Yerragudi Venkata Siva Reddy Vs ACIT (ITAT Hyderabad)
Indexed Cost of Demolished Structure – Capital Gain Issue Remanded for Verification of Demolition Expenses U/s 48 – ITAT Hyderabad
The assessee sold land for ₹2 crore after demolishing an existing cement shed at the request of the buyer and claimed indexed cost of demolition amounting to ₹11.24 lakh while computing LTCG. The AO disallowed the claim pursuant to revision u/s 263, and CIT(A) confirmed the disallowance holding that only vacant land was sold and no proof of demolition expenditure or scrap income was furnished.
ITAT observed that CIT(A) rejected the claim mainly on technical reasoning without examining whether demolition was actually undertaken as part of the transfer and whether expenditure was incurred to enhance sale value. The Tribunal held that if demolition was carried out to facilitate sale or at buyer’s insistence, such expenditure could qualify either as cost of improvement or transfer-related expenditure u/s 48. Since factual verification regarding existence of structure and actual expenses was lacking, the matter was restored to the AO for de-novo adjudication with direction to allow deduction based on documentary evidence. Appeal allowed for statistical purposes.
FULL TEXT OF THE ORDER OF ITAT HYDERABAD
This appeal by the Assessee is directed against the Order dated 10.06.2025 of the learned CIT(A)-National Faceless Appeal Centre [in short “NFAC], Delhi, for the assessment year 2017-2018.
