It has been recently held by The Income Tax Appellate Tribunal (ITAT), Hyderabad bench that the expenditure that has been incurred by the assessee to repair his house to make it habitable ought to be deducted from the sum of capital gain under section 54 of the Income-tax Act, 1961.
Latest Update in Income Tax Section 54
4th August 2022
- Income Tax Appellate Tribunal (ITAT) of the Visakhapatnam bench ruled that the cost of a new house of residential includes the cost of land bought under income tax section 54 of the I-T At, 1961. Read order
Facts & Circumstances of the Aforesaid Case
During a particular assessment year, the assessing officer found that the assessee has claimed a deduction of Rs 55 lakh for the expenditure incurred on furniture and fixtures that includes other fittings such as Air Conditioner, Double Bed, Sofa Set, Dining Table set, and other kitchen equipment, and so on in addition to Rs.14,85,000/- of expenditure that has been incurred towards additional works in the house. However, The Assessing Officer disallowed the same claiming it to be the expenditure that is not meant for making the house habitable.
Read Also: Rights to Acquire Title to Apartment is ‘Transfer’ for Imposing Capital Gain: ITAT
Contrarily, The assessee contended that he along with his mother had bought the house along with furniture and fixtures and consequently, the entire expenditure that has been incurred by the assessee for composite buying of the house and furniture should be allowed to be deducted from the sum of capital gain as per section 54 of the Income-tax Act, 1961.
Judicial Member P. Madhavi Devi, after hearing both sides, found that the cost of acquisition includes the price that is paid by the assessee for the buying of the house and it also includes the expenditure towards the repairs that are born by him to make it habitable and other than that no other expenditure is to be allowed as deducted from the amount of capital gain under section 54 of the Act.
“The Tribunal said, As regards the details of the expenditure furnished in page 31 of the paper book of the assessee which is 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 the cost of improvement and allow the same if found to be in order,”
