Officer regarding why the wife should not get Section 54 long term capital gains exemption. Here's what ITAT Mumbai said: Sale agreement between husband and wife 'The Assessing officer has brought to tax long term capital gains of Rs 4,21,83,273 on sale of two flats without allowing the exemption claimed by the assessee under Section 54 amounting to Rs 3,96,55,000. The sale of flats have been executed vide agreements to sell dated January 9, 2020 and the said flats were initially purchased vide agreement to purchase dated March 14, 2002 read with registered gift deed dated April 1, 2017. The contents of these sale agreements (and purchase/gift deed) are not in dispute and the same have been executed by the assessee in her individual capacity and the consideration has been received by her in her bank account and which has been duly offered to tax by the assessee and has been brought to tax by the AO in the hands of the assessee. Ownership title transfer of the house properties 'Now, coming to exemption claimed by the assessee under Section 54 amounting to Rs 3,96,55,000, the same relates to purchase of another flat by the assessee from her husband vide registered agreement to sell dated March 18, 2021 for a stated consideration of Rs 3,85,00,000 on which the assessee has paid stamp duty of Rs 11,55,000. The factum of ownership of the said flat in the name of the husband of the assessee vide agreement to sell dated March 27, 2015 is not in dispute nor the contents of the subject registered agreement to sell dated March 18, 2021 wherein the title in the property has been transferred by him in the name of the assessee. Rotation of funds 'We find that the AO (tax department) alleging the rotation of funds has merely looked at the transactions on March 12, 2021 when the majority of the purchase consideration has been discharged and has not considered the transactions prior to that date where the money has been initially parked by the assessee in fixed deposits/with the company and thereafter, received back and out of which, the amount was paid to the husband of the assessee towards the purchase consideration. Further, we find that the capital gains which have been brought to tax relates to the flats that have been sold/ transferred by the assessee vide agreement to sell dated January 9, 2020 and the assessee has thereafter purchased another flat vide agreement to sell dated March 18, 2021 wherein the consideration has been discharged by March 12, 2021. The said purchase is thus within the stipulated time period of two years after the date on which transfer of the original asset took place as prescribed under Section 54, the claim of exemption under Section 54 cannot be denied to the assessee(wife)." Judgment: 'In light of aforesaid discussion and in the entirety of facts and circumstances of the case, the AO is hereby directed to allow the exemption claimed by the assessee under Section 54 of the Act.' How does LTCG tax exemption under Section 54 work? Chartered Accountant Suresh Surana explains: "Section 54 of the Income Tax Act, 1961 provides that an individual taxpayer may claim tax exemption on long term capital gains arising from a sale of residential house property/ land by way of investing the capital gains in one residential property in India. Such new house property should be purchased within a period of 1 year before or 2 years after the date of transfer of old house or should be constructed within a period of 3 years from the date of transfer of the old house. It is pertinent to note that such exemption can be claimed only in respect of one residential house property purchased/ constructed in India. However, if the long term capital gains is upto Rs 2 crore, the taxpayer can avail a once in a lifetime option of acquiring 2 house properties within the above time limit. Also, the new house property would be subjected to a lock in of 3 years. If a taxpayer claiming exemption Section 54 of Income Tax Act, 1961 and transfers the new house within 3 years from the date of its acquisition/completion of construction, then the benefit granted under Section 54 of Income Tax Act, 1961 will be withdrawn and accordingly, the cost of acquisition of the new assets would be reduced from the exempted capital gains." The amount of capital gains exemption u/s 54 will be lower of following: Amount of capital gains arising on transfer of land; or Amount invested in purchase/construction of new residential house property (including the amount deposited in Capital Gains Deposit Account Scheme) Surana says: "The threshold limit of considering investment in new house property would be restricted to Rs 10 crore for the purpose of claiming deduction under Section 54 of the Income Tax Act, 1961." What might be some key legal takeaways from this judgement? ET Wealth Online has asked various experts about what might be some key legal takeaways from this judgement. Here's what they said: Keshav Singhania, Head – Private Client, Singhania & Co, says: "Based on our experience, it's always advisable to undertake transactions between related parties, especially those involving gifts and subsequent sales, in different financial years. Additionally, there are a few potential areas of caution to consider. Firstly, if any rental income