Vinodbhai Chhaganbhai Tamboli Bought a house in A.Y 2015-16. Then He spent Rs 86 lakh on reconstruction On that particular house.
Can that also count for tax exemption?
An assessee sold a plot and invested the capital gains in a residential house.
He purchased the house for around Rs 49.5 lakh.
But after purchase, he spent another Rs 86 lakh on reconstruction and other construction work to make the property fit for residence.
The Assessing Officer allowed the exemption only on the purchase related cost and rejected the reconstruction expenditure.
The CIT(A) agreed.
The matter reached the Ahmedabad ITAT.
The Tribunal took a different view.
It held that the “cost of the new asset” is not necessarily limited to the purchase price.
Genuine construction, reconstruction, alterations or improvements can also form part of the qualifying investment, provided the statutory conditions are satisfied.
The Tribunal therefore allowed the full exemption claimed by the assessee.
Buying the house may be the first step. But the cost of making it a qualifying residential asset can matter too.