The Chennai Bench of the Income Tax Appellate Tribunal (ITAT), recently observed that the purchase of Furniture, Air Conditioner to make new house habitable is eligible for capital gain deduction.
The assessee,Mayur MuljibhaiMadhvani, is a non-resident, filed his return of income for the assessment year 2016-17. The case has been selected for scrutiny and during the course of assessment proceedings, the Assessing Officer noticed that the assessee has made investment towards property development. The AO, on the basis of details filed by the assessee and also taken note of nature of expenses incurred made additions as unexplained investment in property.
The CIT(A), after considering relevant submissions of the assessee and also taken note of certain evidences filed by the assessee, allowed partial relief where he has confirmed additions towards payment made to housing society towards transfer charges and expenses incurred towards cost of improvement without supported by any evidence, however allowed relief in respect of balance amount of expenditure incurred for development of the property.
The assessee has spent various expenditure to improve the property after the purchase. The assessee has paid amount towards purchase of air conditioner, curtains and pedestal light fittings. The AO, disallowed said expenditure on the ground that it is in the nature of personal effects and cannot be allowed as deduction.
The Counsel for the assessee, referring to relevant bills in respect of purchase of various items submitted that the assessee has purchased air conditioner, curtains, pedestal light fittings to make house habitable and said expenditure is in the nature of improvement of the property. Therefore, the same needs to be allowed as cost of improvement while computing capital gains.
The Tribunal of Mahavir Singh, Vice President and Manjunatha G, Accountant Member observed that “The assessee has purchased a property and spent various expenditure to make house habitable. The assessee has incurred amount for purchase of Air conditioner. The assessee had also incurred expenditure for furnishing the house and spent amount toward purchase of light fittings. The AO and CIT(A) completely erred in classifying said items as personal effects and disallowed while computing capital gains.”
The Bench directed the AO to allow deduction towards expenditure incurred towards purchase of air conditioner, furnishing of curtains, light fittings as cost of improvement while computing capital gains.
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