In a rare legal win for taxpayers, the Bombay High Court recently ruled in favour of a man who sold his late mother’s flat in Mumbai for ₹1.45 crore and used the entire proceeds to purchase seven residential units in Pune — all without paying a single rupee in capital gains tax.

No Income Tax on ₹1.45 Crore Sale: How a Minor Wording Helped a Son Buy 7 Homes

The twist? It all came down to one small word — “a” in Section 54 of the Income Tax Act (pre-2014).

Back in the early 1990s, Section 54 allowed tax exemption on long-term capital gains if the proceeds from the sale of a residential property were reinvested in “a residential house.” The law didn’t explicitly limit this to just one property. It wasn’t until the 2014 amendment that “a” was replaced with “one,” restricting the benefit to a single home.

The taxpayer’s guardian, acting on his behalf, invested the entire sale proceeds in multiple houses. The tax department contested this, insisting the exemption applied to only one property. After nearly three decades of litigation — including battles in the Income Tax Appellate Tribunal and High Court — the judge sided with the taxpayer, ruling that the pre-2014 law allowed multiple homes, as long as they were residential.

Key Takeaway for Taxpayers:

• Pre-April 1, 2014 transactions: Multiple homes could qualify for the Section 54 exemption.
  
• Post-April 1, 2014: Only one residential property qualifies, with a current cap of ₹10 crore.
  

This judgment reinforces how tiny legislative details can have massive tax implications — and why precise legal drafting matters as much as the law itself. Get in touch with Pitchers Global today to know more!