The Ahmedabad Bench of Income Tax Appellate Tribunal ( ITAT ) allowed the Rs.2.44 lakh cost of improvement as a deductible expense for capital gains.
Bhagabhai Tribhovandas Patel,appellant-assessee,challenged the order dated 10.04.2024 passed by the Commissioner of Income Tax (Appeals)[CIT(A)], under Section 250 of the Act, in quantum proceedings under Section 143(3) read with Section 263 of the Act.
In this case, the Assessing Officer(AO)passed an order under Section 143(3) read with Section 263 of the Act on 12.12.2018 for the Assessment Year(AY) 2011-12, disallowing Rs.2,44,553 as the cost of improvement. The CIT(A) upheld the disallowance made by the AO and rejected the assessee’s contention.
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The assessee counsel explained that Rs.2,44,553/- was spent on making the property, Shanti Arcade, livable after taking possession in 2007. They also referred to the ledger account that had been submitted during the assessment proceedings.
On the other hand, the revenue counsel pointed out that while the assessee claimed to have spent Rs.2.44 lakhs on the cost of improvement, no supporting details were submitted. As a result, the Revenue Authorities correctly disallowed the amount.
The tribunal noted that the cost of improvement was incurred to make the house livable in 2007, and the sources of the expenditure were not disputed. The Revenue Authorities had disallowed the expense solely on the grounds that it was of a revenue nature and not capital expenditure.
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The two-member bench, comprising Dr. B R R Kumar (Vice President) and Suchitra Kamble (Judicial Member), ruled that the distinction between capital and revenue expenditure was not relevant at this stage. It concluded that the expenditure, aimed at making the house livable in 2007, qualified as a legitimate cost of improvement eligible for deduction from capital gains.
In short,the appeal filed by the assessee was allowed.
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