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Business Standard
2 days ago
- Business
- Business Standard
₹6 Cr property sold, ₹0 tax paid-What the Income Tax ruling means for you
In a landmark ruling, the Income Tax Appellate Tribunal, Mumbai has allowed a taxpayer to claim zero tax on long-term capital gains after selling two Mumbai flats worth ₹6 crore—originally gifted by her husband. The exemption was denied by the tax authority citing intra-family transaction and clubbing provisions. However, the tribunal ruled that proper gift documentation, ownership transfer, and timely reinvestment into a residential property (even if purchased from her spouse) met all criteria under Section 54, making the exemption legally valid. Kavita Damani's claim for exemption under Section 54 of the Income Tax Act, 1961 was challenged by the assessing officer, who alleged that the series of transactions—including the purchase of a new flat from her husband—was a colourable device to evade taxes. However, ITAT ruled in her favour, noting: The flat sold was in her individual ownership, after her husband gifted his share through a registered gift deed in 2017. She was receiving rental income from the property post-gift and sold it in her own capacity. The sale proceeds were deposited into her own bank account, and the capital gains were declared and taxed in her name. She then purchased a new residential property from her husband through a properly documented sale agreement, including TDS deduction and stamp duty, satisfying the exemption conditions under Section 54. What the Law Says Under Section 54, if a person sells a long-term residential property and reinvests in another home within the stipulated timeline (1 year before or 2 years after sale), they are eligible for exemption on capital gains tax. Key point: There is no bar on purchasing the new property from a relative, including a spouse, as long as the transaction is genuine and duly documented. As Alay Razvi, Managing Partner, Accord Juris, explains: Kavita Damani won the case before the Income Tax Appellate Tribunal (ITAT), Mumbai, because she fulfilled the legal conditions required to claim exemption from capital gains tax under section 54 of the Income Tax Act . Section 54 clearly defines that if an individual or HUF sells a residential property and invest in another residential property , exemption can be claimed under Section 54 of the Income Tax Act, 1961 within a particular time: Purchase within 1 year before or 2 years after the sale, or Construct a house within 3 years after the sale. If the gains are not utilized before filing the return, the amount must be deposited in a Capital Gains Account Scheme (CGAS). In this particular case, the tribunal found no basis in the Revenue's claim that the transaction was a tax avoidance device. Razvi further explains 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. Transaction Structuring Best Practices As Keshav Singhania (Head – Private Client, Singhania & Co.) advises: Undertake gift and sale transactions in separate financial years to maintain transactional hygiene. Always register gift deeds to affirm legal sanctity—even if not mandatory. Income (e.g., rent) from gifted property must be taxed in the hands of the donee after transfer. Keep a significant time gap between the gift and sale to avoid being deemed a tax avoidance arrangement. Maintain detailed documentation of fund flows for all transactions. Joint Ownership Dos and Don'ts In cases of joint ownership, ensure that: Each person pays for their share from their independent income source, with clear bank statement proof. Ownership stakes are economically genuine, not merely for formality. These practices help establish clear beneficiary ownership and support exemption claims. Section 54 Exemption Conditions Legal expert Alay Razvi (Accord Juris) outlines: The old property must be a long-term residential asset. The sale proceeds must be reinvested in a new residential property within 2 years. Buying from a relative—including a spouse—is permissible if the transaction is genuine and properly documented. Unused gains at filing date must be deposited into a Capital Gains Account Scheme (CGAS). Expert Checklist: How to Ensure a Clean, Tax-Exempt Real Estate Transaction Register gift deeds – Confirms legal ownership and avoids future disputes. Time gift and sale in separate financial years – Prevents tax authorities from questioning the intent. Invest capital gains within the Section 54 timeline – Buy another property within 2 years or construct within 3 years. Maintain complete bank statements and transaction records – Proves genuine fund movement and ownership. In joint ownership, pay from individual sources – Use separate bank accounts to establish economic ownership. Use CGAS (Capital Gains Account Scheme) if reinvestment isn't immediate – Keeps exemption claim valid even if property purchase is delayed. Document rental income shift post-gift – Helps reinforce the done as the real income owner. Avoid parking funds temporarily just to rotate them – Use them meaningfully to show genuine reinvestment. While gifting properties within families is not uncommon, this case highlights how timing, paperwork, and legal intent make all the difference. For taxpayers engaging in high-value property deals with relatives, this judgment serves as a crucial blueprint to ensure exemptions are upheld and tax liabilities avoided.
