RAJESH VRAJLAL DHANKI ,MUMBAI V. ASSISTANT COMMISSIONER OF INCOME TAX -CENTRAL CIRCLE 33(3), MUMBAI

ITA 3565/MUM/2024

AI Insights

The case involves Rajesh Vrajlal Dhanki, the appellant, contesting the disallowance of certain costs incurred for improvements to a flat he purchased and later sold. The improvements were made to make the flat habitable and included various civil works, fixtures, and fittings. The Assessing Officer (AO) initially disallowed Rs. 19,00,626 from the total cost of acquisition, which the appellant contested. The ITAT examined whether these costs were integral to the flat as a capital asset or if they should be treated as personal expenses, which are not deductible under the Income Tax Act. The Tribunal's decision partly favored the appellant by allowing some of the disputed costs.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 713064 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-07-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Assessment Year: 2014-2015
• Other Referred Cases: Pr. Commissioner of Income Tax-4 v. Kamal Jestaram Kapadia, Rajat B Mehta vs ITO
• Laws Referred To: Income Tax Act
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ANNAVARAN KOSURI
• Assessee Lawyers: TEJVEER SINGH
• Keywords: Capital asset; Cost of acquisition
• Section: 2(14)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, MUMBAI BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND MS. PADMAVATHY S, ACCOUNTANT MEMBER ITA No. 3565/MUM/2024 (AY: 2014-15) (Physical hearing) Rajesh Vrajlal Dhanki 122, 1st Floor, Commerce House, Dr. V. B. Gandhi Road Fort, Kala Ghoda, Mumbai-400001. [PAN: AAAPD8581D] Vs ACIT, Central Circle –33(3), 607, C-12,Prathyaksha Kar Bhawan, BKC, Bandra(E), Mumbai-51 Appellant / Assessee Respondent / Revenue Assessee by Sh. Tejveer Singh, Advocate Revenue by Sh. Annavaran Kosuri, Sr. DR Date of hearing 09.07.2025 Date of pronouncement 28.07.2025 Order under section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER; 1. 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. 2. 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. Printed from counselvise.com ITA No. 3565/Mum/2024 Rajesh Vrajlal Dhanki 2 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 Printed from counselvise.com ITA No. 3565/Mum/2024 Rajesh Vrajlal Dhanki 3 Online Bom 18563 and the decision of Ahmedabad Tribunal in Rajat B Mehta vs ITO in ITA No. 19/Ahd/2016 dated 09.02.2018. 3. 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. 4. 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 C.Tribhovandas&C o. Ivory Tiles(Kitchen) 25750 Deepam Electricals Wirings 12000 East West Paints Wall Paints 100000 Printed from counselvise.com ITA No. 3565/Mum/2024 Rajesh Vrajlal Dhanki 4 Services Gayatri Glass Mirrors and Corner pieces 17667 Green Hardware Hardware Fittings and Adhesives 65000 Gulabchand R. Bharadwaj False ceiling and POP 95000 Harish Kapurai Curtains 17500 Kapsons Ceramics Indus Mirror Polished Floor Tiles 373339 Karuna Kanthara Interior Designing Fees 50000 Murtuza Paints & Welding Centre Cement Primers, Wood Polishings 125050 Omkar Lights Tube lights and Bulbs 18595 Papu Kumar Vishwakarma Labour Charges and Carpentry Charges 100000 Paradise Ceramics Tiles and Fittings 34350 Prince Marble White Marble for Mandir 31000 PRINCE PLYWOOD Plywood for Interior 162438 Purshottam De'cor Mason work charges 65000 Purshottam Decorators Mandir De'cor Marble 180000 Rajeshwari Sanitation Sanitaryware 35400 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 5. 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. Printed from counselvise.com ITA No. 3565/Mum/2024 Rajesh Vrajlal Dhanki 5 17,95,864/- is allowed as a part of cost of improvement. In the result, grounds of appeal of assessee are partly allowed. 6. In the result, the appeal of the assessee is partly allowed. Order was pronounced in the open Court on 28/07/2025 as per Rule 34 of Income Tax (Appellate Tribunal) Rules. Sd/- PADMAVATHY S ACCOUNTANT MEMBER Sd/- PAWAN SINGH JUDICIAL MEMBER MUMBAI, Dated: 28/07/2025 Biswajit Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The PCIT / CIT (Judicial); (4) The DR, ITAT, Mumbai; and (5) Guard file. By Order Assistant Registrar ITAT, Mumbai Printed from counselvise.com "