Kumar Madhavanpillai S. vs. Income Tax Officer -1(4)

Parties Involved

Facts Summary

The assessee, Kumar Madhavanpillai S., sold an immovable property for Rs. 1.75 crore and purchased a new property for Rs. 1.5 crore. The assessee claimed indexed cost of acquisition and indexed cost of improvement and deduction under section 54/54F of the Act on account of the purchase of the new property. The assessee declared long-term capital gain at NIL. The Assessing Officer found that the assessee purchased property in 1996 for Rs. 2 lakhs plus registered expenses of Rs. 50,000.00. The assessee incurred construction expenses in 2003-04 for Rs. 12.5 lakh on the construction of the shop, which was claimed as the cost of improvement. The assessee claimed that the property sold during the year was purchased in 1996 and registered expenses of Rs. 50,000.00 only. The assessee further claimed that he incurred construction expenses in the year 2003-04 for Rs. 12.5 lakh on the construction of the shop, which was claimed as the cost of improvement. Thus, the assessee after claiming indexed cost of acquisition and indexed cost of improvement and deduction under section 54/54F of the Act on account of the purchase of the new property declared long-term capital gain at NIL.…

Legal Issues

• 1. Whether the benefit of cost of improvement claimed by the assessee for Rs. 12.52 lakhs is eligible for deduction in calculating the amount of capital gain.
• 2. Whether the short-term capital gain is eligible for exemption under section 54/54F of the Act.
• 3. Whether the investment was made by the assessee in the residential property/qualify so as to qualify the benefit of exemption under section 54/54F of the act.

Judgment Outcome

Decided in favour of Assessee.

Precedents Relied Upon

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