Section 54GB Deduction Allowed on Proportionate Investment | ITAT

Case Details: Jyotsna Kunwar vs. Income-tax Officer [2026] 185 taxmann.com 93 (Mumbai-Trib.)

Judiciary and Counsel Details

• Rahul Chaudhary, Judicial Member & Bijayananda Pruseth, Accountant Member
• S. Krishnan for the Appellant.
• Nakul Agrawal for the Respondent.

Facts of the Case

The assessee, an individual, filed her return for A.Y. 2022-23 declaring a total income of about Rs. 23.80 lakhs. During scrutiny, it was noticed that the assessee had sold a residential property for about Rs. 4.40 crores and earned long-term capital gain of about Rs. 1.76 crores. Out of the net consideration, the assessee invested about Rs. 3.69 crores in equity shares of an eligible start-up and claimed a deduction of about Rs. 1.48 crores under section 54GB on a proportionate basis.

The Assessing Officer disallowed the deduction on various grounds, including that the entire net consideration was not invested, section 54GB did not apply to transfers after 31-03-2017, and there was a cap of Rs. 50 lakhs, and that the conditions regarding utilisation of funds were not satisfied. The Commissioner (Appeals) upheld the disallowance. Aggrieved, the assessee filed an appeal before the Tribunal.

ITAT Held

The Tribunal held that the benefit of section 54GB was extended by the Finance Act 2021 to eligible start-ups until 31-3-2022. The AO’s belief that the benefit of section 54GB could not be availed for the transfer of residential property after 31-3-2017 was incorrect, and, therefore, the objection of the Assessing Officer regarding the applicability of the provision was incorrect. It was further held that section 54GB does not prescribe any limit of Rs. 50 lakhs on investment, and the view taken by the Assessing Officer was without legal basis.

The Tribunal also noted that the investee company had furnished confirmation and financial statements establishing that the amount invested was utilised to purchase plant and machinery. It was observed that the Assessing Officer had not conducted further enquiry despite the availability of such material and that the findings of the lower authorities were contrary to the record.

Accordingly, the assessee had satisfied the conditions prescribed under section 54GB and was entitled to claim a deduction on a proportionate basis. The Commissioner (Appeals )’s order was set aside, and the Assessing Officer was directed to allow the deduction. The assessee’s appeal was allowed.