“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

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

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

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

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

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

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

Ghanshyam Lal, Bilaspur vs. Pr. Commissioner of Income Tax, Raipur-1, Raipur

In the result, appeal of the assessee is dismissed

ITA 241/RPR/2025[2021-22]Status: HeardITAT Raipur14 Nov 2025AY 2021-22

Bench: Shri R.K Panda & Shri Partha Sarathi Chaudhuryआयकर अपील सं. / Ita No.241/Rpr/2025 "नधा"रण वष" / Assessment Year : 2021-22 Ghanshyam Lal Ward No.06, Chhatauna Bilaspur (C.G.)-495 222 Pan: Ajupl0084A ........अपीलाथ" / Appellant बनाम / V/S. The Pr. Commissioner Of Income Tax, Raipur-1 (C.G.)

For Appellant: Shri Yogesh Sethia, CAFor Respondent: Ms. Manisha Kinnu, CIT-DR

Section 10Section 2(14)Section 2(14)(iii)Section 234ASection 263Section 405(1)Section 68

Apex Court found that the A.O’s original assessment order accepting the substantial deduction as “cost of improvement” without proper application of the relevant legal 8 Ghanshyam Lal Vs. Pr. CIT, Raipur-1 provision was both erroneous and prejudicial to the interest of the revenue. In the aforesaid judgment

Venkataswamy Yoshoda, Bangalore vs. Income Tax Officer, Ward-4(1)(3), Bangalore

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

ITA 1484/BANG/2025[2019-2020]Status: DisposedITAT Bangalore14 Nov 2025AY 2019-2020

Bench: Shri Laxmi Prasad Sahu & Shri Soundararajan K.Assessment Year : 2019-20

For Appellant: Shri Shivakumar, CAFor Respondent: Shri Subramanian .S, JCIT-DR

Section 148Section 148ASection 69A

capital gains and other incomes. The assessee also filed the computation for arriving the capital gains but the AO had not accepted the cost of improvement of Rs. 33,62,012/-. The assessment has been completed by adding the cost of improvement and also ... time deposit. The assessee had challenged the said order before the Ld.CIT(A) and disputed the addition made by disallowing the cost of improvement and the addition made u/s. 69A of the Act. The assessee had also raised several legal grounds in respect of the jurisdiction of the notice issued

Shalaka Chandrahas Chavan, Mumbai vs. Income Tax Officer, Ward-34(1)(1), Mumbai

In the result, the appeal of the assessee stands allowed

ITA 4627/MUM/2024[2015-16]Status: DisposedITAT Mumbai14 Nov 2025AY 2015-16

Bench: SHRI AMIT SHUKLA (Judicial Member), SHRI GIRISH AGRAWAL (Accountant Member)

Section 139Section 144Section 147Section 148Section 148ASection 69A

value of Rs.87,29,002, the purchase price of Rs.31,10,000, stamp duty of Rs.3,35,600, registration charges of Rs.30,000, cost of improvement aggregating Rs.12,00,000, and brokerage on sale of Rs.1,50,000. These aspects are not in dispute before us. 5. What survives

Anand Kumar Bansal, Bilaspur vs. Principal Commissioner of Income Tax, Raipur -1, Raipur

In the result, appeal of the assessee is dismissed

ITA 133/RPR/2025[2013-14]Status: HeardITAT Raipur13 Nov 2025AY 2013-14

Bench: Shri Partha Sarathi Chaudhury & Shri Arun Khodpiaआयकर अपील सं. / Ita No.133/Rpr/2025 "नधा"रण वष" / Assessment Year : 2013-14 Anand Kumar Bansal Madhya Nagari Chowk, Bilaspur (C.G.)-495 001 Pan: Ahnpb0374N

For Appellant: NoneFor Respondent: Ms. Manisha Kinnu, CIT-DR

Section 147Section 263

Apex Court found that the A.O’s original assessment order accepting the substantial deduction as “cost of improvement” without proper application of the relevant legal provision was both erroneous and prejudicial to the interest of the revenue. In the aforesaid judgment, on perusal of the assessment order and relying

Janarthanan Gajalakshmi, Salem vs. DCIT, Circle-1(1), Salem

ITA 1968/CHNY/2025[2016-17]Status: DisposedITAT Chennai12 Nov 2025AY 2016-17

Bench: Shri S.S. Viswanethra Ravi & Shri Amitabh Shuklaआयकर अपील सं./I.T.A. No.1968/Chny/2025 िनधा"रण वष"/Assessment Year: 2016-17 Janarthanan Gajalakshmi, Vs. The Deputy Commissioner Of 3-16-B, Bharathi Nagar, Vellakalpatty, Income Tax, Salem 636 014. Circle 1(1), [Pan:Bojpg0239M] Salem. (अपीलाथ"/Appellant) (""थ"/Respondent) अपीलाथ" की ओर से / Appellant By : Shri S. Sridhar, Advocate (Erode) ""थ" की ओर से/Respondent By : Ms. Samatha M. Mullamudi, Jcit सुनवाई की तारीख/ Date Of Hearing : 08.10.2025 घोषणा की तारीख /Date Of Pronouncement : 12.11.2025 आदेश /O R D E R Per S.S. Viswanethra Ravi: This Appeal Filed By The Assessee Is Directed Against The Order Dated 19.06.2025 Passed By The Ld. Commissioner Of Income Tax (Appeals), National Faceless Appeal Centre [Nfac], Delhi For The Assessment Year 2016-17. 2. Ground Nos. 1 To 3 Raised By The Assessee Is General In Nature & Requires No Adjudication.

For Appellant: Shri S. Sridhar, Advocate (Erode)For Respondent: Ms. Samatha M. Mullamudi, JCIT

Section 131Section 65B

making the addition on account of development expenses. 4. We note that the assessee claimed expenditure of ₹.69,82,270/- on account of cost of improvement. The ld. AR contended that the assessee incurred such expenditure for construction of compound wall of length 638 feet, fixing of gate, filling ... order and the submission of the appellant. In this case, the AO has worked meticulously in making additions of Rs.69,82,270/- towards cost of improvement of the property and Rs.2,17,530/-towards brokerage payment. He has proceeded scientifically by making use of modern technology in the form

Coffeeday Trading Limited, Bangalore vs. DCIT, Circle-2(2)(1), Bangalore

In the result, the Assessee’s appeal is allowed for statistical purposes in the aforesaid terms

ITA 1172/BANG/2025[2020-21]Status: DisposedITAT Bangalore12 Nov 2025AY 2020-21

Bench: Shri Narender Kumar Choudhry & Shri Waseem Ahmedassessment Year: 2020-21

For Appellant: Ms. Mega , Ld. CA/ARFor Respondent: Shri Balusamy N, Ld. JCIT D.R

Section 143(2)Section 250

Trading Ltd. Vs DCIT should not be disallowed, as these are not incurred wholly and exclusively as cost of acquisition and not the cost of improvement for calculating capital gain. 6. The Assessee furnished its reply vide letter dated 7th Sep, 2020 stating that it held huge volume of shares