ITAT rules on Capital Gain Exemption

ITAT rules on Capital Gain Exemption

The bench found the basis of the Income Tax authorities devoid of merit

The Ahmedabad bench of the Income Tax Appellate Tribunal (ITAT) has held that the capital gain exemption under the Income Tax Act, 1961 can be allowed on bonafide expenses incurred for making the new house habitable, prior to its possession.

The assessee, Hiren Himmatsingh Rathod, had incurred the cost of making the new property inhabitable before taking over its possession.

The Income Tax department stated that under the IT Act it did not find any embargo in granting relief to the assessee. It said that the bonafide expenses incurred for making the new house habitable prior to possession, but before the completion of the time limit prescribed were found to be allowable.

It said it also did not doubt the genuineness of the payment of Rs.12,00,000 for the repairing work along with Rs.2,37,650 paid towards payment of the stamp duty and Rs.48,800 paid towards the registration fees.

The tribunal bench comprising Judicial Member Madhumita Roy and Accountant Member Waseem Ahmed referred to the judgment passed by the Coordinate Bench in an earlier matter.

It held that there was no restriction on the buyer from incurring any construction expenditure on improvisation or supplementary work of the readymade units. Therefore, under the IT Act, the additional expenses incurred would be eligible for qualifying investment.

The bench ruled, "When the assessee incurred an expenditure for making the new property habitable within the stipulated time as framed by the provision of the law and particularly when such an expenditure had not been doubted by the authorities, it is entitled to the exemption of Rs.14,00,000 as the expenditure incurred."