is earned from immovable property, ensure that it is taxed solely in the hands of the done party after the gift deed is executed. Secondly, while gift deeds are not mandatory to be registered, it's always advisable to register them to ensure the legal sanctity of the document. A significant time gap between such transactions helps to promote the overall hygiene of the transaction and provides an additional defence against it being classified as a colourable device used to evade importantly, maintain comprehensive and accurate documentation regarding the fund flow for consideration of purchase or takeaway from the ruling is that in the case of joint ownership of immovable property, both parties should pay for their share of ownership from their own independent sources of income and clearly document the same vide bank account statement. The same is pivotal in establishing that both the parties are the real economic owners and that the name of the other party has not been added merely for name the ruling provides a welcome relief by reinstating the principle of substance (genuine transaction) over form(relationship between purchaser and seller)." Priyanka Jain, Partner, Vaish Associates, says: "This case effectively shifts the focus from "who" you're transacting with to "how" you're conducting the transaction—emphasizing substance over form in family financial planning and also asserts that genuine adherence to the law should not be penalised by tax authorities. The person in whose hands the gains are taxed is entitled to the exemption under Section 54. The ITAT noted a logical inconsistency in the tax department's approach: if they considered the husband to be the real/economic/deemed owner of the property for denying Section 54 exemption, then the capital gains themselves should have been assessed in the husband's hands, not the wife's . Thus, if you're considered the owner of a property for purposes of capital gains/income, same recognition must apply for claiming exemptions related to those gains/ the ITAT clarified that there is no bar in Indian tax law on claiming Section 54 exemption for buying a house from a relative, such as a spouse, as long as the transaction is genuine. What makes this particularly valuable for taxpayers is the practical flexibility it offers in tax planning. In many families, one spouse may own multiple properties while the other has capital gains tax liabilities. If property is received as a gift from a spouse, income may be clubbed with the transferor spouse. However, any exemptions (like Section 54) must first be fully applied—meaning, clubbing provisions do not override basic exemption it is crucial to maintain proper documentation of all property transactions, including purchase agreements, gift deeds, sale agreements, discharge of stamp duty liability and evidence of payment of consideration." Nikhil Kabra, Partner, Ved Jain and Associates, says: "Key findings of the Hon'ble ITAT due to which the assessee won the case: In the present case, the Tribunal observed that the sale consideration from the old property was duly received in the assessee's bank account and was offered to tax in her hands. Importantly, the capital gain was assessed and taxed by the Assessing Officer (AO) in the hands of the assessee(wife), thereby acknowledging her ownership. Furthermore, the assessee had utilized the sales consideration to purchase the new residential property (from her husband) within the stipulated time limit, and the payment was duly made through banking channels. Accordingly, the Tribunal found the transaction to be genuine and held that the assessee(wife) was eligible for exemption under Section 54 of the Act. Key legal takeaways are as follows: The property which has been sold should have been long term residential property and the sales consideration has to be invested for the purchase of residential property within two years after the date on which the transfer took place Section 54 does not prohibit purchase of a new house from a relative, including the spouse. What matters is that the transaction is genuine, duly documented, and the consideration is actually paid through proper banking channel. The amount to the extent of capital gain should have been utilized for the purpose of investment in the new residential house. Parking funds temporarily somewhere doesn't equate to tax evasion, if the funds are eventually utilized in purchase of new residential house before the due date of filing of ITR. If the funds could not have been utilized for purchase of new residential property before the due date of filing of ITR, then the unutilized capital gain has to be deposited in CGAS account scheme. Ankit Namdeo, Founder, ANK Advisors, says: Some key legal takeaways are: You can claim Section 54F exemption even on capital gains on transfer of a property received as a gift from your spouse or 'relative', as long as you are the legal owner of the property, through a valid registered gift deed, if the gains are reinvested in another residential property. There is no bar on purchasing the new residential property from a spouse or relative, provided the transaction is genuine and properly documented. The reinvestment must be completed within two years from the sale (or within three