Gujarat High Court Allows Section 54 Deduction On Cash Transaction Of Sell And Purchase Of Residential Property

In a recent Gujarat High Court decision, it was ruled that cash transactions in the sale and purchase of residential properties cannot be disallowed merely for exceeding the threshold prescribed under Section 40A(3) of the Income Tax Act, 1961. The court emphasized that such disallowance can only be justified if the transactions are found to be bogus or non-genuine. The case arose when the Income Tax Department disallowed the deduction claimed by the assessee for payments made in cash beyond the specified limit. The court held that unless the revenue establishes mala fides or non-genuineness of the transactions, disallowance solely based on the cash payment exceeding limits is not sustainable.