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“cost of improvement”

Capital GainsSection 55Section 55749 judgments

The decision most relied on for cost of improvement is CIT v. Kasturi Estates (P.) Ltd. (62 ITR 578), cited in 25 judgments on BharatTax.

Leading authorities on cost of improvement

CIT v. Kasturi Estates (P.) Ltd.
62 ITR 578 · 1966 · High Court
25
citing judgments

Expenditure incurred to improve property before sale, such as dividing land into plots and laying roads, does not constitute an adventure in the nature of trade if the primary purpose is to obtain a better price for the property.

Arunachalam v. CIT
227 ITR 222 · 1997 · Supreme Court
22
citing judgments

Expenditure incurred by an assessee to discharge a mortgage created by a previous owner is an allowable deduction in computing capital gains, as it represents the cost of acquisition or perfecting an imperfect title. The assessee's payment to clear the encumbrance is not deductible for capital gains computation.

Commissioner of Income-tax v. Miss Piroja C. Patel
242 ITR 582 · 2000 · High Court
12
citing judgments

Compensation paid to hutment dwellers for vacating land is an allowable expenditure in computing capital gains, as it relates to the transfer of the asset. Such payments are considered a cost of acquisition or improvement under Section 48 read with Section 55 of the Income-tax Act, 1961.

Naozar Chenoy v. CIT
234 ITR 95 · 1998 · High Court
11
citing judgments

Expenditure incurred to pay tenants to vacate premises, which are the subject of a sale transaction, is allowable as a deduction in computing capital gains. This is because the expenditure is directly connected to and necessary for effecting the transfer of the property.

Mahindra & Mahindra Ltd. v. DCIT, 313 ITR (AT) 263 (SB)
110 ITD 59 · 2008 · ITAT
10
citing judgments

The Assessing Officer cannot improve his assessment by adopting a new theory during reassessment proceedings.

Mrs. June Perrett v. Income-tax Officer
298 ITR 268 · 2008 · High Court
10
citing judgments

Payment made to secure an order of eviction and evict an unauthorized occupant can be treated as a cost of improvement.

Judgments citing cost of improvement

Anupama Sthapak, Jabalpur vs. Income Tax Officer Ward 1(3), Jabalpur

In the result, the appeal of the assessee stands partly allowed for statistical purposes

ITA 25/JAB/2024[2016-17]Status: DisposedITAT Jabalpur19 Feb 2026AY 2016-17

Bench: Shri Kul Bharat & Shri Anadee Nath Misshra

Section 143(3)Section 54Section 54F

cost of acquisition of property at Rs.2,50,90,876 against Rs. 2,62,88,389 taken by the appellant and also cost of improvement at Rs. 18,69,383 against Rs. 19,53,664 shown by the appellant without appreciating that it is settled law that fair market value

Biharilal, Hoshangabad vs. Comissioner of Income Tax (Appeals), NFAC-Delhi

Appeal is allowed for statistical purpose

ITA 278/IND/2025[2018-19]Status: DisposedITAT Indore19 Feb 2026AY 2018-19

Bench: Shri B.M. Biyani & Shri Paresh M. Joshiassessment Year:2018-19 Assessment Unit Of Income- Biharilal, Tax Department S/O Gaurishankar, 508, Ward No. 15, बनाम/ Shobhapur, Vs. Hoshangabad (Assessee/Appellant) (Revenue/Respondent) Pan: Eonpb2765E Assessee By Ms. Saniya Farhaz Memon, Ar Revenue By Shri Ashish Porwal, Sr. Dr Date Of Hearing 29.01.2026 Date Of Pronouncement 19.02.2026

Section 142(1)Section 144Section 147Section 148Section 148ASection 50C(2)

Market Value as on 01.04.2001 for the purpose of computation of long-term Capital gains. Ground7. The learned A.O. has erred in treating Cost of improvement of land to be Rs. NIL ignoring the necessary Expenditure incurred on the plots sold. Ground8. That the appellant craves leave

