ITAT decision: Improving cost claim partly allowed for calculating capital gain.

The ITAT partly allowed the appeal concerning the disallowance of the cost of improvement for calculating long term capital gain on the sale of agricultural land. The ITAT directed the Assessing Officer to calculate 50% of the improvement cost of the land, based on a previous decision in a similar case. Grounds 7 and 8 of the appeal were adjudicated, with ground 7 allowed and ground 8 dismissed as not pressed. This decision emphasizes the significance of providing supporting evidence for improvement cost claims in tax assessments.

---

---

Issues:
1. Disallowance of cost of improvement for computing long term capital gain on sale of agricultural land.
2. Adjudication of grounds 7 and 8 of the appeal.

Issue 1: Disallowance of cost of improvement for computing long term capital gain on sale of agricultural land:
The appeal pertains to the assessment year 2011-12, arising from the order of the CIT(A)-11, Ahmedabad under section 143(3) r.w.s. 153A of the Income Tax Act, 1961. The assessee, along with other co-owners, sold agricultural land at Makarba, Ahmedabad, and claimed an improvement cost of Rs. 9,60,000 with an indexed cost of Rs. 20,82,093. The Assessing Officer disallowed the claim due to lack of supporting evidence. The Co-ordinate Bench of the ITAT had previously adjudicated a similar issue in the case of co-owners, allowing 50% of the improvement cost. The ITAT, following the previous decision, directed the Assessing Officer to calculate 50% of the improvement cost of the agricultural land, thereby partly allowing the appeal.

Issue 2: Adjudication of grounds 7 and 8 of the appeal:
The appeal included grounds 7 and 8 related to the disallowance of the cost of improvement and the contention that the long term capital gain would still be nil even after considering the improvement cost. The ITAT, after allowing ground no. 7 regarding the cost of improvement, dismissed ground no. 8 as not pressed since the main issue was resolved by allowing 50% of the improvement cost. Consequently, the appeal of the assessee was partly allowed, and the order was pronounced on 12-07-2021.

This judgment addresses the disallowance of the cost of improvement for computing long term capital gain on the sale of agricultural land and the adjudication of specific grounds of the appeal based on previous decisions by the Co-ordinate Bench of the ITAT. The ITAT's decision to allow 50% of the improvement cost based on the precedent set in a similar case demonstrates the importance of providing supporting evidence for such claims in tax assessments.

---