Indexed cost of improvement was allowed for compulsory land acquisition after evidence showed post-purchase land development.

Indexed cost of improvement was allowable in computing long-term capital gains on compulsory acquisition where the assessee proved post-purchase land improvement through the original deed, acquisition notice, and translated records showing filling of wet land and construction of a compound wall. The factual finding that no evidence of improvement was produced was held incorrect on the record. The claim was therefore allowed, and the Assessing Officer was directed to recompute capital gains by recognising the improvement cost.

---

---

Issues: Whether the assessee was entitled to claim indexed cost of improvement while computing long-term capital gains on compulsory acquisition of land.

Analysis: The assessee produced the original purchase deed showing the land as paddy field, the land acquisition notice describing it as filled wet land, and translated copies of the note book evidencing expenditure for filling up the land and constructing a compound wall. These materials showed that the property had undergone improvement after purchase and that the finding that no evidence of improvement was produced was factually incorrect. On the facts, the denial of indexed cost of improvement was not justified.

Conclusion: The claim for indexed cost of improvement was allowed, and the Assessing Officer was directed to recompute the long-term capital gains by taking into account improvement of Rs. 8,000 per cent.

---