Loading judgment…
Facts
The assessee purchased a raw flat and incurred expenses for making it habitable, including civil work, painting, fixtures, and fittings. The Assessing Officer (AO) disallowed a portion of these expenses as cost of improvement, considering some items as personal assets. The assessee contended that these expenses were integral to making the flat habitable and should be included in the cost of the asset.
Held
The Tribunal held that items such as mirrors, curtains, tube lights, bulbs, and furniture cannot be considered integral or inseparable parts of the asset. However, other items were considered part of permanent fixtures necessary for making the raw house habitable. A portion of the disallowed amount was allowed as cost of improvement.
Key Issues
Whether expenses incurred on making a raw flat habitable, including fixtures and fittings, qualify as cost of improvement or part of the asset's cost. Determination of which items constitute integral parts of the asset versus personal or separable items.
Sections Cited
2(14), 254(1)
AI-generated summary — verify with the full judgment below
PER PAWAN SINGH, JUDICIAL MEMBER;
This appeal by assessee is directed against the order of Ld. CIT(A)/NFAC dated 31.05.2025 for assessment year (AY) 2014-15. The assessee has raised following grounds of appeal:
“1. That the Ld. A.O and Ld. CIT (Appeals) has erred in both facts and law while passing the order.
That the Ld. A.O. and CIT (A) had erred in not passing a speaking order.
3. That the Ld. A.O and Ld. CIT (A) has erred in not considering the Bombay HC judgement in Pr. Commissioner of Income Tax-4 v. Kamal Jestaram Kapadia, allowing the cost of improvement incurred by assesse for making the flat habitable as similar to our case.
4. That the Ld. A.O and Ld. CIT (Appeals) has erred in not considering the cost of furniture and fixture as cost of Improvement of the flat wherein the flat was in raw state when delivered by the new builder to the assessee.
5. That the Id. A.O and Ld. CIT (Appeals) has erred in not excluding the furniture and fixture value from sales consideration while they disallowed the same as cost of improvement.” 2. Rival submissions of both the parties have been heard and record perused.
The learned Advocate/ Authorised Representative (ld. AR) of the assessee submits that a very short dispute is involved in the present appeal. The assessing officer while passing the assessment order has not accepted certain part of cost of improvement being part of total cost of asset. The assessing officer disallowed Rs. 19,00,626/-, out of total cost of acquisition, details of which are recorded in para 8 of the assessment. Before assessing officer, the assessee furnished complete details and bifurcation of item wise cost along with relevant evidence. The assessee purchased a raw flat from Poonam Realtors. To make the flat habitable, the assessee spent / incurred various expenses which are inseparable and integral part of flat/ asset.
During the course of hearing, the ld. AR of the assessee furnished item wise details and cost of such items and would submit that such cost was incurred on civil work, painting, various fixtures and fittings. Such expenses were incurred before taking possession and to make the flat as habitable. The assessee sold the flat / asset. The assessing officer accepted other component of cost of improvement except of Rs. 19,00,626/-. The assessee sold the flat along with all fixtures and fittings being integral part of the asset and it should be included in the cost of asset / flat. To support his submission, the ld. AR of the assessee relied upon the decision of Hon’ble Jurisdictional High Court in PCIT vs Kamal Jestaram Kapadia (2018) SCC Online Bom 18563 and the decision of Ahmedabad Tribunal in Rajat B Mehta dated 09.02.2018.
On the other hand, learned Senior Departmental Representative (ld. Sr. DR) for the revenue supported the order of lower authorities. The ld. Sr. DR for the revenue submits that as per the definition of capital asset under section 2(14) of the Income Tax Act, furniture and personal assets are excluded from the definition. There are various items in the list provided by ld. AR of the assessee which cannot be considered as a part of capita asset like tube lights and bulbs, furniture, wall paintings and mandir. There is no evidence of all these items of extra work were part of subsequent sale deed executed by assessee. The ld Sr DR for the revenue prayed for dismissal of the appeal.
We have considered the rival submissions of both the parties and have gone through the orders of lower authorities carefully. We have also deliberated on various case laws relied by ld. AR of the assessee. We find that except this amount of Rs. 19.006 Lacs, the assessing officer has not disputed other cost of improvement. Before us, the ld. AR of the assessee furnished the details of various items which were disputed by lower authorities. All such details were also furnished during assessment proceedings. For appreciation of facts, the details are extracted / scanned below:
Contractor/ Vendor Work Debit Amount. Rs.000/ C. Bhogilal & Co. General Items- Ivory Borders 3500 A.R. Interiors False Ceiling 35800 Ceramic Corner Tiles, Sanitaryware 102712 Ivory Tiles(Kitchen) 25750 C.Tribhovandas&C o. Deepam Electricals Wirings 12000 Wall Paints 100000 East West Paints
Services Gayatri Glass Mirrors and Corner pieces 17667 Green Hardware Hardware Fittings and Adhesives 65000 Gulabchand R. False ceiling and POP 95000 Bharadwaj Harish Kapurai Curtains 17500 Mirror Polished Floor Tiles 373339 Kapsons Ceramics Indus Karuna Kanthara Interior Designing Fees 50000 Cement Primers, Wood Polishings 125050 Murtuza Paints & Welding Centre Omkar Lights Tube lights and Bulbs 18595 100000 Papu Kumar Labour Charges and Carpentry Vishwakarma Charges Paradise Ceramics Tiles and Fittings 34350 Prince Marble White Marble for Mandir 31000 Plywood for Interior 162438 PRINCE PLYWOOD Purshottam De'cor Mason work charges 65000 Mandir De'cor Marble 180000 Purshottam Decorators Sanitaryware 35400 Rajeshwari Sanitation Rekha Electricals Wirings for the Flat 66800 Sai Plywood Commercial Plywood 53025 Samir Ceramics Bathroom Tiles and Ceramics 15000 Shivam Electricals Wirings 11000 Shree Shivam Electrical Switches and Wirings 3500 Swastik Ceramics Basins 1700 Nita Singh Consultancy 7500 Wicker World Furniture 51000 Woodland Traders Timber for Furniture 21000 Grand Total 19,00,626
On careful perusal of various items, we find that items like mirrors and corner pieces of Rs. 17,667/-, curtains of Rs. 17,500/, tube lights and bulbs of Rs. 18,595/- and furniture of Rs. 51,000/- cannot be considered / treated as integral or inseparable part of asset, therefore, the disallowance to that extent is confirmed. We find that rest of the items are part of permanent fixtures which necessary for making the raw house as habitable. The aggregate cost of such items is Rs. 1,04,762/-. Thus, out of total disallowance of Rs. 1,04,762/- are allowed and remaining of additions of Rs. 17,95,864/- is allowed as a part of cost of improvement. In the result, grounds of appeal of assessee are partly allowed.
In the result, the appeal of the assessee is partly allowed.