Joint Ownership Not a Barrier! ITAT Mumbai Allows Full Rs 3.67 Cr Section 54 Deduction
The present appeal (I.T.A. No. 2053/Mum/2025) has been filed by an Income Tax Officer (Appellant) in the Income Tax Appellate Tribunal (ITAT), “B” Bench, Mumbai, before Shri Amit Shukla (Judicial Member) and Ms Padmavathy S (Accountant Member), against a taxpayer named Neelam Shamsher Kashyap (respondent). The appeal is related to the assessment year 2021-22. The case was heard on October 09, 2025, and was decided on October 27, 2025.
The appeal has been filed challenging an order dated 30.01.2025, passed by the Commissioner of Income Tax (Appeals) [CIT(A)], who gave relief to Mrs Neelam Shamsher Kashyap. This case mainly revolves around two issues:
- Cost of acquisition (property value as of 01.04.2001), i.e., what the property was worth when she bought it long ago (for computing capital gains).
- Deduction under Section 54, i.e., how much exemption she can get for reinvesting the sale proceeds into a new residential property.
On December 17, 2021, Mr Kashyap filed his income tax return (ITR) for the assessment year 2021-22, disclosing a total income amounting to Rs. 89,08,020. The return was selected for the purpose of scrutiny by the Assessing Officer (AO). The officer discovered that the assessee earned Long Term Capital Gains (LTCG) from the sale of two properties and claimed a Section 54 exemption of Rs. 4,00,84,000, saying she used this money to buy a new residential property. The new property was bought jointly with her son-in-law. The price of the new property was Rs. 41,794,500, from which Rs. 36,794,500 was paid by Mrs Kashyap and Rs. 5,000,000 by her son-in-law.
The AO accepted that she paid most of the amount, but since the property was in joint names, he assumed each person owned 50%. Therefore, only 50% of the deduction was allowed by the officer under Section 54. Additionally, she disagreed with the value Mrs Kashyap used as the cost of acquisition for her old property. She used a government valuer’s report, which gave a higher value. The AO replaced that with the ready reckoner rate (stamp duty value) of Rs. 5,078 per sq. ft. This amendment led to an increment in her taxable capital gains.
When the case was taken to the CIT(A), it concluded that Mrs Kashyap invested Rs 36,794,500 (out of her capital gains) in the new property, so she is entitled to a full deduction under Section 54 for that amount. The valuation of property as of 01.04.2001 provided by her (Rs. 1,71,57,000) matches the Stamp Valuation Authority’s certificate (Rs. 1,70,61,370), so it’s reasonable. The AO never submitted a remand report, even after being given the chance. Therefore, CIT(A) accepted her claim on both issues.
Thereafter, the Income Tax Officer, dissatisfied with the ruling of CIT(A), then approached the ITAT Mumbai. After hearing both parties, the ITAT made the following findings:
- The AO himself accepted that the assessee paid most of the money. There is no law saying deduction must be restricted if property is bought jointly; what matters is how much the assessee actually invested. CIT(A) had verified documents (including the rectified deed). Therefore, the ITAT agreed with CIT(A), the full deduction of Rs. 3,67,94,500 was correctly allowed.
- On the cost of acquisition (valuation as on 01.04.2001): The valuer’s report and the stamp authority’s certificate were almost the same. Hence, the value taken by the assessee did not exceed the stamp duty value, and the new proviso to Section 55(2)(b) was not violated. The AO had no valid reason to reject the valuer’s report. Therefore, the valuation adopted by the assessee was accepted.
- In the final ruling, the ITAT Mumbai upheld the order of CIT(A) and found no error in it. Therefore, the Revenue’s appeal was dismissed. Meaning, the final decision has been announced in favour of Mrs Kashyap.
Citation: Income Tax Officer Vs Neelam Shamsher Kashyap (ITAT Mumbai); I.T.A. No. 2053/Mum/2025; 27/10/2025; 2021-22
