• Cost of acquisition for house which has been demolished and rebuild

I am co owner of house . Land cost purchased in 1976 was 523000/-
Cost of GF constructed prior to 1.4.81 rs 315262/-
Cost of FF and sf in 1994 Rs 14,19000
Building was demolished in 2014 and new building was constructed.
Some part of newly constructed builidng is sold in 2017. 
AO is considering only land cost ( indexed cost) as cost of acquisition saying that since the building is demolished old building cost is Zero.
I have considered all the above cost (indexed) as COA and paid LTCG tax .
Please advice is AO correct in rejecting the old cost as part of COA as the case is time barring . Your early advice with case law will be quite helpfull
Asked 17 days ago in Capital Gains Tax

Even if the assessing officer is not considering the improvements made before 2014 you can take an argument before the assessing officer that improvements made in 2014 should be considered. 


There is no reason to not consider improvements made Post 2014.

Lakshita Bhandari
CA, Mumbai
5475 Answers
551 Consultations

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No the contention of AO is not right. AO can't deny such cost of acquisition. 

We can assist please have a phone consultation for details discussion.

Karishma Chhajer
CA, Jodhpur
2391 Answers
22 Consultations

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- As the land and building was constructed before 01.04.2001, law says actual cost or FMV (optional) as on 01.04.2001 whichever is higher may be considered. Value as on 01.04.2001 is total value of the building, it is not only land cost. Any cost of improvement incurred before 01.04.2001 is clubbed in actual cost of the asset.

- Cost incurred in 2014 will be treated as cost of improvement and indexation will be allowed from 2014. If the old construction which was demolished is not allowed as a part of actual cost, meaning and purpose of cost of improvement will get defeated. While incurring cost of improvement, it is certain in most of the cases that old construction will be altered/modified which may result into demolition of old construction and new construction will emerge. The capital expenditure incurred on old construction was within the four corners of the definition of the cost of improvement.


Vivek Kumar Arora
CA, Delhi
4079 Answers
346 Consultations

5.0 on 5.0

Section 55(2)(b) clearly mentioned the definition of cost of acquisition for capital assets acquired before 01.04.2001. Here is an extract of law for your reference.

"where the capital asset became the property of the assessee before the 1st day of April, 2001, means the cost of acquisition of the asset to the assessee or the fair market value of the asset on the 1st day of April, 2001, at the option of the assessee"


For detailed discussion, you may contact telephonically.

Vivek Kumar Arora
CA, Delhi
4079 Answers
346 Consultations

5.0 on 5.0

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