ITAT Mumbai – Redevelopment & Income Tax – Multiple Floors in new Building Still One House for Section 54 Exemption

ITAT Mumbai – Redevelopment & Income Tax – Multiple Floors in Redeveloped Building Still One House for Section 54 Exemption

ITAT Mumbai Ruling of 20.2.2026 – Major tax relief to the home owners for full indexed cost of acquisition and Section 54 exemption on multiple floors received in the redevelopment.

Disallowance of indexed cost of acquisition & Deduction under Section 54 of the IT Act.

The assessee declared LTCG of Rs.3,37,93,219/- and claimed deduction of Rs.4,40,49,819/- under Section 54 of the IT Act.  Thus, the LTCG was set off against the section 54 deduction.

The owners were to receive share in the ratio of 77.25 in the building and Rs.2.5 crores from the builder.  The husband of the assessee will get ground floor and the assessee-wife would get second & third floors.

The Assessing Officer found that although the assessee and her husband have transferred only 22.5% of the plot but they had claimed entire cost of acquisition of entire land while computing capital gain. The deduction under section 54 would be available in respect of one residential house.

The assessee and her husband & owners of the land had agreement of redevelopment of old building with the builder.\

HELD that since the entire property was handed over to the  builder for redevelopment, the assessee is entitled to indexation benefit on the whole property, not just developer’s share.

Entire Property handed over to the builder for redevelopment qualifies for indexed cost of acquisition.

Section 54 Exemption applies even if Assessee receives multiple floors, as long as they form part of one residential house.

News in Business Standard of 25.2.2026 and the judgment dated 20.2.2026 of ITAT Mumbai in ITA No.6714/Mum/2025 of Seeta Nayyar Vs.   Asstt. Commissioner of Income Tax Mumbai