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2015 (12) TMI 108 - AT - Income TaxComputation of capital gains - Disallowance of cost of improvement - development of the property under joint development agreement (JDA) and subsequent cancellation as well as sale of the property - Held that:- One of the expenditure has already been allowed by the AO, therefore, we are of the view that the other than the interest expenditure no other expenditure can be allowed either as cost of the acquisition or cost of improvement of the land as per the provision of sec. 48 of the Act. As regards interest expenditure, the same is allowable as cost of acquisition if paid on the amount used for acquisition of the land in question. Further the interest paid for the period prior to the joint development agreement would be allowable as cost of the acquisition. Accordingly, the AO is directed to verify and determine the interest paid on the borrowed funds used for acquisition of the land in question up to the date of Development agreement and allowed the same as cost of acquisition while computing the capital gain on the sale of land. - Decided in favour of assessee in part. Disallowance of the indexed cost of expenses - CIT(A) has confirmed the action of the AO by holding that the assessee has failed to establish that the expenditure was incurred on land and that it has resulted in any improvement of the property - Held that:- The entire expenditure is claimed to have been incurred in cash. However, the assessee has not produced any bills or details of work as well as parties to whom the payment was made. What was produced by the assessee were the self made vouchers without any confirmation from the other party. It is pertinent to note that the assessee companies are in the business of development of the properties and the joint development agreement were entered into between the parties in connection with their business activities. The assessee were to get 13% of the developed property and the income from the sale the developed property would be the business income of the assessee. Therefore, any activity under the Joint Development Agreement was in the nature of business activity of the assessee. The expenditure incurred in pursuant to or as an obligation under the Joint Development Agreement can be claimed as business expenditure despite the fact that the said Joint Development project could not materialize. Therefore, the expenditure incurred subsequent to the Joint Development Agreement cannot be treated as the expenditure incurred for improvement of the capital asset in question. Accordingly, in the facts and circumstances of the case, we do not find any error or legality in the orders of the authorities below to qua this issue. - Decided against assessee.
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