TaxTMI 
TaxTMI 
2026 (5) TMI 1274
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....n for a sale consideration adopted under section 50C at Rs. 4,39,66,173/-. While computing long term capital gains, the assessee claimed indexed cost of acquisition/improvement amounting to Rs. 1,03,41,977/-, deduction under section 54 amounting to Rs. 2,12,81,658/- on account of investment in a new residential property at Pune and deduction under section 54EC amounting to Rs. 50,00,000/- on account of investment in specified bonds. Consequently, the assessee declared taxable long term capital gain at Rs. 73,42,538/-. 4. During the course of assessment proceedings, the Assessing Officer required the assessee to substantiate the claim of indexed cost of improvement and deduction claimed under section 54. The Assessing Officer observed that the assessee had failed to produce supporting bills, vouchers and documentary evidence in support of the expenditure claimed towards improvement carried out in financial years 1985-86, 1986-87, 1996-97 and 2006-07. The Assessing Officer further observed that the new residential property at Pune had been purchased jointly in the names of the assessee and her husband and accordingly held that deduction under section 54 was allowable only to the e....
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....inder Kumar Arora and other judicial precedents. 8. Per contra, the ld. DR strongly relied upon the orders of the lower authorities and submitted that the assessee had failed to produce any supporting evidence in respect of the alleged cost of improvement despite repeated opportunities granted during assessment proceedings. It was further submitted that the new residential property admittedly stood jointly owned and therefore the Assessing Officer had rightly restricted deduction under section 54 to the extent of assessee's ownership share. 9. We have heard the rival submissions and perused the material available on record. So far as the issue relating to indexed cost of improvement is concerned, we find that the assessee had originally acquired residential plot bearing House No.156, Sector 33-A, Chandigarh admeasuring 523.13 square yards vide registered sale deed dated 02.09.1985 for a total consideration of Rs. 2,25,000/- besides stamp duty and other incidental expenses, thereby resulting into total acquisition cost of Rs. 2,49,000/- claimed by the assessee for the financial year 1985-86. Thereafter, the assessee carried out construction and improvements in the said residen....
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....lable. The Assessing Officer has also not brought any material on record to establish that no construction or improvement whatsoever had been carried out by the assessee over the years, despite the existence of a residential structure measuring 3300 square feet. 12. In our considered opinion, the approach adopted by the lower authorities in disallowing the entire indexed cost of acquisition/improvement is neither justified nor in consonance with settled principles governing the computation of capital gains. It is common knowledge that, in cases involving old constructions and improvements carried out several decades earlier, complete preservation of bills and vouchers may not always be possible. The claim of the assessee, therefore, cannot be discarded merely for want of complete documentary evidence, particularly when the chronology of acquisition and investments in the property stands duly demonstrated from the material placed on record. The assessee had acquired the plot in the financial year 1985-86, carried out substantial construction in the financial year 1986-87, thereafter made further improvements in the financial years 1996-97 and 2006-07 and ultimately sold the const....
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.... the assessee incurred stamp duty charges of Rs. 6,81,000/- and registration charges of Rs. 30,000/- in connection with the acquisition of the property. The assessee had also made payments towards utility charges, Amanora Cluster Fund, infrastructure charges, club charges, and Amanora Environment Fund, together with the applicable taxes thereon. 17. Insofar as the allowability of these payments for the purposes of deduction under section 54 is concerned, we find that the payments towards one-time premium, GST thereon, stamp duty, registration charges, utility charges, Amanora Cluster Fund, infrastructure charges and Amanora Environment Fund are directly connected with and incidental to acquisition of leasehold rights in the residential property and therefore partake the character of cost of acquisition eligible for deduction under section 54 of the Act. 18. However, so far as club charges are concerned, we find that club membership is optional in nature and is not a mandatory condition for acquisition or enjoyment of the residential property. The payment towards club membership cannot be regarded as an expenditure intrinsically linked with the acquisition of the residential u....