Dedcution of cost of acquisition and cost of improvement

[DEVKUMAR KOTHARI]

Natural improvemtn in quality of land- by conversion of rural land into urban land, agricultural land into non-agricultural land,development in locality etc. takes place without any cost of improvement incurred by assessee. When ther is no cost of improvement or it is not computed and when the date of improvement is also not ascertainable, the gain on transfer of such asset may not at all be taxable. This is becasue cost of acquisition and cost of improvement bothe are necessary to be deducted from sale value, otehrwise there will be no profit or gain in context of S. 45 read with S.48. Readers may refer to judgments in case of B.C.Sriniwas Setty 128 ITR 294(SC), Home Industries (BBY),Evans Fraser (BBY), Octovious Steel ITR (Cal), Suman Tea and Plywood (Cal),and other cases on the point of computation of capital gain and send feed back. Article on this website on this issue can also be referred to.

AI Summary

Debate on Tax Deductions for Natural Land Improvements Raises Questions on Sections 45 and 48 Applicability A discussion on the deduction of the cost of acquisition and improvement for tax purposes highlights that natural improvements, such as land conversion or development, may not incur costs for the owner. This raises questions about taxability under Sections 45 and 48 if no improvement costs are involved. One participant extends the discussion to urban land price increases due to nearby developments and questions if such increases should be considered improvements. Another participant argues that natural appreciation without owner effort should not be taxed as gain. They emphasize the relevance of past judgments despite legislative amendments, suggesting that tax claims can still be challenged.