Section 54 of the Income Tax Act

Income-tax Act, 2025: s.82

Section 54 of the Income-tax Act, 1961 corresponds to section 82 (Profit on sale of property used for residence) of the Income-tax Act, 2025.

Read section 82 of the 2025 Act

Correspondence checked against the ICAI tabular mapping of the two Acts and the BharatTax.co section commentary.

The decision most relied on for Section 54 is Allied Motors (supra); CIT v. Podar Cement Pvt Ltd. (226 ITR 625), cited in 244 of the 1,745 judgments on BharatTax that turn on this section.

Leading authorities on Section 54

Allied Motors (supra); CIT v. Podar Cement Pvt Ltd.
226 ITR 625 · 1997 · Supreme Court
244
citing judgments

Amendments to tax laws that are explanatory, declaratory, curative, or clarificatory in nature are judicially construed as retrospective, especially if they are intended to remedy unintended consequences.

Sanjeev Lal v. CIT
365 ITR 389 · 2014 · Supreme Court
122
citing judgments

For claiming capital gains exemption under beneficial provisions like section 54, the 'date of transfer' can be the date of the agreement to sell, particularly when coupled with substantial advance consideration or an enforceable right, adopting a purposive and liberal interpretation to acknowledge the assessee's intent.

CIT v. Manjula J. Shah
355 ITR 474 · 2013 · High Court
113
citing judgments

For capital assets acquired by gift or will, the indexed cost of acquisition under Section 48 is computed with reference to the year the previous owner first held the asset. The period of holding for determining if an asset is long-term also includes the previous owner's holding period, as per Section 2(42A).

CIT v. D. Ananda Basappa
309 ITR 329 · 2009 · High Court
97
citing judgments

For exemption under Section 54, the expression 'a residential house' allows for investment in multiple residential units that form one functional unit, as 'a' does not imply a singular number. The amendment to Section 54, effective from April 1, 2015, is prospective.

CIT v. Gita Duggal
357 ITR 153 · 2013 · High Court
77
citing judgments

For capital gains exemption under sections 54 and 54F, the term "a residential house" does not restrict the exemption to a single residential unit and can include multiple contiguous or combined residential units treated as one house.

CIT v. Kamal Wahal
351 ITR 4 · 2013 · High Court
71
citing judgments

An assessee is eligible for capital gains exemption under Sections 54 and 54F even when the new residential house is purchased in the name of their spouse, provided the investment comes from the assessee's own funds. This allows for a purposive construction of these provisions.

CIT v. Rajesh Kumar Jalan
286 ITR 274 · 2006 · High Court
66
citing judgments

Section 139(4) of the Income-tax Act, which allows for filing a belated return, acts as a proviso to Section 139(1). Consequently, the time limit for depositing amounts or utilizing funds to claim exemptions, such as under Section 54, extends up to the due date for filing a return under Section 139(4).

CIT v. Gurnam Singh
327 ITR 278 · 2010 · High Court
66
citing judgments

For capital gains exemption under Section 54F, the new residential house is not required to be purchased exclusively in the assessee's own name; acquisition in joint names or in the name of a spouse qualifies for the exemption. This principle also applies to Section 54 due to their pari materia nature.

Suraj Lamp & Industries (P) Ltd. v. State of Haryana
340 ITR 1 · 2012 · Supreme Court
64
citing judgments

A transfer of immovable property by way of sale is legally valid only through a duly stamped and registered deed of conveyance. Unregistered instruments like agreements to sell, General Power of Attorney, or wills do not transfer title or create an interest in the property.

CIT v. K. Ramachandra Rao
56 Taxmann.com 163 · 2015 · High Court
62
citing judgments

The exemption under Section 54F (or Section 54) for long-term capital gains cannot be denied if the assessee invests the entire sale consideration in constructing a residential house within the prescribed three-year period, even if the amount was not deposited in the Capital Gains Account Scheme before the due date for filing the income tax return under Section 139(1). The purpose of the Capital Gains Account Scheme is to preserve the exemption when actual investment is pending, not to deny it if actual utilization occurs within the statutory timeframe.

