In 2006‑07, the homeowner bought a 510‑sq‑ft flat in a Mumbai housing society, moving in with his wife. The property sat idle for years, but its status changed when the society entered a redevelopment agreement in 2012‑13.
Under the scheme, he was allotted a replacement unit that was 30% larger than his original. The Permanent Alternate Accommodation Agreement signed in 2018 transferred his ownership rights to the newly constructed flat.
Only eight days after possession, he sold the redeveloped flat for ₹1.95 cr. He claimed the profit as long‑term capital gains under Section 54F, citing that he had invested the proceeds in another residential property.
The Assessing Officer, however, treated the transfer of the original flat and the subsequent sale as two separate transactions, classifying the gain as short‑term capital gains and adding ₹80.14 lakh to his taxable income. The Commissioner of Appeals upheld the assessment, arguing that the arrangement did not constitute a sale of a new asset.
On 16 July 2026, the ITAT Mumbai reversed the decision, holding that the redeveloped unit was a continuation of the homeowner’s ownership rights. Chartered accountant Suresh Surana explained that the tribunal viewed the property as a substitution of the original asset, not a fresh acquisition. The ruling means the homeowner can claim the LTCG exemption and avoid the added tax.
The homeowner, who had used the sale proceeds to purchase a two‑bedroom flat in Navi Mumbai, said the relief was a long‑awaited victory for many families caught in complex redevelopment schemes.