Capitla Gain issue

[HITESH SHAH]

One of our client had acquired commercial premises in 2004 and took the loan for the same. Such premises was decided to be demolished in 2007 and to be newly re-constructed as per the arrangement with the society and developer. However, after demolition the said premises was never developed. Now my client is intending to sell the said commercial premises (though construction is not made)

My query is whether interest expenditure incurred since last 10 years in relation to such premises be allowed as cost of improvement?? Also can he get indexation benefit on such interest expenditure or is it deducted under other heads of income.

AI Summary

Capitalisation of interest: whether loan interest on undeveloped commercial premises may be treated as cost of improvement with indexation. A taxpayer bought a commercial premises financed by a loan, demolished it for planned reconstruction which never occurred, and intends to sell the site. The issue is whether interest incurred on the loan over the years can be treated as cost of improvement of the capital asset and thereby attract indexation benefit, or whether that interest must be deducted under other heads of income.