Wife buys husband's Rs 7.5 crore Mumbai property, ITAT allows tax benefit

The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) recently ruled that purchasing a residential property from one's spouse does not automatically constitute a tax avoidance scheme, allowing a woman to claim an exemption under Section 54F for buying a Mumbai property from her husband for Rs 7.5 crore. The tax authority initially denied the exemption, citing suspicion that the transaction was a means to circumvent taxes.

However, the ITAT dismissed this suspicion, considering the transaction was executed within legal parameters and the husband's business loss did not arise until months after the property sale. The taxpayer had declared a taxable income of Rs 1.9 crore for the financial year 2020-21, with long-term capital gains of Rs 8.31 crore from unlisted shares.

She claimed nearly Rs 7 crore under Section 54F, using the property for future rental income and explaining the source of funds. The ITAT found merit in the argument that the transactions were genuine and supported by proper documentation, including registration, payment of stamp duty, and real consideration. The tribunal also acknowledged that the husband's business loss occurred months after the property transaction, further supporting the legitimacy of the claim.