Genuine family transactions can’t be dismissed as tax evasion without proof, rules tribunal.

ITAT Clears ₹41.5 Crore Section 54F Exemption on Property Bought From In-Laws.

In a landmark ruling, the Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has granted a ₹41.5 crore capital gains tax exemption under Section 54F, holding that buying property from close relatives cannot be deemed a sham transaction merely because it results in tax savings. The case involved an individual who reinvested long-term capital gains from the sale of unlisted shares into a high-value residential flat purchased from her in-laws. The tax department had denied the exemption, alleging the arrangement was a colourable device to avoid tax. Rejecting this view, the ITAT noted that both the sale of shares and purchase of property were fully supported by documentary evidence such as registered agreements, stamp duty payments and demat records. It emphasised that the Income-tax Act does not prohibit the claim of Section 54F benefits for properties purchased from relatives. The tribunal reiterated that lawful tax planning is not tax evasion and that suspicion, however strong, cannot replace evidence.