Costs Incurred to Make House Habitable Qualify as Part of Asset's Cost of Improvement: ITAT:

Costs Incurred to Make House Habitable Qualify as Part of Asset's Cost of Improvement: ITAT The assessee, Vijay Lakhmichand Israni, is a senior citizen who derives his income under the heads 'House Property', 'Capital Gains' and income from other sources. He filed his Income Tax Return for AY 2022-23 under section 139 of the Income Tax Act on 16.06.2022, reporting an income of Rs 35,67,355. His return was selected for scrutiny under CASS and notices under sections 143(2) and 142(1) of the Income Tax Act were sent to the assessee. The assessee had sold a house property jointly owned with his wife for Rs 4,02,00,000. The property was an unfurnished property in 2005, on which they incurred expenses to make it habitable. These expenses were added to the value of the property. The AO disallowed a few expenditures, including:

• Rs.25,72,807 claimed as the cost of improvement for personal items such as a rooftop solar plant, air conditioners, wall speakers, a microwave oven, etc.
• Rs 4,99,000 claimed as travel and courier expenses and as a sale expense for calculating capital gain.
• Rs. 11,35,023 claimed as the cost of acquisition.

Aggrieved by these disallowances, the assessee filed an appeal before the Income Tax Appellate Tribunal (ITAT), Bangalore. The ITAT, Bangalore, observed that the assessee had already submitted the payment statements to the builders for civil and electrical work. Therefore, the claim of Rs 11,35,023 was allowed as the cost of acquisition. Regarding the claim of Rs 25,72,807 towards the cost of improvement, The Tribunal agreed that certain items like ACs are personal effects and therefore, Rs 5,49,644 was disallowed. However, the balance claim of Rs 20,23,163 was allowed for the cost of improvements, being permanent fixtures. The Travel and courier expenses were mostly personal, as they included Air Freight, meals, local travel, and boarding costs, which are not related to the transfer of immovable property and the same cannot be allowed as expenses wholly and exclusively for sale. Hence, the tribunal dismissed this ground of the assessee.