The Income Tax Appellate Tribunal (ITAT), Hyderabad bench has recently held that the expenditure incurred by the assessee to repair the house to make the same habitable shall be deducted from the amount of capital gain as per section 54 of the Income tax Act, 1961.
During the relevant assessment year, the Assessing Officer found that claim of deduction of Rs. 55 lakhs has been made by the assessee towards furniture and fixtures including other fittings such as Air Conditioner, Sofa Set, Double Bed, Dining Table set, and other interior fitting kitchen equipment, etc., and also Rs.14,85,000/- as expenditure towards additional works in the house. The Assessing Officer disallowed the same holding it to be not for making the house habitable.
The assessee, on the other hand, contended that he and his mother had purchased the house along with furnitures and fixtures and therefore, the entire expenditure incurred by the assessee was towards the composite purchase of the house and furniture and should be allowed in toto.
After hearing both the sides, Judicial Member P. Madhavi Devi found that the cost of acquisition is the price paid by the assessee for the purchase of the house and also the expenditure towards the repairs made by him to make the house habitable and no other expenditure is to be allowed under section 54 of the Act.
“As regards the details of the expenditure furnished in page 31 of the paper book of the assessee which are being sought as exempt by the assessee, I find that except for the expenditure incurred by the assessee towards electrical, water leakage problem and plumbing work, no other expenditure is required to be incurred for making the house habitable. Assessing Officer is directed to allow the same as cost of improvement and allow the same, if found to be in order,” the Tribunal said.