GOTTEMUKKALA CHAKRADHAR,HYDERABAD vs. ADIT(INT TAXN)-1, HYDERABAD

आदेश / O R D E R PER MANJUNATHA.G, AM:

This appeal filed by the assessee is directed against final

Assessment Order passed by the AO u/s.143(3) r.w.s.144C(13) of the

Income Tax Act, 1961 (in short “the Act“) dated 11.12.2024 in pursuant

to directions of the Dispute Resolution Panel-1, Bengaluru, u/s.144C(5) of

the Act dated 28.11.2024 and pertains to AY 2022-23.

:: 2 :: 2. The brief facts of the case are that the assessee is a Non-Resident

Indian (individual), resides in USA and filed his return of income (RoI) for

AY 2022-23 on 31.12.2022 declaring total income of Rs.52,87,890/-,

which includes Long Term Capital Gains (LTCG) of Rs.44,78,094/- arising

from the sale of joint owned immovable property. The case was selected

for scrutiny and during the course of assessement proceedings, the AO

noticed that the assessee has computed LTCG from transfer of immovable

property and thus, called upon the assessee to file relevant details,

including computation of capital gains along with evidences of sale of

property, details of ‘cost of acquisition & cost of improvement‘. In

response, the assessee submitted that he along with his brother sold

immovable property being a building comprising stilt and mezzanine

floors, ground floor, first floor, second floor, third floor & fourth floor

having a total built up area of approximately 24,000 sq.ft. constructed on

land admeasuring 776.50 sq.yds., situated at Plot No.12, Municipal No.1-

90/HUDA/TEC/12, Sector-II, HUDA Techno Enclave, Survey No.64,

Madhapur Village, Serilingampally Mandal, Ranga Reddy District to Smt.

Saranala Sandhya, for a consideration of Rs.5.20 Crs. The assessee

further submitted that he computed Long Term Capital Gains by taking

into account his 50% share of consideration of Rs.2.60 Crs. and after

claiming deduction towards cost acquisition of property and improvement

being cost of construction of commercial building has reported capital

gains of Rs.44,78,094/-. The assessee further submitted that, his late :: 3 :: father has obtained permission for construction of building by paying

Rs.7,03,184/- to HUDA and further spent a sum of Rs.40,80,000/- in

Financial Year 2002-03 and Rs.14,50,000/- in FY 2003-04 for construction

of building of 24,000 sq. ft. The AO after considering the relevant

submissions of the assessee and also taken note of various evidences

observed that although, the assessee claims to have constructed 24,000

sq.ft. building which is evident from copy of Sale Deed but no evidence

has been furnished to prove construction of building. Therefore, the AO

only allowed fees paid to HUDA for construction of building of

Rs.7,03,184/- and assessee’s share of Rs.3,51,592/- towards cost of

improvement. However, not allowed construction cost of Rs.40,80,000/-

& Rs.14,50,000/- claimed by the assessee for AY 2003-04 & 2004-05 on

the ground that the assessee failed to file any documentary evidence in

support of the same and that passed draft assessement order

u/s.144C(1) of the Act on 19.03.2024 and determined total LTCG at

Rs.2,14,01,108/-, as against LTCG reported by the assessee for

Rs.44,78,094/-.

objections before the DRP and raised various contentions including

disallowance of cost of improvement claimed by the assessee for

Rs.55,30,000/-. The DRP vide directions dated 28.11.2024 issued

u/s.144C(5) of the Act has rejected explanation of the assessee and :: 4 :: sustained the capital gains computed by the AO by holding that as per

Section 48 of the Act only verified cost supported by documentation can

be considered for deduction while computing capital gains. In the absence

of substantiating evidences, the AO decision to disallow this claim is

appropriate and consistent with statutory requirement. Therefore,

sustained the additions made by the AO towards computation of capital

gains. In pursuant to directions issued by the DRP, u/s.144C(5), the AO

passed final assessement order u/s.143(3) r.w.s.144C(13) of the Act on

11.12.2024 and determined total income of Rs.2,22,20,901/- by making

additions of Rs.2,14,01,108/- towards capital gains derived from sale of

property.

assessee is now in appeal before this Tribunal.

submitted that the Ld.DRP/AO erred in disallowing cost of construction of

the building of Rs.55,30,000/- incurred by the assessee in the Financial

Year 2002-03 & 2003-04, even though, the Sale Deed clearly shows

existence of 24,000 sq.ft. building with ground plus four floors. The Ld.

