The decision at a glance
In Dilip Mohandas Devani v. Income Tax Officer, ITA No. 272/Ahd/2025 for Assessment Year 2012-13, the Ahmedabad Bench of the Income Tax Appellate Tribunal examined three connected capital-gains issues: adoption of stamp-duty value under Section 50C, proof of historical cost of improvement and the extent of exemption under Section 54 where the replacement house was purchased jointly.
The order was pronounced on 25 August 2025 by the SMC Bench comprising Dr. B.R.R. Kumar, Vice President, and Shri Siddhartha Nautiyal, Judicial Member. CA. Jigar Shah appeared as authorised representative for the assessee. The appeal was partly allowed for statistical purposes, with verification directions on the contribution toward the new property.
- Historical cost of improvement considered on the best documentary evidence available
- Section 54 relief linked to actual contribution rather than an automatic equal-ownership presumption
- Section 50C stamp-duty substitution upheld
- Delay of 140 days condoned on the facts recorded by the Tribunal
Historical improvement paid in cash: absence of old bank records was not fatal
The assessee claimed Rs. 6,00,300 as cost of improvement, which after indexation was stated at Rs. 11,08,780. The expenditure related to repairs and renovation undertaken nearly two decades earlier. Contractor bills and details of the work were produced, but the payments had been made in cash and did not appear in the available bank records.
The Tribunal accepted the practical difficulty in expecting passbooks or banking records for such an old transaction. It observed that the assessee had produced the best available documentary evidence in the form of contractor bills and work details, and found that the indexed cost-of-improvement claim may be allowed in the interests of justice.
The decision does not establish that every cash-paid expense must be accepted. Its value lies in the evidentiary principle: a historical claim should be evaluated on credible contemporary material and the best evidence reasonably available, rather than rejected only because banking records no longer exist.
Section 54 in a jointly purchased house: follow the actual contribution
The new residential property was purchased jointly by the assessee and his wife. Because the purchase document did not specify unequal shares, the Assessing Officer and the first appellate authority restricted the assessee's Section 54 exemption to 50% of the investment.
The assessee contended that the investment had actually been made in a 2:1 ratio, corresponding to the respective interests in the sale proceeds of the original property. An affidavit from the joint purchasers was also placed on record.
The Tribunal held that actual contribution toward purchasing the new house is a relevant factor for determining the eligible Section 54 exemption. It accepted the contention in principle and directed the Assessing Officer to verify the respective contributions and allow the exemption accordingly.
Section 50C was upheld—and the missing DVO request mattered
The sale deed recorded consideration of Rs. 41,00,151, while the stamp-duty valuation was Rs. 67,14,284. The Tribunal upheld adoption of the higher stamp-duty value under Section 50C for computing capital gains.
The order specifically records that the assessee had not requested a reference to the Departmental Valuation Officer at any stage. The practical lesson is important: where the stamp-duty value is genuinely disputed, the objection and request for valuation under Section 50C(2) should be raised clearly and at the appropriate stage, supported by the relevant property facts and valuation material.
Evidence checklist for similar capital-gains matters
The decision is fact-specific, but it provides a useful framework for preparing capital-gains claims involving old improvements or jointly funded replacement property.
- Contractor bills, work descriptions, estimates and correspondence relating to the improvement
- Photographs, municipal permissions or other records that corroborate the work where available
- A clear year-wise cost and indexation working
- Bank trail connecting sale proceeds with payments for the new residential property
- Affidavits or confirmations explaining the actual contribution ratio between joint purchasers
- A specific and timely DVO-reference request where Section 50C valuation is disputed
Scope and practical limitation of the ruling
The appeal was partly allowed for statistical purposes. The Section 54 contribution ratio remained subject to verification by the Assessing Officer, while the Tribunal's acceptance of the old improvement claim rested on the contractor bills, work details, age of the transaction and the surrounding facts.
The decision should therefore be cited for its precise factual and evidentiary propositions, not as a blanket rule validating unsupported cash expenditure or granting Section 54 relief solely because a contribution ratio is asserted. Current statutory provisions, the year of transfer and the complete documentary record should be reviewed before applying the ruling to another matter.