years in case of construction) to qualify for the exemption. The transaction must involve a registered sale deed, payment of stamp duty, and deduction of TDS wherever required. Courts and tribunals assess the authenticity and legal compliance of the transaction, not the personal relationship between the parties involved. Courts and tribunals assess the authenticity and legal compliance of the transaction, not the personal relationship between the parties involved. Even if the transaction of purchase or reinvestment is between close family members, the exemption should be allowed if all legal and financial formalities are fulfilled. "In the present case, it must be noted that the potential tax was less than Rs 3 crore, i.e. threshold for applicability of general anti avoidance rules. Under the GAAR regime an arrangement lacking commercial substance could be disregarded, in which case the outcome may have been different. GAAR which allows the taxmen wide powers to disregard any impermissible avoidance arrangement, undertaken with the main purpose to inter alia avoid tax, is a statutory anti abuse provision contained in the Income Tax Act, 1961." Alay Razvi, Managing Partner, Accord Juris, says: The reason why her claim was upheld: She was the legal and beneficial owner of the property sold. The flat was originally in joint name with her husband, but he gifted his share to her in 2017 via a registered gift deed. Since then, she received the rental income and sold the property in her individual capacity, receiving the entire sale proceeds in her bank account. The capital gains were assessed in her hands, and hence she was eligible to claim exemption under Section 54. The new flat was purchased from her husband via a registered agreement dated 18 March 2021 for ₹3.85 crore. Although the husband was the seller, Section 54 does not bar purchases from relatives, and the transaction was genuine, with proper TDS deduction and stamp duty payment. The consideration was paid by 12 March 2021, well before the extended deadline under the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA). The Assessing Officer alleged that there was just rotation of funds between the assessee, her husband, and their private company. But the ITAT found that the sale consideration was actually paid, and the timing and flow of funds were explained, showing no intent to evade taxes. N.R. 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Daily Mirror
a day ago
- Health
- Daily Mirror
Experts urge monthly cleaning of one household item often neglected by Brits
A survey of 2,000 Brits uncovered a surprising hygiene blind spot in UK households - They are a breeding ground for germs, bacteria, allergens and dust mites If you're a parent, you might often find yourself stumbling over cuddly toys scattered around the house. However, despite being a source of comfort for your child, teddy bears and soft toys are items that an astonishing number of people confess to never washing. These items are a hotbed for germs, bacteria, allergens and dust mites. They may be well-loved, but new research has discovered that parents avoid washing teddy bears and cuddly companions for various reasons. However, experts at advise that they should be washed monthly to ensure they're not transmitting anything harmful. Parents confess there are numerous reasons they avoid washing these snuggly bedtime pals, travel buddies, and comforters in times of need. A survey of 2,000 Brits revealed this surprising hygiene blind spot in UK households, reports the Daily Record. It discovered that more than one in five people (21 per cent) confess that they've never washed their children's teddy bears or cuddly toys, despite 83 per cent acknowledging they can harbour all sorts of germs. While 32 per cent of Brits say there's simply "no reason" they haven't done it, whilst 15.6 per cent worry they'll get damaged in the machine. A further six per cent fear they'll lose their familiar scent. Katy Roberts, AO's washing machine expert, says mums and dads should be washing these constant companions every month. She advised: "As a rule of thumb, try to wash your teddy bear every month – particularly if they're regularly handled". "Blankets, you should pop in the washing machine once every fortnight to help keep them fresh. Your teddies and blankets can easily harbour dust mites and allergens so err on the side of caution and stick them in your washing machine when they're dirty". If you're concerned about ruining them, she has some guidance. She continued: "It's completely understandable that many of us are worried about washing our teddies at home, however with a few handy tips, there's no need to stress". "If your furry companion is looking a bit worse for wear, there's nothing finer for it than popping your teddy bear into your washing machine. To clean them properly, check your care label and if this has worn away over the years, then put on a gentle, cold wash with a mild detergent to be on the safe side. "If your teddy has seen better days and is more on the delicate side, then use a soft cloth or sponge with shampoo and dab away at any dirty areas. Leave this to air dry naturally and you can even give this a quick fluff with a soft brush for a magic touch to finish."