Meghna Organic, Valsad vs. ITO, Ward-5, Vapi

ITA 824/SRT/2025[2018-19]Status: DisposedITAT Surat17 Feb 2026AY 2018-19

Bench: Dr. B.R.R. Kumar, Vice-Ms. Suchitra Kamble

Section 147Section 148Section 151ASection 250Section 270A(8)Section 271FSection 272A(1)(d)

subject, the learned Commissioner of the Income Tax (Appeals) has erred in confirming the action of the Assessing officer in disallowance of cost of improvement of Rs.20,00,000/- 4. On the facts and in the circumstances of the case as well as the law on the subject, the learned

Musheer Ahamed, Bangalore vs. Income Tax Officer, Ward-1(2)(1), Bangalore

In the result appeal of the assessee is allowed as indicated above for statistical purposes

ITA 1794/BANG/2025[2018-19]Status: DisposedITAT Bangalore17 Feb 2026AY 2018-19

Bench: Shri Prashant Maharishi & Shri Soundararajan K.Assessment Year: 2018-19

For Appellant: Shri Pani Kumar, CAFor Respondent: Shri Subramanian, Jt.CIT (DR)(ITAT), Bengaluru
Section 143Section 144BSection 147Section 148

assessee has shown short-term capital gain of ₹ 988,040. Therefore the learned assessing officer noted that assessee has claimed cost of improvement of ₹ 4,820,000 and also claimed selling expenses of ₹ 85,000 which assessee has failed to substantiate. Accordingly, he held that assessee has failed to substantiate ... cost of improvement of ₹ 4,820,000 and selling expenses of ₹ 85,000, the claim of the assessee was rejected. Accordingly he made an addition of ₹ 4,905,000 in the assessment order passed under section 147 read with section 144B of the Act on 3 March 2023 determining

Mustafa Alihusain Sunelwala, Pune vs. ITO, Ward-14(1), Pune

In the result, the appeal of the assessee is allowed

ITA 1396/PUN/2025[2022-23]Status: DisposedITAT Pune16 Feb 2026AY 2022-23

Bench: Shri R.K. Panda & Ms. Astha Chandra

For Appellant: Smt. Deepa KhareFor Respondent: Shri Madhan Thirmanpalli
Section 142(1)Section 144Section 270(9)Section 270ASection 274Section 54F

completed the assessment u/s 144 r.w.s. 144B of the Act vide his order dated 11.03.2024 thereby disallowing : (i) Rs.7,92,500/- towards cost of improvement claimed by the assessee and (ii) Rs.25,90,875/- towards claim of deduction u/s 54F of the Act aggregating to total disallowances of Rs.33 ... appellant over the advice of tax-consultant. In this case, additions of Rs. 7,92,500/- towards disallowance of claim for cost of improvement and of Rs. 25,90,875/- for disallowance of deduction claimed u/s 54F of the Act were made. The appellant accepted both the additions

Rohit Manchand, Delhi vs. ITO Ward 5(3)(2), Gautam Budh Nagar

In the result, appeal filed by the assessee is allowed

ITA 5124/DEL/2025[2012-13]Status: DisposedITAT Delhi12 Feb 2026AY 2012-13

Bench: Shri S. Rifaur Rahman & Shri Raj Kumar Chauhan

For Appellant: Sh. Raj Kumar, CA &For Respondent: Ms. Ankush Kalra, Sr.DR
Section 139Section 142(1)Section 144Section 147Section 148Section 151Section 50cSection 54

assessee declared the sale of property in regular ITR U/s.139. (100) - In ITR U/s. 139, LTCG declared at 'Zero' after claiming indexed cost of improvement at Rs.55,26,495/- and by claiming exemption U/s.54 at Rs.2,41,005/(100) - In R/R,  A.O. has admitted that he has verified the cost ... LTCG stood calculated Nil, hence in ITR it was claimed at Rs.2,41,005/- - Now, even if we ignore the indexed cost of improvement at Rs.55,26,495/-, then, the exemption U/s.54 needs to be allowed for Rs.57,67,510/- Rs.55,26,495 Rs.2,41,005). after which, again, LTCG

