Taxman denied exemption on 3 floors after Rs 75L builder deal; ITAT grants relief
A man inherited 400 square yards of leasehold land from his late mother in 1997. Towards the end of 1999, he entered into an agreement with a developer to demolish the existing house and construct a new building. Nearly two decades later, in 2018, the man decided to undertake another redevelopment of the property. As part of the 2018 redevelopment agreement, the man received Rs 75 lakh from the…
In a landmark case, a Delhi man was able to avoid paying taxes on a property he redeveloped after receiving Rs 75 lakh from a builder. The man, who inherited a leasehold property in 1997, decided to redevelop it and entered an agreement with a builder to demolish the original house and construct a new one. Under the agreement, the man retained rights to parts of the building, while the builder received ownership of the first floor.
The man claimed an exemption under Section 54 for long-term capital gains, but the Income Tax Officer rejected his claim. The case reached the Income Tax Appellate Tribunal (ITAT) Delhi, which ruled in his favor, allowing him to pay no taxes on the transaction. The tribunal concluded that the basement, ground floor, and third floor, which the man kept, could not be considered separate residential units for tax purposes.
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