2021 (7) TMI 933 - AT - Income Tax

Capital gain computation - Cost of improvement for computing long term capital gain on sale of agricultural land - HELD THAT - As decided in case of the co-owner 2018 (3) TMI 1340 - ITAT AHMEDABAD wherein 50% of the cost of improvement of the agricultural land was allowed - we direct the Assessing Officer to calculate 50% cost of improvement of the agricultural land as directed in the order of the ITAT as mentioned above. Accordingly, this ground of appeal of the assessee is partly allowed.

Summary

Issues:
1. Disallowance of cost of improvement for computing long term capital gain on sale of agricultural land.
2. Adjudication of grounds 7 and 8 of the appeal.

Issue 1: Disallowance of cost of improvement for computing long term capital gain on sale of agricultural land:
The appeal pertains to the assessment year 2011-12, arising from the order of the CIT(A)-11, Ahmedabad under section 143(3) r.w.s. 153A of the Income Tax Act, 1961. The assessee, along with other co-owners, sold agricultural land at Makarba, Ahmedabad, and claimed an improvement cost of ?9,60,000 with an indexed cost of ?20,82,093. The Assessing Officer disallowed the claim due to lack of supporting evidence. The Co-ordinate Bench of the ITAT had previously adjudicated a similar issue in the case of co-owners, allowing 50% of the improvement cost. The ITAT, following the previous decision, directed the Assessing Officer to calculate 50% of the improvement cost of the agricultural land, thereby partly allowing the appeal.

Issue 2: Adjudication of grounds 7 and 8 of the appeal:
The appeal included grounds 7 and 8 related to the disallowance of the cost of improvement and the contention that the long term capital gain would still be nil even after considering the improvement cost. The ITAT, after allowing ground no. 7 regarding the cost of improvement, dismissed ground no. 8 as not pressed since the main issue was resolved by allowing 50% of the improvement cost. Consequently, the appeal of the assessee was partly allowed, and the order was pronounced on 12-07-2021.

This judgment addresses the disallowance of the cost of improvement for computing long term capital gain on the sale of agricultural land and the adjudication of specific grounds of the appeal based on previous decisions by the Co-ordinate Bench of the ITAT. The ITAT's decision to allow 50% of the improvement cost based on the precedent set in a similar case demonstrates the importance of providing supporting evidence for such claims in tax assessments.