Muqeem Khan, Saharanpur vs. ITO-Ward-3(3)(3), Saharanpur

Appeal is partly allowed in above terms

ITA 327/DEL/2026[2019-20]Status: DisposedITAT Delhi11 Feb 2026AY 2019-20
Section 144BSection 147Section 69A

other words. 2|Page ITA No.327/Del/ 2026 4. Learned counsel next seeks the relief of the assessee cost of improvement amounting to Rs. 6,14,985/- in computation of his capital gains. He could hardly dispute that assessee has not been seen also to plead and proved the impugned cost

Prem Parkash, New Delhi, Delhi vs. Income Tax Officer, Ward 54(1), Delhi, New Delhi

In the result, the appeal of the assessee is partly allowed as indicated above

ITA 8356/DEL/2025[2017-18]Status: DisposedITAT Delhi11 Feb 2026AY 2017-18

Bench: Shri C.N. Prasadassessment Year 2017-18 Prem Prakash Vs. Income Tax Officer A-32, 2Nd Floor, Amar Ward- 54(1) Colony, Lajpat Nagar-4, Delhi New Delhi-110024 Pan No.Agwpp9248D Appellant Respondent Appellant Sh. Akshat Jain, Ca Sh. Rajat Jain, Ca Respondent Sh. Manoj Kumar, Sr. Dr

Section 147Section 148

Ld.Commissioner of Income Tax (Appeals)/NFAC in sustaining the addition made by the AO in respect of the claim made towards the cost of improvement while computing the capital gains. 2. Brief facts of the case are that the assessee is an individual, the assessment proceedings u/s.147 ... income on 17.05.2024 declaring capital gains of Rs.1,54,497/- after claiming indexed cost of acquisition at Rs.5,08,794/- and indexed cost of improvement of Rs.77,16,709/-apart from declaring income from other sources of Rs.12,737/-. However, the AO denied 50% of indexed cost of improvement

Late Sharad Shankar Kale, Nagpur vs. ITO Ward 5(1), Nagpur

In the result, appeal of the Assessee is partly allowed as per the terms indicated above

ITA 511/NAG/2025[2014-15]Status: DisposedITAT Nagpur10 Feb 2026AY 2014-15

Bench: Dr. Manish Borad

For Appellant: Mrs. Anchal Gupta, CAFor Respondent: Shri Surjit Kumar Saha, Sr.DR
Section 143(3)Section 250

incurring such improvement cost, however considering the fact that there was a construction of triple storeyed building, assessee deserves deduction for indexed cost of improvement. 5. On the other hand, Ld. Departmental Representative (DR) supported the order of Ld. CIT(A). 6. I have heard rival contentions and perused ... both the parties. The issue is only regarding the genuineness of the claim of 4 ITA.No.511/NAG/2025 (Late Sharad Shankar Kale) indexed cost of improvement of ₹ 13,27,061/-. In the computation of income, assessee has claimed that she incurred improvement cost

Indorigin Electric Ltd, Wadala Mumbai vs. ACIT Central Circle 4 4 Mumbai, Mumbai

In the result, the appeal by the assessee is partly allowed for statistical purposes

ITA 4682/MUM/2025[2014-15]Status: DisposedITAT Mumbai10 Feb 2026AY 2014-15

Bench: Shri Vikram Singh Yadavshri Sandeep Singh Karhailm/S. Indorigin Electric Ltd. Rectifier House, 570, Naigum Cross Road, Wadala, Mumbai- 400 031. ............... Appellant Pan: Aaaci1040B V/S Acit, Central Circle-4(4), Mumbai R. No. 424, 4Th Floor, Kautilya Bhavan, ……………… Respondent C-41 To C-43, G Block, Bandra Kurla Complex, Bandra (East), Mumbai- 400 051

For Appellant: Shri Kalpesh Turalkar, AdvFor Respondent: Shri Virabhadra Mahajan, Sr. DR
Section 10(34)Section 142(1)Section 143(2)Section 143(3)Section 14ASection 250

paid as transfer charges, which is to be adjusted from the sale proceeds and does not form part of the cost of improvement. With respect to the balance amount of INR 17,95,011, it was observed that the expenses are on account of lease rate, tax paid, utilisation charges ... provisions of the section 55 of the IT Act, these expenses are not capital in nature and thus cannot form part of cost of improvement as none of these expenses are incurred for making any improvement, addition or alteration to the said land. The assessee it self submitted during assessment

