Surat man wins Rs 5.06 crore tax exemption on inherited land

A Surat-based real estate businessman, Mr Patel, has secured a full tax exemption on a long-term capital gain of Rs 5.06 crore from converting inherited land into stock-in-trade. The Income Tax Appellate Tribunal (ITAT) Surat ruled in his favour on July 10, 2026, allowing him to claim a deduction under Section 54F of the Income Tax Act, even though he bought the replacement land before formally transferring the original asset.

Patel inherited a 50% share in a 9,510 sq. meter plot from his mother in Althan, Surat, originally bought for Rs 21.17 lakh in 2008. He converted it into stock-in-trade on April 1, 2017, reporting a LTCG of Rs 5.06 crore. He claimed exemption by investing Rs 2.13 crore in another land and spending Rs 2.93 crore on construction, totalling Rs 5.06 crore. The assessing officer rejected the claim, but ITAT Surat upheld it, citing a 1983 CBDT circular and rulings from the Karnataka and Madras High Courts.

The tribunal held that Section 54F does not require the land for the new house to be bought after the original transfer, only that the house is completed within three years. Chartered Accountant Dhruvang Diwan represented Patel. CA Suresh Surana noted the judgement clarifies that unutilised amounts need not be deposited in the Capital Gains Account Scheme before the ITR filing due date if ultimately invested within the three-year window.