Question And Answer
Subject: cost of improvement in capital gains
Querist: sirivella gopal
Answered by:
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Date: March 12, 2024
Query asked by sirivella gopal

Respected Sir,

Recently we have sold a land by dividing into small plots which is part of capital asset in partnership firm.We filed the Income Tax Returns by showing this transaction as the long term capital gain and in this long term capital gain we  show the cost of improvement as the amount to equal to  30 cents of land value as the  road formation expenditure for road  formation. Is this type of cost of improvement is allowable under cost of improvement or not. Please clarify

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Answer given by

One has to read the terms of the agreement . Expenditure incurred in connection with transfer of asset is allowable as deduction. In ACIT v. Ijyaraj Singh (2020) 183 ITD 237 / 207 TTJ 953 (Jaipur) (Trib.) held that development expenses incurred on land before its sale was required to put property in saleable condition would be allowable . Burden is on the assessee to prove that cost of land was used for laying road .

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2 comments on “cost of improvement in capital gains
  1. Sirivella Gopal says:

    Thankyou sir for you reply it is very useful to me.

    Thanks and regards

    Sirivella Gopal

  2. Luv Singla says:

    Respected Sir,
    I have a bungalow that I want to self develop into a building. The cost of redevelopment will be recovered by sale of additional condominiums constructed. How should I treat this cost while computing capital gains?
    Can we consider it as cost of improvement?

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