Counsel for the assessee further submitted that the AO has allowed cost

incurred by the assessee towards license fees paid to HUDA for taking

sanctioned plan for the building, however, not allowed cost of construction

even the construction was taken place almost ‘20’ years back and further, :: 5 :: cost of construction has been incurred by late father of the assessee. He

further submitted that the assessee has claimed cost of construction at

Rs.460.83 per sq.ft which is almost equal to PWD rate of Government of

Telangana, where Government has specified cost of construction of

building at Rs.440 per sq.ft. Since the assessee has proved existence of

building and the AO has not disputed the fact that there is a building on

the land, ought not to have disallowed cost of construction only for the

reason at not submitting supporting evidences, even though, the building

was constructed ‘20’ years back and no person will keep any evidences

including bills & vouchers for more than ‘20’ years. Therefore, he

submitted that the additions made by the AO should be deleted.

allowed cost of construction, however, not allowed stamp duty charges

paid for registration of the property for Rs.1,22,501/-, even though, the

stamp duty charges is part of cost of acquisition of the property. The DRP

even though admitted the fact that there is evidence of payment of stamp

duty, but upheld the additions made by the AO only on the ground that

stamp duty is a ancillary expenses and not contributing to ownership.

Since the assessee has incurred cost of stamp duty paid for registration of

the property which goes to add to the property and thus, the AO should

have allowed stamp duty charges of Rs.1,22,501/- while computing

capital gains.

:: 6 :: 7. The CIT-DR, Mrs. Seema Meena, supporting the order of the

Ld.DRP/AO submitted that the assessee has not furnished any evidence

for cost of construction. The assessee had also not filed valuation report

from the Registrar of Valuer to prove the existence of the building and the

cost of such building. In the absence of any evidence, the AO has rightly

disallowed cost of improvement being cost of construction of building.

Therefore, she submitted that the reasons given by the AO for not

considering cost of improvement should be upheld and the appeal filed by

the assessee should be rejected.

the stamp duty and registration charges except filing registered Sale Deed

copy for purchase of the property. The DRP rightly held that stamp duty

charges is a ancillary expenses and not forming part of cost of property.

Therefore, she submitted that there is no error in the reasons given by

the AO/DRP and thus, the grounds taken by the assessee should be

rejected.

record and had gone through orders of the authorities below. There is no

dispute with regard to sale consideration received for sale of property and

computation of capital gains arising out of transfer of property. The

assessee has declared capital gains of Rs.44,78,094/- by considering 50%

share of sale consideration of Rs.2.60 Crs. and after claiming deduction :: 7 :: towards cost of acquisition of the property and cost of improvement has

declared LTCG of Rs.44,78,094/-. The AO had computed LTCG of

Rs.2,14,01,108/- by taking into account sale consideration of Rs.2.60 Crs.

and after allowing deduction towards cost of acquisition of Rs.35,37,420/-

for purchase of property and further deduction towards indexed cost of

improvement of Rs.10,61,472/- towards license fees paid to HUDA for

approval and sanction of the construction of the building of Rs.3,51,592/-.

