The Pune bench of Income Tax Appellate Tribunal (ITAT) has allowed increase in proportionate capital gain deduction under Section 54F of the Income Tax Act, 1961 for disallowance of index cost of improvement.
Section 54F of the Income Tax Act provides tax exemption to long term capital gain earned from selling any capital asset other than house property.
Sanket Joshi appeared for the assessee. Shivraj Morey appeared for revenue.
Assessee Yashpalsingh Surindersingh Matharu,is a non-resident individual who filed his return declaring total income at Rs.13,49,630/-.
During the course of assessment proceedings, the AO observed that the assessee had computed income under the head `Capital gains’ on transfer of certain property and claimed exemption towards long term capital gain.
While computing the capital gain, the assessee had claimed deduction of indexed cost of improvement at Rs.9,17,560/- towards development work carried out.
After considering the submissions of the assessee the AO did not grant deduction and made addition of Rs.9,17,560/-. Aggrieved assessee filed an appeal before the tribunal.
Assessee submitted that he purchased the property on 22-09-1998 Thereafter he incurred development cost on such property, whose indexed value was Rs.9,17,560/-. Also assessee furnished estimate given by the developer on the date 22-09-1998.
Counsel for the revenue supported the decision of the assessing officer.
When it was observed that assesse purchased the property on 22-09-98 through a registered sale deed and it found the development work in the property had been completed on or before the date of purchase by the assessee.
It was also found that the assessee did not adduce any evidence of having done any development work on the property by furnishing the direct invoices for the development work.
Thus the bench detrmined that “even if it is presumed that the development work was actually carried out as claimed through the estimate/Bill of the developer, it is hard to accept that the development of the property was done by the assessee before the date of its purchase itself”.
In the above view the bench disallowed the ground raised by the assessee .
After the submissions and observations the two member bench of R.S. Syal, (Vice President) and Partha Sarathi Chaudhury, (Judicial Member) allowed an increase in the proportionate deduction under section 54F Income Tax Act because of the resultant increase in the amount of capital gain for the disallowance of the claim for indexed cost of improvement.
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