Mahmadhusen Salmanji Gandhi, Jamnagar vs. Principle Commissioner of Income Tax, Jamnagar

In the result, the appeal of the assessee is dismissed

ITA 495/RJT/2025[2015-16]Status: DisposedITAT Rajkot09 Feb 2026AY 2015-16

Bench: Dr. Arjun Lal Saini & Dr. Dinesh Mohan Sinhaआयकरअपीलसं./Ita No. 495/Rjt/2025 Assessment Year: (2015-16) Mahmadhusen Salmanji Gandhi Vs. Principle Commissioner Of Income C/O, Kadarbhai Hasanbhai Gandhi, Tax Kv Road, Bedi Gate, Jamnagar Office Of The Principle Gujarat 361001 Commissioner Of Income Tax, Jamnagar, Gujarat 361008 "थायीलेखासं./जीआइआरसं./Pan/Gir No.: Aaqpg8128H (Appellant) (Respondent) Appellant By : Ms. Amoli Gusani, Ld. A.R. Respondent By : Shri Shramdeep Sinha, Ld. Cit. Dr Date Of Hearing : 19/11/2025 Date Of Pronouncement : 09/02/2026 आदेश / Order Per Dr. Dinesh Mohan Sinha, Jm: Captioned Appeal Filed By The Assessee, Pertaining To Assessment Year (Ay)-2015-16, Is Directed Against The Order Passed By The Ld. Pcit Income Tax Vide Order (U/S 263 Of The Act) Dated 04.06.2025. 2. Grounds Of Appeal Raised By The Assessee Are As Follows: “1. The Learned Pcit Has Erred In Law & In Facts By Contending & Directing The Assessing Officer To Conduct A Fresh Assessment Regarding The Brokerage Expenses To The Tune Of Rs. 1,66,121/- 2. The Learned Pcit Has Erred In Law & In Facts By Contending & Directing The Assessing Officer To Conduct A Fresh Assessment Regarding The Claim Of Indexed Cost Of Improvement To The Tune Of Rs. 35,02,298/- 3. The Learned Pcit Has Erred In Law By Invoking The Revision Of The Assessment Order Under Section 263. The Assessment Order Is Not Erroneous As Per Section 263 Of The Income Tax Act & Therefore The Mahmadhusen Salmanji Gandhi

For Appellant: Ms. Amoli Gusani, Ld. A.RFor Respondent: Shri Shramdeep Sinha, Ld. CIT. DR
Section 147Section 263

erred in law and in facts by contending and Directing the Assessing Officer to conduct a fresh assessment regarding the claim of Indexed Cost of Improvement to the tune of Rs. 35,02,298/- 3. The learned PCIT has erred in law by invoking the revision of the assessment order ... conduct a fresh assessment after making thorough inquiries and verifications regarding the brokerage expenses of Rs. 1,66,121/- and the Indexed Cost of Improvement of Rs. 35,02,298/- claimed by the assessee. The Assessing Officer shall provide adequate opportunity of being heard to the legal heir

Hyginus Joseph Dsa, Mumbai vs. Tio Ward 24(2)(2), Mumbai

In the result, the appeal of the assessee is allowed for statistical purposes

ITA 7764/MUM/2025[2017-18]Status: DisposedITAT Mumbai09 Feb 2026AY 2017-18
Section 147Section 50C

section 50C of the Act, on the premise that the assessee failed to furnish documentary evidence in respect of cost of acquisition and cost of improvement. The factual matrix reveals that the properties in question were originally agreed to be sold by the assessee's mother through agreements dated

Kuldip Kumar Goel, Delhi vs. ACIT(1)(1), Delhi

In the result, the appeal of the assessee is partly allowed in above

ITA 3285/DEL/2025[2012-13]Status: DisposedITAT Delhi06 Feb 2026AY 2012-13

Bench: Shri Raj Kumar Chauhanand

Section 143(3)Section 144Section 147Section 148Section 149(1)Section 250

completed after making addition of Rs. 44,05,518/-. The said addition was made on account of disallowance of cost of improvement claimed by the appellant. 2.1 Aggrieved by the order passed u/s 144 of the I.T. Act the appellant filed an appeal before ... circumstances of the case, the NFAC erred in upholding the assessment order, whereby a disallowance of 50% of the expenses incurred on the cost of improving the immovable property was made, and thereby an addition of Rs. 44,05,518 was made to the income of the Appellant