There is no dispute with regard to these facts. The only dispute is with

regard to not allowing the indexed cost of improvement being cost of

construction of building of Rs.55,30,000/- claimed by the assessee. The

assessee has claimed construction cost of Rs.40,80,000/- in FY 2002-03

and Rs.14,50,000/- in FY 2003-04 in aggregating for Rs.55,30,000/-. The

AO disallowed cost of improvement only on the ground that no supporting

evidence has been filed by the assessee.

at 24,000 sq.ft. super built-up area and the land sold by the assessee. It

is also not in dispute that the assessee has obtained sanctioned plan from

HUDA by paying charges of Rs.7,03,184/- in FY 2002-03 and in fact, the

same has been accepted by the AO and allowed deduction while

computing capital gains. Once there is no dispute about existence of

building which is supported by copy of Sale Deed, in our considered view,

merely for the reason at not submitting supporting bills & vouchers, the :: 8 :: existence of building can’t be disputed and cost incurred by the assessee

for construction of building can’t be disallowed. Further, as claimed by

the assessee, the building was constructed in FY 2002-03 & 2003-04,

almost ‘20’ years back and in our considered view, nobody will keep any

supporting bills & vouchers for nearly two decades going by human

probability. Therefore, in our considered view, the AO having noticed the

facts, there was sanction plan from HUDA and also not disputed the fact

that there was a building in the land sold by the assessee, ought to have

allowed indexed cost of improvement claimed by the assessee towards

cost of construction of Rs.55,30,000/-. The DRP without appreciating the

relevant facts simply upheld the reasons given by the AO to compute

capital gains without considering cost of improvement. Thus, we direct

the AO to allow indexed cost of improvement towards loss at

Rs.55,30,000/- while computing capital gains arising from transfer of

property.

Rs.1,22,501/-. There is no dispute with regard to the fact that the

assessee has paid stamp duty charges of Rs.1,22,501/- for purchase of

the property which is evidenced by copy of Sale Deed dated 23.03.2001.

The DRP also not disputed the fact that the assessee has paid stamp duty

charges of Rs.1,22,501/-. But, upheld the reasons given by the AO for not

considering the stamp duty by stating that it is an ancillary expenses not :: 9 :: contributing to ownership. In our considered view, the AO and the

Ld.CIT(A) has committed a fundamental error, because, stamp duty is not

an ancillary expenses, but it is a compulsory component of the cost of

acquisition of the property, because, without paying stamp duty,

registration of the Sale Deed will not take place and unless the Sale Deed

is registered, the rights in the property would not transfer to the buyer.

Therefore, in our considered view, the AO and the DRP erred in not

considering the cost of acquisition being stamp duty of Rs.1,22,501/-

paid by the assessee and thus, we direct the AO to include stamp duty

charges of Rs.1,22,501/- while allowing deduction towards cost of

acquisition of the property.

Order pronounced on the 24th day of June, 2026, in Hyderabad.

Sd/- Sd/- (िवजय पाल राव) (मंजूनाथा. जी) (VIJAY PAL RAO) (MANJUNATHA.G) उपा�� /VICE-PRESIDENT लेखा सद�/ACCOUNTANT MEMBER

Hyderabad, dated 24.06.2026. TLN

आदेशकी �ितिलिप अ�ेिषत/ Copy of the order forwarded to:

िनधा�रती/The : Gottemukkala Chakradhar, C/o. P. Murali & 1 Co., Chartered Accountants, 6-3-655/2/3, Assessee Somajiguda, Hyderabad-500 082.

राज�/ The Revenue 2 : The ADIT (International Taxation)-1, Hyderabad. 3 The Principal Commissioner of Income Tax, Hyderabad / The CIT (IT & TP), Hyderabad. िवभागीय�ितिनिध, आयकर अपीलीय अिधकरण, हैदराबाद / DR, ITAT Hyderabad. 4 गाड�फ़ाईल / Guard file 5

आदेशानुसार / BY ORDER

TUMMALACHARLA Digitally signed by TUMMALACHARLA LAKSHMI NARAYANA DN: cn=TUMMALACHARLA LAKSHMI LAKSHMI NARAYANA, c=IN, o=INCOME TAX APPELLATE TRIBUNAL, ou=INCOME TAX NARAYANA APPELLATE TRIBUNAL, CHENNAI BENCH Date: 2026.06.24 16:59:39 +05'30'

Sr. Private Secretary ITAT, Hyderabad