Cost of improvement to property

hi my dad purchased piece of land with 950 sq ft house for 100000 in 1980
after his demise my mother gave her 50 % share through settlement deed in 2015
then I sold the property for 1.5cr
after my father's death in 1991 my mother constructed first floor and did so many renovations like compound wall, bathroom fitting etc in these 20 years
but she doesn't have any paper copy to prove it
not even bank transaction
all I have is
 1) property tax paid separately for ground floor and first floor
 2) electricity bill
 3) buyer from me registered property deed showing ground and first floor building estimation for 40 laks 
all these documents are enough or do  I need some other proof
Asked 10 months ago in Capital Gains Tax from Chennai, Tamil Nadu
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Shyam Sunder Modani
CA, Hyderabad
955 Answers
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Hello! It seems you have concerns regarding allowability of expenses incurred as cost of improvement given the documentary evidence in respect of expenses incurred are not available. In this scenario, you can get valuation report from the Engineer/Approved valuer for estimated cost of construction of first floor during the year 1991. This is very subjective and depend on case to case basis and assessing officer may or may not fully allow your claim or may refer to the valuation officer for determining the cost. Further, you can not claim property tax, electricity expenses as cost of improvement. 

Regards,
CA Ankit Adhyaru
Mo. +91 9898789180  
Ankit Adhyaru
CA, Ahmedabad
19 Answers
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It will be difficult to prove the cost of improvement, the documents you have will help you to estimate the cost of improvement. You may get a valuation done by a qualified valuer under the Income Tax and use it for the purpose of calculating capital gains.

As it is long term capital gain, you can claim exemption u/s 54F by investing the sale proceeds in a new residential house and also in capital gains bonds upto Rs. 50 Lakhs. If this is possible, whatever be the differences you may have with the Income Tax Dept.  in estimating the cost of improvement  has no relevance as the entire sale proceeds are exempt because of your investment in capital gains bonds and new residential house.
B Vijaya Kumar
CA, Hyderabad
290 Answers
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Dear Sir,

The documents mentioned by you are sufficient to prove or justify your Cost of Acquisition. It is preferred if you get a valuation done from a Certified Valuer under the Income Tax, which can be used to justify your claim.


Hope this clarifies your query.

Please feel free for any further clarifications.

Thanking You.

Regards,
CA Rohit R Sharma
BCOM, CA, LLB - GEN, CERT. FAFP, CERT FAFD.
Rohit R Sharma
CA, Mumbai
719 Answers
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Obtain a Detailed Estimate/Valuation Report from any Income Tax Approved Valuer whereby the detail of construction and improvement/s will be certified by the expert.
Anuj Agarwal
CA, Aligarh
34 Answers
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Dear Sir,

You need a civil engineer a certificate stating the cost incurred on the house at different interval and based on the same you need to establish the cost incurred for construction.

And based on settlement deed you need to provide for bifurcation of total cost incurred. and you can determined the working of total cost of the property.
Vishrut Rajesh Shah
CA, Ahmedabad
194 Answers
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