India Today
2 days ago
- Business
- India Today
Wife pays no income tax after selling two houses gifted by husband
Do you have doubts regarding family property transfers and long-term capital gain (LTCG) taxation?This case might serve as an eye-opener. A Mumbai-based woman has successfully won a legal battle at the Income Tax Appellate Tribunal (ITAT), which ruled she was not liable to pay income tax after selling two flats worth Rs 6 crore that were gifted to her by her husband, reported The Economic case has drawn wide attention for its implications on capital gains tax in cases of spousal property SOLD, REINVESTED IN HUSBAND'S FLAT The woman sold two residential properties in 2020, which were originally bought by her husband in 2002 for Rs 34 lakh and Rs 17 lakh. The total sale value reached Rs 6 crore. She then reinvested the capital gains into another residential property, a Lodha apartment in Mumbai that was registered in her husband's Income Tax Department raised objections, arguing that the transaction appeared to be a roundabout way to avoid questioned whether the reinvestment in her husband's house qualified for the capital gains exemption under Section 54 of the Income Tax Act. However, ITAT Mumbai ruled in her tribunal confirmed that the transfer of property from husband to wife was legally valid and properly documented. The reinvestment of the capital gains into a residential property met the conditions for claiming the exemption, even though the transaction was between close family PRECEDENT CLARIFIED BY TRIBUNALThe ITAT decision reaffirms that capital gains exemptions under Section 54 are available even when the sold property is received as a gift, provided the taxpayer adheres to the rules regarding reinvestment and to the tribunal's findings, the woman had declared long-term capital gains of Rs 4.08 crore after applying inflation used the entire amount to purchase a share in the new flat, meeting the reinvestment conditions under Section 54. The tribunal stated that the transaction, though between spouses, was genuine and lawful, making her fully eligible for the experts believe this judgment will help clarify confusion for taxpayers involved in family property transfers. As reported by The Economic Times, the tribunal emphasised that there was no evidence of tax evasion or misuse, and the woman had lawfully followed the provisions of the Income Tax case sets a significant precedent, highlighting that tax exemptions cannot be denied simply due to the familial nature of a transaction, as long as legal formalities are properly followed.- Ends
Hindustan Times
24-07-2025
- Hindustan Times
Unauthenticated info from foreign country not evidence: HC
The Delhi high court has held that unauthenticated information received from a foreign country regarding an individual's Swiss bank account cannot be treated as evidence and form a valid basis for criminal prosecution for tax evasion under the Income Tax (IT) Act. Unauthenticated info from foreign country not evidence: HC The ruling was delivered by justice Neena Bansal Krishna on Monday, in a plea by Anurag Dalmia to quash the case registered by the IT department for tax evasion. The case was registered in 2016 on the basis of the information received by the French government regarding the existence of a Swiss Bank account in Dalmia's name till 2005. Pursuant to receipt of information and unauthenticated documents received in 2011, the department conducted a raid in his premises in December 2012, but failed to recover anything. It later reopened the assessment proceedings for assessment year (AY) 2006-07, 2007–08 in 2012, and imposed fresh penalties by way of an assessment order (AO). In 2016, it also registered a case under section 276C (wilful evasion of tax, penalty, or interest chargeable), 276D (failure to produce accounts and documents), 277 (false statement in verification) of the Income Tax Act. The department had alleged that he evaded taxes by not disclosing details of his HSBC Bank account in Switzerland in his income tax returns for the assessment years 2006–07 and 2007–08, and by refusing to sign a consent waiver form that would have allowed access to the Swiss account information. The Income Tax Appellate Tribunal (ITAT) in February, 2018, concluding that there was no basis for revising Dalmia's ITR. In his petition, Dalmia asserted that the Swiss authorities had failed to respond to the department's request of further information from about the Swiss account and mere surmises or conjectures were not enough for pressing criminal charges. He further argued that the assessment order, which formed the basis for the department's initiation of criminal proceedings, had already been quashed by the Income Tax Appellate Tribunal (ITAT), and this alone should be sufficient grounds for dropping the criminal case. On the contrary, the IT department had asserted that quashing of the AO, was not sufficient to exonerate Dalmia of the criminal charges and the ITAT's order was not binding on the criminal court. It was also asserted that the case was not solely based on the AO but also independent information received from the French government. Rejecting the department's contention, justice Krishna in her 33-page ruling said, 'Merely on some unauthenticated information received from a third Country with no material evidence, is not sufficient to make out a prima facie case and there cannot be a presumption that a person has committed any wrongdoing. Thus, mere surmise and conjectures is not enough to prosecute a person alleging a criminal offence under Section 276D.' She added, 'Respondent has no cogent evidence whatsoever, to establish that the Petitioner has any Swiss Bank accounts and the unauthenticated documents have no evidentiary value, to make out a prima facie case against the Petitioner. It, therefore, has to be concluded that the unauthenticated documents under DTAA cannot be a basis to conclude that there was no complete disclosure of the income by the Petitioner for the relevant Financial Years.' Ultimately, the court quashed the criminal proceedings observing that the department lacked 'cogent, credible and corroborative evidence' to establish the existence of Swiss accounts and the receipt of such information from the French and not Swiss government raised questions on the document's authenticity. The judge further noted that the department had failed to recover incriminating material during the raid and confront Dalmia with the bank details before imposition of penalty. 'There was nothing even remotely to suggest that either the Assessee was having any bank account in Switzerland with HSBC or he was in any way linked with these bank accounts It thus concluded that if no incriminating material has been found during the course of search, no additions can be made in the Assessment year where Assessments had attained finality,' the court maintained.