Tom's Guide
a day ago
- Business
- Tom's Guide
You can finally buy the Ninja Creami Swirl in the UK — and it's a summer essential
First announced in January, Ninja has kept the U.K. waiting impatiently for its Creami Swirl. Adding another genius twist to its ice cream maker, you can now use the Swirl to create homemade soft serve, and we even got a first look ahead of its U.S. launch. With its Swirl machine, Ninja takes the popular Creami model and adds a whole new soft-serve feature. Once your ice cream is processed using the Creami side of your machine, you can then fit the lid and attach it vertically to the front of the soft serve dispenser. Then, you can lower the dispensing arm and start to pour your soft serve. There's also a new setting called Creamifit, which should work perfectly when processing protein-based mixes. The Creami Swirl is on sale for £349 at NinjaKitchen right now, but I don't think stock will last long. Expected to sell out fast, the Ninja Creami Swirl is now available at NinjaKitchen. It features 13 one-touch programs and a soft-serve handle that's designed to dispense up to 4 small cones from one container. You can also buy it from AO and Currys. The Creami Swirl first caught my eye on TikTok, where influencers have been showcasing its Creamify technology, which will turn ice cream mixtures into delectable soft-serve in minutes. The Swirl also has an all-new CreamiFit program that's custom-made to work with protein-rich mixes for a smoother and more realistic ice-cream consistency. Perfect for those who want low-sugar, high-protein desserts in minutes. Get instant access to breaking news, the hottest reviews, great deals and helpful tips. Because it has a whole soft serve dispensing element, the Creami Swirl is wider than the already large Creami machines. But you'll still benefit from Ninja's mix-in tech which allows you to first spin your base and then add, say, Oreos for a cookies & cream mix. Just be aware that you can't put these mix-in combos through the soft serve dispenser, or you'll risk clogging up your machine. When we got hands-on with the swirl, we found it was super noisy. It hit 93dB in our tests, which is definitely loud enough to make you worry that you'll get a noise complaint. Another downside we encountered when we tested it is that the Creami Swirl won't make enough ice cream in one container to entertain a crowd. So be prepared to stock up on extra containers if you're planning on throwing an ice cream party. Follow Tom's Guide on Google News to get our up-to-date news, how-tos, and reviews in your feeds. Make sure to click the Follow button.


Daily Record
2 days ago
- General
- Daily Record
Common household item that 1 in 5 never wash as experts say 'do it monthly'
The children's favourite is a hygiene blind spot in UK households, according to a new survey If you're a parent you may well find yourself tripping over toys and cuddly toys strewn across the house. But as well as being your child's comfort, teddy bears and soft toys are something a staggering amount of people admit to never washing. That's despite them being a breeding ground for germs, bacteria, allergens and dust mites. They may be well loved but new research has found that parents avoid washing teddy bears and cuddly companions for a number of reasons. However, experts at say they should be washed monthly to ensure they're aren't passing on anything nasty. Parents admit there are many reasons they avoid washing these snuggly bedtime buddies, travel companions, and comforters in times of need. A survey of 2,000 Brits uncovered this surprising hygiene blind spot in UK households. It found that more than one in five people (21 per cent) admit they've never washed their children's teddy bears or cuddly toys, despite 83% knowing they can carry germs. And that's despite 83 per cent admitting they know they can be harbouring all sorts of germs. Almost a third of Brits (32 per cent) say there's simply 'no reason' they haven't done it, whilst 15.6 per cent worry they'll get damaged in the machine. A further 6 per cent fear they'll lose their familiar scent. Katy Roberts, AO's washing machine expert, said that mums and dads should be washing these constant companions every month. She said: "As a rule of thumb, try to wash your teddy bear every month – particularly if they're regularly handled. Join the Daily Record WhatsApp community! Get the latest news sent straight to your messages by joining our WhatsApp community today. You'll receive daily updates on breaking news as well as the top headlines across Scotland. No one will be able to see who is signed up and no one can send messages except the Daily Record team. All you have to do is click here if you're on mobile, select 'Join Community' and you're in! If you're on a desktop, simply scan the QR code above with your phone and click 'Join Community'. We also treat our community members to special offers, promotions, and adverts from us and our partners. If you don't like our community, you can check out any time you like. To leave our community click on the name at the top of your screen and choose 'exit group'. If you're curious, you can read our Privacy Notice. "Blankets you should pop in the washing machine once every fortnight to help keep them fresh. Your teddies and blankets can easily harbour dust mites and allergens so err on the side of caution and stick them in your washing machine when they're dirty." If you're worried about destroying them, she has some advice. She added: "It's completely understandable that many of us are worried about washing our teddies at home, however with a few handy tips, there's no need to stress. "If your furry companion is looking a bit worse for wear, there's nothing finer for it than popping your teddy bear into your washing machine. To clean them properly, check your care label and if this has worn away over the years, then put on a gentle, cold wash with a mild detergent to be on the safe side. 'If your teddy has seen better days and is more on the delicate side, then use a soft cloth or sponge with shampoo and dab away at any dirty areas. Leave this to air dry naturally and you can even give this a quick fluff with a soft brush for a magic touch to finish."