ACIT, New Delhi vs. Sh. Atul Bansal, New Delhi

In the result, grounds raised by the revenue are dismissed

ITA 2803/DEL/2017[2013-14]Status: DisposedITAT Delhi06 Feb 2026AY 2013-14

Bench: Shri Satbeer Singh Godara & Shri S. Rifaur Rahmanatul Bansal, Vs. Acit, Central Circle 16 Farm No. 22, The Green Rajokri Delhi. New Delhi – 110 038. (Pan: Agcpb1274F) Acit, Central Circle 16, Vs, Atul Bansal Delhi Farm No. 22, The Green Rajokri New Delhi – 110 038. (Pan: Agcpb1274F) Assessee By : None Revenue By : Sh. Jitender Singh, Cit Dr Date Of Hearing : 18.11.2025 Date Of Order : 06.02.2026 O R D E R

For Appellant: NoneFor Respondent: Sh. Jitender Singh, CIT DR
Section 143(1)Section 143(2)Section 14ASection 2(22)(e)Section 54Section 54B

cost of the asset as the said figures have been accepted as such. It is seen that the purchase price and the cost of improvement had been part of the financial statement and the same had been accepted in order passed under section 153A/143(3) for assessment year

Sh. Atul Bansal, New Delhi vs. ACIT, New Delhi

In the result, grounds raised by the revenue are dismissed

ITA 2737/DEL/2017[2013-14]Status: DisposedITAT Delhi06 Feb 2026AY 2013-14

Bench: Shri Satbeer Singh Godara & Shri S. Rifaur Rahmanatul Bansal, Vs. Acit, Central Circle 16 Farm No. 22, The Green Rajokri Delhi. New Delhi – 110 038. (Pan: Agcpb1274F) Acit, Central Circle 16, Vs, Atul Bansal Delhi Farm No. 22, The Green Rajokri New Delhi – 110 038. (Pan: Agcpb1274F) Assessee By : None Revenue By : Sh. Jitender Singh, Cit Dr Date Of Hearing : 18.11.2025 Date Of Order : 06.02.2026 O R D E R

For Appellant: NoneFor Respondent: Sh. Jitender Singh, CIT DR
Section 143(1)Section 143(2)Section 14ASection 2(22)(e)Section 54Section 54B

cost of the asset as the said figures have been accepted as such. It is seen that the purchase price and the cost of improvement had been part of the financial statement and the same had been accepted in order passed under section 153A/143(3) for assessment year

Zafar Iqbal, Siliguri vs. DCIT, Circle - 1, Siliguri

ITA 1170/KOL/2024[2016-2017]Status: DisposedITAT Kolkata05 Feb 2026AY 2016-2017

Bench: Shri Sonjoy Sarma & Shri Rakesh Mishra

Section 139(1)Section 143(2)Section 250Section 54F

paving way for easy transfer of the same was an allowable deduction either as expenditure incurred in connection with the transfer or as cost of improvement. The Ld. CIT (A) was not justified in denying the deduction on the plea that the same was not within the scope of cost ... against the assessee in respect of his sold land. The Ld. AO was of the view that the said payments did not constitute cost of improvement of the sold land and had also added back a sum of ₹1,10,10,000/- being security deposits received from tenants, advance received

ITO, Mumbai vs. Himanshu Sarda, Mumbai

ITA 5862/MUM/2025[2017-18]Status: DisposedITAT Mumbai05 Feb 2026AY 2017-18

Bench: Shri Anikesh Banerjee & Shri Makarand Vasant Mahadeokarito,Ward-42(1)(2), Mumbai Vs Himanshu Sarda Room No. 734, Kautilya 705/706, Shivalaya Residency Chs Bhawan, Bkc, Bandra (E) Ltd., Thakur Complex, 90 Feet Mumbai-400051 Road, Kandivali East, Mumbai- 400101 Pan: Flpps9753F Appellant Respondent C.O.410/Mum/2025 (Arising Out Of I.T.A. No.5862/Mum/2025 A.Y. :2017-18)

