Capital Gain Computation: Renovation expenses not allowed, Brokerage deduction restricted to 2%

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Capital Gain Computation: Renovation expenses not allowed, Brokerage deduction restricted to 2%

There were 3 issues involved in the case of
SMT. RUKMANI DEVI GANWANI vs. INCOME TAX OFFICER
(2019) 33 NYPTTJ 185 (Jp)
as under:
1. Whether DVO Valuation to be adopted or registered valuers valuation can be adopted?
2. Whether renovation expenses onnshop is allowable as deduction?
3. Whether entire brokerage paid against sale of shop is eligible for deduction?
The same is summarised in Short for the benefit of readers of www.theTAXtalk.com.
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Case in Short:
1.  Capital gains—Computation
—Fair market value under s. 50C—Assessees were joint owners of a property which was sold by them
—They declared the sale consideration of Rs. 13,00,000 for each ½ share though the stamp duty valuation of the property is Rs. 15,14,934
—AO after getting the fair market value determined by the DVO, adopted the full value consideration as per the stamp duty valuation
—DVO determined the fair market value of the property at Rs. 15,33,800 whereas the registered valuer determined the fair market value of the property at Rs. 13,22,227 for each ½ share of the assessees
—Thus, the determination of fair market value is subjective to the individual decision
—Therefore, average of two fair market value determined one by the DVO and another by the registered valuer can be adopted as fair market value under s. 50C which comes to Rs. 14,28,013
—Accordingly, the AO is directed to adopt fair market value of the ½ share of the property at 14,28,013
2. Capital gains—Deduction under s. 48
—Cost of renovation and brokerage charges
—Assessees were joint owners of a property which was sold by them
—They have claimed expenditure towards the renovation work carried out in the year 2002
—Thus, it is clear that this expenditure was incurred by the assessee just after purchasing the shop in question and thereafter the assessees have used this shop for their own business purpose
—Once the shop was used after the renovation for business purpose and the nature of expenditure is not any addition to the shop but an ordinary and repair work, the current repair charges cannot be allowed as cost of acquisition
3. Brokerage expenses:
 As regards the brokerage charges of Rs. 81,000, the same are very high in comparison to the prevailing rate of brokerage in the real estate transaction
—Having regard to the facts and circumstances of the case, 2 per cent of the sale consideration declared in the sale deed is allowed as brokerage charges which comes to Rs. 26,000 each for both the assessee

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