A person invested Rs.65L for the purchase of H.Property. The agreement clearly indicate the beneficiary rights of the owner in the common area of the building. After few years Rs.2.5L has been paid by the owner for the repairing work of the building.Definitely this has increase the value of the property. Will this be considered as "Cost of Improvement" in Income Tax while calculating Capital Gain that arises on the sale of the property?Do quote any case study in this connection for better understanding.
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Tax treatment
Replies (1)
Yes. This is eligible to be classified as "Cost of Improvement" as per capital gains. I am quoting the lines from Income Tax Act
"Expenses must have actually been incurred - Only those expenses which have been actually incurred by the assessee in making additions and improvements in the property ought to be taken into consideration as ‘cost of improvement’ while computing capital gains under section 55(1)(b) of the Act - Shri Parmanand Bhai Patel & Smt. Jyotsna Devi Patel v. CIT [1984] 149 ITR 80 (MP)."
Hope this helps.
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