Judgments on Section 54

Rajamanickam Meerabai, Chennai vs. ITO, Chennai

In the result, the appeal filed by the assessee is allowed

ITA 923/CHNY/2020[2006-07]Status: DisposedITAT Chennai18 Oct 2023AY 2006-07

Bench: Shri Mahavir Singh & Shri Manjunatha.Gआयकरअपीलसं./Ita No.: 923/Chny/2020 िनधा"रण वष"/Assessment Year: 2006 - 07 Smt. Rajamanikam Meerabai, The Income Tax Officer, Door No.29, Old No.T-2-2, Vs. Non Corporate Ward -15(3), Cauveri Salai Chennai. Besant Nagar South, Chennai – 600 090. Pan: Aaopm 7401M (अपीलाथ"/Appellant) (""यथ"/Respondent) अपीलाथ" क" ओरसे/Appellant By : Shri N. Arjun Raj, C.A ""यथ"क" ओ रसे/Respondent By : Shri P. Sajit Kumar, Jcit सुनवाई क" तारीख/Date Of Hearing : 10.10.2023 घोषणा क" तारीख/Date Of Pronouncement : 18.10.2023 आदेश /O R D E R Per Mahavir Singh: This Appeal By The Assessee Is Arising Out Of The Order Of The Commissioner Of Income Tax (Appeals)-15, Chennai In Ita No.180/Cit(A)-15/2016-17 Dated 21.09.2020. The Assessment Was Framed By The Income Tax Officer, Non Corporate Ward 15(3), Chennai For The Assessment Year 2006-07 U/S. 143(3) R.W.S. 254 Of The Income Tax Act, 1961 (Hereinafter The ‘Act’), Vide Order Dated 31.03.2016. 2. The Only Issue In This Appeal Of Assessee Is As Regards To The Order Of Cit(A) Confirming The Action Of The Ao In Computing Long Term Capital Gain & Disallowing The Claim Of Exemption U/S.54 Of The Act. For This, Assessee Has Raised Various Grounds Which Are Argumentative & Exhaustive & Hence, Need Not Be Reproduced.

For Appellant: Shri N. Arjun Raj, C.A ""For Respondent: Shri P. Sajit Kumar, JCIT
Section 143(3)Section 2(47)(v)Section 54

Jyoti Jha, Jaipur vs. ACIT (It), Circle-2(1), Kolkata

In the result, appeal of the assessee is allowed

ITA 225/KOL/2023[2014-15]Status: DisposedITAT Kolkata16 Oct 2023AY 2014-15

Bench: Dr. Manish Borad, Hon’Ble & Shri Sanjay Garg, Hon’Blei.T.A. No. 225/Kol/2023 Assessment Year: 2014-15 Jyoti Jha Acit(It), Circle-2(1), Kolkata Kalani & Co. Chartered Accountants Vs 5Th Floor, Milestone Building Gandhinagar Turn Tonk Road Jaipur - 302015 [Pan : Aezpj7440J] अपीलाथ"/ (Appellant) "" यथ"/ (Respondent) Assessee By : Shri P.C. Parwal, Fca Revenue By : Shri Sunil Kr. Agarwala, Cit, D/R सुनवाई क" तारीख/Date Of Hearing : 10/08/2023 घोषणा क" तारीख /Date Of Pronouncement: 16/10/2023 आदेश/O R D E R Per Dr. Manish Borad: The Above Captioned Appeal Is Directed At The Instance Of The Assessee Against The Directions Of The Dispute Resolution Panel – 2, New Delhi, (Hereinafter The “Ld. Drp”) Dt. 05/12/2022, Passed U/S 144C(5) Of The Income Tax Act, 1961 (“The Act”) For The Assessment Year 2014-15. 2. The Assessee Has Raised The Following Grounds Of Appeal:- “1. The Ld. Ao Has Erred On Facts & In Law In Assessing The Income Under The Head Capital Gain At Rs.41,46,0917- As Against Nil Income Declared By The Assessee On The Basis Of Direction Of Drp Ignoring That The Amount Of Capital Gain Has Been Invested In Purchase Of Flat Before The Time Available For Filing The Return U/S 139 & Thus Eligible For Deduction U/S 54 Of The Act Even If The Sale Deed Was Executed Subsequently. He Has Further Erred In Observing That Assessee Has Failed To Produce Documentary Evidence In Support Of Claim Ignoring That The Same Was Filed Before The Drp. 2. The Ld. Ao Has Erred On Facts & In Law In Making Addition Of Rs. 7,41,700/- In Respect Of Cash Deposit In The Bank Account U/S 68 Of The Act As Per The Direction Of Drp. He Has Further Erred In Holding That Assessee Failed To Produce Documentary Evidence In Support Of Averments In The Affidavit.

For Appellant: Shri P.C. Parwal, FCAFor Respondent: Shri Sunil Kr. Agarwala, CIT, D/R
Section 139Section 144CSection 144C(5)Section 147Section 148Section 194Section 54Section 68Section 69