Shivani Bhasin Sachdeva Vs Assessment Unit (ITAT Mumbai)
The Income Tax Appellate Tribunal (ITAT), Mumbai, has ruled in favor of the assessee, Shivani Bhasin Sachdeva, allowing expenses incurred on interior fit-outs before the formal possession of a property to be considered as “cost of improvement” for calculating capital gains upon its sale. This decision over-turns the orders of the Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) [CIT(A)], who had disallowed the assessee’s claim. The AO’s primary contention was that since the property was purchased in December 2017, expenses incurred based on an agreement dated May 2010, prior to ownership, could not be treated as improvement costs. The AO also noted that the payment for these improvements was based on an unregistered agreement, further questioning its validity. The CIT(A) up-held the AO’s view, leading to the assessee’s appeal before the ITAT.
The assessee’s counsel argued that the agreement with DLF Hotels and Apartment Pvt. Ltd. in May 2010 was for civil and electrical work as the flat was bought as an unfinished unit (“Khoka” flat). Payments were made according to this agreement, and the fit-out work was completed after receiving the occu-pancy certificate in March 2014, coinciding with the letter of possession. Subsequently, the flat was leased out in June 2014 and later sold in November 2020. The counsel emphasized that the AO’s as-sumption that improvement costs could not be incurred before ownership was factually incorrect in this scenario. The ITAT, after reviewing the agreement details, including clauses outlining the fit-out work’s scope (marble flooring, wooden flooring, walling, tiling, false ceiling, doors, wardrobes, kitchen, electri-cal works, etc.) and noting that the payments were undisputed, sided with the assessee.
