DIVYAKUMAR BHISHAM SAWILANI,MUMBAI vs. INCOME TAX OFFICER INT TAX WARD 4(2)(1),, MUMBAI

ITITA 1777/MUM/2025Status: DisposedITAT Mumbai17 August 2026AY 2022-2318 pages
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What did the Tribunal hold?

The Tribunal held that the payments towards Club House Charges, Corpus Fund, and Municipal Taxes are includible in the cost of acquisition for computing capital gains under Section 48. The reasoning was that these payments were made to the builder in relation to the identified property, supported by contemporaneous receipts and banking evidence, and their genuineness was undisputed. The Tribunal found no material to suggest they were independent personal expenditure, refundable deposits, or recurring expenses incurred after acquisition unconnected with the acquisition itself. The Club House Charges pertained to an amenity accompanying the property, the Corpus Fund was a one-time contribution connected with the residential complex, and the Municipal Taxes were paid during the construction/acquisition stage before the occupancy certificate, not representing the assessee's recurring municipal liability. The Tribunal directed the Assessing Officer to include these amounts in the cost of acquisition and recompute the capital gain, granting consequential benefits. The addition of ₹26,71,684/- was noted to be the consequential enhancement of capital gain, not the sum of the payments themselves. The Tribunal also noted an inadvertent factual reference in the DRP's directions and minor typographical variations in the assessee's submissions, clarifying that its decision was based on the amounts evidenced by contemporaneous documents. The grievance relating to demand computation was rendered consequential.

What were the facts?

The assessee, Divyakumar Bhisham Sawilani, a non-resident individual, sold a residential property in Mumbai for ₹4,41,00,000/- in Assessment Year 2022-23. He declared a long-term capital gain of ₹13,71,351/-, claiming an indexed cost of acquisition of ₹4,27,28,649/-. The Assessing Officer (AO) noted that the assessee had included payments for Club House Charges (₹3,12,552/-), Corpus Fund (₹2,20,020/-), and Municipal Taxes (₹6,21,624/-) in the cost of acquisition, which were not part of the builder's ledger. The AO excluded these amounts, leading to an enhanced capital gain of ₹40,43,035/- and an addition of ₹26,71,684/-. The Dispute Resolution Panel (DRP) upheld the AO's exclusion. The assessee appealed to the ITAT Mumbai.

What were the issues?

1. Whether, having regard to the nature and incidence of payments for Club House Charges, Corpus Fund, and Municipal Taxes, and the circumstances of their payment to the builder, these amounts can be included in the cost of acquisition of the residential property for computing capital gains under Section 48 of the Income-tax Act, 1961. Assessee's Contention: The assessee argued that these payments were collected by the builder in connection with the purchase of the flat, were one-time payments made during the acquisition process, and were supported by builder's receipts and bank statements. The Club House Charges were for an amenity attached to the property, the Corpus Fund was a one-time contribution related to the property, and the Municipal Taxes were paid during the acquisition phase before the occupancy certificate was received, thus not being recurring maintenance expenses. The assessee relied on the amendment to Section 194-IA by the Finance (No.2) Act, 2019, which expanded the definition of 'consideration for immovable property'. Revenue's Contention: The Assessing Officer and the DRP contended that 'cost of acquisition' under Section 48 is confined to the original purchase price. Ancillary payments like club charges and corpus fund do not directly affect ownership acquisition, and municipal taxes are recurring maintenance expenses. The genuineness of payments was not disputed, but their allowability as part of acquisition cost was questioned.

Which sections of the Income-tax Act were involved?

Section 48,Section 144C(13),Section 143(3),Section 194-IA

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘I’ BENCH

Before: SHRI AMIT SHUKLA & SHRI ARUN KHODPIA

For Appellant: Shri Vimal Punmiya, CA
Hearing: 04/08/2026Pronounced: 17/08/2026

PER AMIT SHUKLA (J.M): The aforesaid appeal has been filed by the assessee against the final assessment order dated 19.12.2024 passed under section 144C(13) read with section 143(3) of the Income-tax Act, 1961, in pursuance of the directions of the Dispute Resolution Panel, for the Assessment Year 2022-23. The principal grievance raised by the assessee relates to 2 IT(IT)A No. 1777/Mum/2025 Divyakumar Bhisham Sawilani exclusion, from the cost of acquisition of the residential property, of the amounts paid towards Club House Charges of ₹3,12,552/-, Corpus Fund of ₹2,20,020/- and Municipal Taxes of ₹6,21,624/-, and the consequential enhancement

The order continues below.

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