Consumable items on account of furnishing sofa, microwave, etc cannot be considered as cost of improvement for computation of capital gain: ITAT Mumbai 

 

Meeta Hasmukh Gandhi Vs ITO (ITAT Mumbai (I.T.A. No. 5966/Mum/2019)

 

Facts:

1. The taxpayer had treated expenses such as for wallpaper and labour, furniture, crockery and even kitchen appliances such as chimney, microwave and coffee maker as the “cost of improvement”. Even the purchase price of a laundry basket and a shoe rack cabinet was treated as a cost of improvement for the purpose of calculating the Long Term Capital Gains on the sale of a house property.

 

2. As per Sec 55 of the IT Act, cost of improvement means all expenditure of a capital nature incurred in making any additions or alterations to the capital asset. Thus expenses which are not capital in nature cannot be included in the cost of improvement.

 

ITAT Mumbai held as below:

1. The above  items claimed as incurred by the appellant are not capital assets within the meaning of ‘asset’ spelt out in Section 2(14) of the Income Tax Act, 1961.

 

2. The above items are consumable items on account of furnishing sofa, microwave, etc. The authorities are correct that these items cannot be considered as cost of improvement for computation of capital gain.