ITAT Bengaluru: Meals, Transport & Courier Costs Not Deductible In-House Property Transfer for NRIs

ITAT Bengaluru: Meals, Transport & Courier Costs Not Deductible In-House Property Transfer for NRIs

Tribunal Clarifies What Expenses Qualify as Transfer Costs

Judgment Provides Guidance for NRIs on Capital Gains Deductions

By Our Legal Reporter

New Delhi: December 30, 2025:

In a recent ruling, the Income Tax Appellate Tribunal (ITAT), Bengaluru Bench, rejected claims by a Non-Resident Indian (NRI) who sought to deduct expenses such as meals, transport, and courier charges while calculating capital gains on the sale of a residential property. The tribunal held that such expenses are not part of the “transfer of property” costs under the Income Tax Act, 1961.

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This judgment provides clarity for taxpayers, especially NRIs, on what expenses can legitimately reduce capital gains tax liability.

Background of the Case

• The assessee, an NRI, sold his share in a residential villa in Bengaluru.
• While filing returns, he claimed deductions for various incidental expenses, including meals, transport, and courier charges, arguing they were incurred during the property transfer process.
• The Assessing Officer disallowed these claims, stating they were not directly related to the transfer.
• The matter reached the ITAT, which upheld the disallowance.

Court’s Observations

• Direct Connection Required: Only expenses directly linked to the transfer of property are deductible.
• Examples of Allowable Expenses: Brokerage, stamp duty, registration charges, and legal fees.
• Non-Allowable Expenses: Meals, transport, courier, and other incidental costs are personal in nature and not integral to the transfer.
• Legal Basis: Section 48 of the Income Tax Act allows deduction of expenses incurred “wholly and exclusively in connection with such transfer.”

Legal Principles Involved

• Section 45 of the Income Tax Act: Governs capital gains taxation.
• Section 48: Permits deduction of transfer-related expenses.
• Judicial Precedent: Courts have consistently held that only expenses essential to the transfer qualify.

Implications of the Judgment

1. For NRIs

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• Must carefully distinguish between personal and transfer-related expenses.
• Cannot claim incidental costs like meals or travel as deductions.

2. For Taxpayers in General

• Provides clarity on what qualifies as deductible expenses.
• Reduces scope for disputes with tax authorities.

3. For Tax Administration

• Strengthens consistency in assessment of capital gains.
• Prevents misuse of deduction provisions.

Broader Context

• Capital Gains Taxation: A major source of litigation in India, especially for NRIs selling property.
• Common Misconceptions: Many taxpayers assume all expenses incurred during a sale are deductible.
• Judicial Guidance: ITAT rulings help clarify grey areas and reduce disputes.

Expert Views

• Tax Professionals: Applaud the ruling for clarifying boundaries of deductible expenses.
• Legal Analysts: Stress that Section 48 must be interpreted strictly to prevent misuse.
• Policy Experts: Suggest awareness campaigns for NRIs to avoid incorrect claims.

Conclusion

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The ITAT Bengaluru’s ruling that meals, transport, and courier expenses are not deductible in property transfer is a landmark clarification for capital gains taxation. By reinforcing that only expenses directly connected to the transfer qualify, the tribunal has provided much-needed guidance for NRIs and domestic taxpayers alike.

This judgment underscores the importance of accurate tax compliance and highlights the need for taxpayers to seek professional advice before making deduction claims.

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