Time of India
3 days ago
- Business
- Time of India
Wife pays no income tax after selling 2 houses for Rs 6 crore gifted by her husband, wins case in ITAT Mumbai; here's how it happened
Academy Empower your mind, elevate your skills How did this income tax case start? March 14, 2002: The wife purchased two flats in Hiranandani Gardens, Powai, Mumbai, for Rs 34 lakh (34,51,000) and Rs 17 lakh (17,40,00). She claimed to have purchase these properties in the joint name with her husband. The wife purchased two flats in Hiranandani Gardens, Powai, Mumbai, for Rs 34 lakh (34,51,000) and Rs 17 lakh (17,40,00). She claimed to have purchase these properties in the joint name with her husband. March 27, 2015: Husband purchased another house property in Lodha Estrella solely in his own name. Husband purchased another house property in Lodha Estrella solely in his own name. April 1, 2017: Her husband through a legal gift deed, gifted the wife his share of 50% in the said properties in Hiranandani Gardens, Powai, Mumbai. Her husband through a legal gift deed, gifted the wife his share of 50% in the said properties in Hiranandani Gardens, Powai, Mumbai. January 9, 2020: The wife sold the two house properties located in Hiranandani Gardens for Rs 5.98 crore (5,98,00,000). She calculated her long term capital gains as Rs 4 crore (4,21,83,273) and claimed Section 54 tax exemption benefits in respect of purchase of another immovable house property from her husband of Rs 3.85 crore (3,85,00,000). The wife sold the two house properties located in Hiranandani Gardens for Rs 5.98 crore (5,98,00,000). She calculated her long term capital gains as Rs 4 crore (4,21,83,273) and claimed Section 54 tax exemption benefits in respect of purchase of another immovable house property from her husband of Rs 3.85 crore (3,85,00,000). March 18, 2021: The wife used the money she got from the sale of the two Hiranandani Gardens house properties (2020) to buy her own husband's Lodha properties which had he purchased in 2015. She claimed Section 54 long term capital gains tax exemption for this purpose. What did ITAT Mumbai say? Sale agreement between husband and wife 'The Assessing officer has brought to tax long term capital gains of Rs 4,21,83,273 on sale of two flats without allowing the exemption claimed by the assessee under Section 54 amounting to Rs 3,96,55,000. The sale of flats have been executed vide agreements to sell dated January 9, 2020 and the said flats were initially purchased vide agreement to purchase dated March 14, 2002 read with registered gift deed dated April 1, 2017. The contents of these sale agreements (and purchase/gift deed) are not in dispute and the same have been executed by the assessee in her individual capacity and the consideration has been received by her in her bank account and which has been duly offered to tax by the assessee and has been brought to tax by the AO in the hands of the assessee. Ownership title transfer of the house properties 'Now, coming to exemption claimed by the assessee under Section 54 amounting to Rs 3,96,55,000, the same relates to purchase of another flat by the assessee from her husband vide registered agreement to sell dated March 18, 2021 for a stated consideration of Rs 3,85,00,000 on which the assessee has paid stamp duty of Rs 11,55,000. The factum of ownership of the said flat in the name of the husband of the assessee vide agreement to sell dated March 27, 2015 is not in dispute nor the contents of the subject registered agreement to sell dated March 18, 2021 wherein the title in the property has been transferred by him in the name of the assessee. Rotation of funds 'We find that the AO (tax department) alleging the rotation of funds has merely looked at the transactions on March 12, 2021 when the majority of the purchase consideration has been discharged and has not considered the transactions prior to that date where the money has been initially parked by the assessee in fixed deposits/with the company and thereafter, received back and out of which, the amount was paid to the husband of the assessee towards the purchase consideration. Further, we find that the capital gains which have been brought to tax relates to the flats that have been sold/ transferred by the assessee vide agreement to sell dated January 9, 2020 and the assessee has thereafter purchased another flat vide agreement to sell dated March 18, 2021 wherein the consideration has been discharged by March 12, 2021. The said purchase is thus within the stipulated time period of two years after the date on which transfer of the original asset took place as prescribed under Section 54, the claim of exemption under Section 54 cannot be denied to the assessee(wife)." How does LTCG tax exemption under Section 54 work? "Section 54 of the Income Tax Act, 1961 provides that an individual taxpayer may claim tax exemption on long term capital gains arising from a sale of residential house property/ land by way of investing the capital gains in one residential property