Scroll.in
23-07-2025
- Business
- Scroll.in
I-T tribunal rejects Congress' plea for tax break on Rs 199 crore income
The Income Tax Appellate Tribunal on Monday dismissed an appeal by the Congress seeking tax exemption on an income of Rs 199 crore for the assessment year 2018-'19, Live Law reported. The tribunal rejected the party's claim under Section 13A of the 1961 Income Tax Act, observing that the Congress had filed its tax returns late and violated rules related to cash donation limits. A bench of Judicial Member Satbeer Singh Godara and Accountant Member M Balaganesh ruled: 'The assessee's return filed on [February 2, 2019] is not within the 'due' date to make it eligible for the impugned exemption.' The deadline for filing the income tax return for 2018-'19 was December 31, 2018. Its tax tiling for the year also did not provide details about contributions worth Rs 14.4 lakh out of the total donations worth Rs 142.8 crore it had received that year. Due to its non-compliance with the provisions to claim exemption, the Income Tax Department had issued notices to the Congress in September 2019, January 2020 and March 2020, demanding a tax of Rs 94.4 crore on an assessed income of Rs 199.1 crores for 2018-'19. The assessment order dated July 6, 2021, had denied the entire exemption claim, making the full receipt amount taxable. The Congress challenged the assessment order in August 2021 and applied for a stay on the recovery of the amount demanded by the Income Tax Department in October 2021. Later that month, an assessment officer disposed of the application, directing the Congress to pay 20% of its outstanding tax liability, failing which it would be treated as a defaulter. However, the Congress did not pay the 20% tax amount, leading the Income Tax Department to issue a letter in January 2023 to the Congress requiring the party to deposit and liquidate its tax liability. The Congress challenged this before the Commissioner of Income Tax (Appeals), the Income Tax Appellate Tribunal and the Delhi High Court, being denied relief at every forum. The High Court had criticised the Congress for 'badly' handling the matter and said that somebody from the Congress' office 'went off to sleep' from 2021. In April 2024, less than three weeks before polling began in the Lok Sabha elections, the Congress received tax notices for seven other assessment years. Are political parties exempt from income tax? Under Section 13A of the 1961 Income Tax Act, registered political parties will be exempt from paying tax on the income they receive provided they fulfil certain conditions. The party must maintain a book of accounts recording its income. It must maintain a record of the names and addresses of each person who contributes a sum over Rs 20,000 to it. The party's accounts must be audited by a chartered accountant. It must only accept contributions over Rs 20,000 via cheque, demand draft, electronic clearing system or other prescribed electronic modes. To claim an exemption, the treasurer of the party must submit a report listing all donations over Rs 20,000 received by the party in a financial year to the Election Commission by the due date for filing income tax returns. The provision also requires parties to file a tax return for the previous year. If any of these conditions are not satisfied, the party will not be able to claim income tax relief, according to Section 13A of the Income Tax Act and Section 29C of the 1951 Representation of the People Act.