For Appellant: Shri Ajay R. Singh, Adv & Akshay Pawar, AdvFor Respondent: Shri Ritesh Misra (CIT DR)
Section 147Section 148Section 148ASection 151Section 250

reassessment was completed and the 3 ITA No.5862 & CO No.410/Mum/2025 Himanshu Sarda assessee was unable to submit any cost of acquisition or cost of improvement of the said property. So the Ld. AO adopted the entire stamp duly value amount of Rs.1,53,83,500/- as capital gain

Income Tax Officer, Ward-30(5), Delhi vs. Sanjeev Aggarwal, Delhi

The appeal of the revenue is dismissed

ITA 5555/DEL/2025[2015-16]Status: DisposedITAT Delhi05 Feb 2026AY 2015-16

Bench: Shri Satbeer Singh Godara & Shri Naveen Chandraincome Tax Officer, Vs. Sanjeev Aggarwal, Ward-30(5), E2-1410, Civic Center, Delhi New Delhi (Assessee) (Respondent) Pan: Aaepa2964M Assessee By : None Revenue By: Ms. Harpreet Kaur Hansra, Sr. Dr Date Of Hearing 05/02/2026 Date Of Pronouncement 05/02/2026

For Appellant: NoneFor Respondent: Ms. Harpreet Kaur Hansra, Sr. DR
Section 147Section 148

evidence on the basis of Rule 46A. The ld CIT(A) thereafter, considering the facts of the case, found the disallowance of the cost of improvements made by the Assessing Officer as unjustified. The CIT(A) held as under: “The assessee has furnished credible details of the cost of improvement ... develop the property into a usable commercial space for conducting business activities under the name and style of M/s Sanjeev Industrial Corp. The cost of improvements claimed by the assessee includes multiple phases of construction spread over different years, such as initial building structures, subsequent extensions, reconstruction after partial demolitions

S Rajasekaran, Chennai vs. DCIT, Ncc-7(1), Chennai

In the result, the appeal of the assessee is partly allowed for statistical purposes, in the manner indicated above

ITA 2821/CHNY/2025[2023-24]Status: DisposedITAT Chennai02 Feb 2026AY 2023-24

Bench: Shri Aby T Varkey & Shri S. R. Raghunatha

For Appellant: Shri. M. Karunakaran, AdvocateFor Respondent: Shri. Kumar Chandan, JCIT
Section 143(3)Section 37Section 40

capitalized with the cost of the asset every year and the accumulated interest included in the cost of the asset was claimed as cost of improvement while computing the capital gains when the said land was sold. 4. The appellant submits that the authorities below are not disputing the above ... interest capitalized on the loans availed for acquiring the asset has to be allowed if not as cost of acquisition but as cost of improvement as they were made subsequently after acquisition of the asset in the light of the various decision relied on by the appellant before the NFAC

Chhedi Lal, Raebareli vs. Income Tax Officer, Raebareli

In the result, the appeal of the assessee is allowed for statistical purposes

ITA 87/LKW/2025[2011-12]Status: DisposedITAT Lucknow30 Jan 2026AY 2011-12

Bench: the Assessing Officer and furnished submissions. After considering the submissions and making necessary enquiries, the Assessing Officer adopted the stamp duty valuation u/s 50C of the Income-tax Act, 1961 (“Act” for short) and assessed the total income at Rs.31,95,000/. Aggrieved by this, the assessee carried the matter before the Ld. CIT(A), who partly allowed the appeal of the assessee, thereby directed the Assessing Officer to consider the value of new residence of property at Rs.8,97,0

For Appellant: Shri A. P. Sinha, AdvocateFor Respondent: Shri Amit Kumar, Addl. CIT(DR)
Section 159Section 50C

assessment year 2011-12. The assessee has raised the following grounds of appeal: - “1. Ld. CIT(A) erred while not allowing the cost of improvement of land the initial amount was Rs.67,693.00 (F.Y. 97-98). 2. Ld. CIT(A) blatantly erred while directing to take the value of newly