in India. Such new house property should be purchased within a period of 1 year before or 2 years after the date of transfer of old house or should be constructed within a period of 3 years from the date of transfer of the old house. It is pertinent to note that such exemption can be claimed only in respect of one residential house property purchased/ constructed in India. However, if the long term capital gains is upto Rs 2 crore, the taxpayer can avail a once in a lifetime option of acquiring 2 house properties within the above time limit. Also, the new house property would be subjected to a lock in of 3 years. If a taxpayer claiming exemption Section 54 of Income Tax Act, 1961 and transfers the new house within 3 years from the date of its acquisition/completion of construction, then the benefit granted under Section 54 of Income Tax Act, 1961 will be withdrawn and accordingly, the cost of acquisition of the new assets would be reduced from the exempted capital gains." Amount of capital gains arising on transfer of land; or Amount invested in purchase/construction of new residential house property (including the amount deposited in Capital Gains Deposit Account Scheme) A wife managed to win an income tax case in ITAT Mumbai, even after selling two house properties gifted by her husband in Mumbai for Rs 6 crore without paying any income tax. These properties were originally bought in 2002 for Rs 34 lakh and Rs 17 lakh each, and she sold them in 2020 for Rs 6 crore. According to income tax rules, she made a long term capital gain (LTCG) of just over Rs 4 crore after factoring in indexation (inflation). However, despite this LTCG of Rs 4 crore, she didn't owe any income tax because she reinvested the money to buy her husband's Lodha house property, also located in Mumbai, by claiming Section 54 strange as it may seem, all of her transactions were completely legal, and she even paid the full stamp duty required for these real estate Income Tax Assessing Officer (AO) said in this case since the husband is the deemed owner of the said property, as per income tax clubbing provisions, the capital gain earned on sale of property counts as the income of her husband. 'One cannot claim exemption under Section 54 on purchase of one's own property.'Apart from this, the AO also raised six objections as to why this lady should be liable for income tax on the sale of her Rs 6 crore property. One of the objections relates to the money used to pay for the AO took a look at the bank account statement of the husband and wife and saw that the wife received Rs 70 lakh on March 12, 2021 from a company where both she and her husband are employed as directors. On the same date, she transferred the Rs 70 lakh to her husband's bank account. And then, on the very same day, her husband transferred back the Rs 70 lakh to the company's bank account where they both serve as AO observed: 'The same rotation was followed for another payment of Rs 3 crore or 3,00,00,000 (Rs 1.5 crore each) on the same day that is 12.03.2021. Hence, it is seen that the payment of Rs 3.7 crore was moved from the company and reached the company through the wife and husband in a single day. This is nothing but rotation of money just to evade tax. There's no actual transfer of money, no right to use the property changed, only title of the property has changed. In view of the above, it is nothing but a colourable device used to evade tax.'The Income Tax Appellate Tribunal (ITAT) Mumbai rejected the objections of the Income Tax Assessing Officer (AO) and confirmed that the wife in this case is not required to pay any income tax on the capital gains of Rs 4 crore since she claimed Section 54 tax exemption by purchasing another house from her the rotation of money, the ITAT Mumbai's judge said that the AO only focused on the transactions on March 12, 2021, when most of the purchase consideration has been discharged. The transactions prior to that date were not considered, where the assessee (wife) had initially parked the money in fixed deposits/with the company and then, received it back, which was used to pay the husband for buying the house apartment built by Lodha out what else the ITAT Mumbai had to say and how the wife managed to win her case where she had to pay no income tax despite having Rs 4 crore in capital gains from sale of the property in to the judgement order of ITAT Mumbai dated June 9, 2025, here's the timeline of events:A total of six grounds were raised by the Income Tax Assessing Officer regarding why the wife should not get Section 54 long term capital gains 'In light of aforesaid discussion and in the entirety of facts and circumstances of the case, the AO is hereby directed to allow the exemption claimed by the assessee under Section 54 of the Act.'Chartered Accountant Suresh Surana explains:Surana says: "The threshold limit of considering investment in new house property would be restricted to Rs 10 crore for the purpose of claiming deduction under Section 54 of the Income Tax Act, 1961."