The Hindu
23-07-2025
- Business
- The Hindu
The Hindu Morning Digest: July 23, 2025
Rear section of AI aircraft catches fire in Delhi as passengers deplane The rear section of an Air India Airbus A321 aircraft caught fire on Tuesday (July 22, 2025) at Delhi airport as passengers were deplaning after arriving from Hong Kong, the airline said. Over 21 lakh enumeration forms yet to be received in Bihar: ECI The Election Commission of India (ECI) on Tuesday (July 22, 2025) said that enumeration forms of 21.36 lakh electors are yet to be received in the ongoing Special Intensive Revision (SIR) of Electoral Rolls in Bihar. Displaced Manipur families get ready to return home under security cover Several Meitei families displaced by ethnic violence are gearing up to return to their homes on the periphery of Manipur's Imphal Valley under security cover. Income Tax Appellate Tribunal rejects Congress' appeal against tax demand on ₹199 crore income The Income Tax Appellate Tribunal on Tuesday (July 22, 2025) has rejected the Indian National Congress' appeal against an income tax demand on an income of ₹199.15 crore, saying that the party filed its returns past the deadline for availing of exemptions due to political parties, and that it also violated cash donation limits. Bihar BJP leaders bat for Nitish as Dhankhar's successor In the wake of Jagdeep Dhankhar's resignation, Bihar BJP leaders on Tuesday pushed the name of Chief Minister and JD(U) leader Nitish Kumar for the post of Vice-President. Over ₹44,000 crore released under MGNREGS so far: Centre tells Lok Sabha The Centre has released ₹44,323 crore to states and union territories under the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) so far, Rural Development Minister Shivraj Singh Chouhan informed the Lok Sabha on Tuesday (July 22, 2025). COVID-19 cases surged during May-end, declined after June 13, Rajya Sabha told A surge in Covid-19 cases was witnessed during the end of May this year, which peaked around June 13 after which the trajectory of cases declined significantly in the country, Minister of State for Health, Prataprao Jadhav, told the Rajya Sabha on Tuesday (June 22, 2025). 21 children died from starvation in 72 hours in Gaza, says hospital The head of Al-Shifa hospital in Gaza City said on Tuesday (July 22, 2025) that 21 children had died across the Palestinian territory in the past three days 'due to malnutrition and starvation'. Surprised to observe the pace with which our body can adjust to new settings, says astronaut Shubhanshu Shukla Indian astronaut Group Captain Shubhanshu Shukla, who is undergoing a week-long rehabilitation programme to mitigate any adverse effect of microgravity, has shared an update of his rehabilitation and said that he was 'surprised to observe the pace with which our body can adjust to new settings.' Congress protests at Jantar Mantar for immediate restoration of Statehood to J&K Amid the ongoing Monsoon Session of Parliament, the Congress on Tuesday (July 22, 2025) held a demonstration in New Delhi's Jantar Mantar area to press for the restoration of Statehood for Jammu and Kashmir, and the inclusion of Ladakh in the Sixth Schedule. Congress began collecting signatures to remove Justice Varma last week to deny government 'sole credit' The Opposition's decision to move a motion to remove Justice Yashwant Varma in the Rajya Sabha was set rolling on July 15 at the Congress Parliamentary Strategy meeting, where the lead Opposition party took a call that the government should not be allowed exclusive ownership of the motion, aimed at uncovering the alleged corruption in the judiciary. In over 90% of sewer deaths, workers had no safety gear: government audit Over 90% of workers who died while cleaning sewers did not have any safety gear or personalised protective equipment (PPE) kits, according to a recent social audit commissioned by the Union Government to look into hazardous sewer and septic tank cleaning across the country. Even in the cases where they had some safety gear, it was limited to a pair of gloves and gumboots. India joins international support campaign for Bangladesh after air force jet crashed in Dhaka The Government of India on Tuesday (July 22, 2025) reached out to Bangladesh offering assistance to deal with the aftermath of the tragic crash of an aircraft from the Bangladesh Air Force that led to the death of at least 20 students and teachers and injury for more than a hundred others in a school in capital Dhaka. In a statement, the Ministry of External Affairs announced that a team of doctors will be visiting Bangladesh soon. Ozzy Osbourne, godfather of heavy metal who led Black Sabbath, dies at 76 Ozzy Osbourne, the gloomy, demon-invoking lead singer of the pioneering band Black Sabbath who became the throaty, growling voice — and drug-and-alcohol ravaged id — of heavy metal, died on Tuesday (July 22, 2025), just weeks after his farewell show. He was 76. Trump accuses Obama of treason in escalating attacks over 2016 Russia probe U.S. President Donald Trump accused former President Barack Obama of 'treason' on Tuesday (July 22, 2025), accusing him, without providing evidence, of leading an effort to falsely tie him to Russia and undermine his 2016 presidential campaign.
