Deuctibility of Cost of Furniture in Computation of Capital Gain on Property Sale

Issue which arises for our consideration is whether Rs. 12 lakhs paid by the appellant assessee to the seller at the time of purchase of the property in question must be construed as a cost of acquisition of the asset so as to be deducted from the full value of consideration received by the appellant assessee at the time when he had sold and transferred the property in question. Section 48 of the Act stipulates the manner in which the capital gain shall be calculated. We reproduce the said Section as under:

“Section 48:

The income chargeable under the head capital gain shall be computed by deducting from the full value of consideration received or accruing as a result of transfer of capital asset, the following amounts namely:-

i) expenditure incurred wholly and exclusively in connection with such transfer;

ii) the cost of acquisition of the asset and the cost of any improvement thereto.”

From the perusal of the said Section, it is clear that; (1) asset sold should be a capital asset; (2) from the sale consideration, only the cost of acquisition of the asset, cost of improvement, if any, and expenses incurred wholly and exclusively in connection with such transfers, are to be reduced. The issue would be, whether the display windows, partition of drawing room, wooden grills, wooden temples, wardrobes, cupboards, crockery, windows, fans, geysers, light fittings, rugs, furniture, fixtures, can be said to be capital asset, which were acquired by the assessee. It is an admitted position as noted by the Authorities below that the assessee had acquired the property by way of four sale deeds, each of Rs. 4.50 lakhs, the total of which, was Rs.18 lakhs. Another amount of Rs. 12 lakhs has been paid for acquisition of furniture and fixtures, which was by way of a following bill: