On October 31, 2025, the Income Tax Appellate Tribunal (ITAT) Bangalore supplied relief to Mr. Israni, a senior, by getting rid of the disallowance of the acuisition expense for a home residential or commercial property in Bengaluru that he collectively offered with his spouse for Rs 8 crore. Out of this Rs 8 crore, he is entitled to Rs 4 crore, as his better half had a 50% share in this home.
To inform you in a short about how this case started, it began when Mr. Israni offered a home residential or commercial property situated in Bangalore for Rs 4 crore (4,02,00,000) (50% of Rs 8 crore or 8,04,00,000). He submitted his tax return (ITR) for AY 2022-23 on June 16, 2022 reporting an overall earnings of Rs 35 lakh (35,67,355). Quickly after, his case was selected for analysis under CASS, leading to issuance of tax notifications under Sections 143( 2) and 142( 1 ).
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Chartered Accountant (Dr.) Suresh Surana stated to ET Wealth Online: “In the given case (ITA Nos.607 & 608/Bang/2025), the taxpayer, a senior-citizen non-resident, had jointly sold a residential property (held jointly with his wife) and declared capital gains after claiming certain builder-related expenses as cost of acquisition, and certain home-related improvements as cost of improvement. The Assessing Officer (AO) disallowed these claims primarily on the grounds that the supporting documents appeared “prefinal,” lacked cheque numbers or bank proofs, and contained approximate figures. The Dispute Resolution Panel (DRP) upheld the AO’s view.”
According to Surana, the taxpayer appealed before the Bangalore ITAT and provided in-depth composed submissions, consisting of contractor declarations, invoices, modified charge memos and the ownership certificate, all released by the contractor M/s Akash Infotech and Infrastructure. He likewise discussed that bank declarations might not be produced since the pertinent checking account had actually been closed more than 10 years back. The taxpayer furthermore showed that a lot of the enhancement expenditures were ingrained components important to making your home habitable.
Surana states that the ITAT accepted the taxpayer’s accurate description and kept in mind that both the AO and DRP had actually stopped working to value that the whole quantity of Rs. 22.70 lakh (taxpayer’s share Rs. 11.35 lakh) represented real payments made to the home builder for civil work, pipes and electrical setups. These payments were supported by the contractor’s own files, consisting of invoices and the belongings certificate which would just have actually been provided after complete settlement of charges.
According to Surana, the ITAT for that reason held that the claim of Rs 11,35,023 as expense of acquisition stood and allowed. Relating to the expense of enhancement, the Tribunal thoroughly evaluated the list of products and observed that numerous expenditures were on long-term components and ingrained structures forming part of the residential or commercial property. It accepted the taxpayer’s voluntary deal to deal with Rs 5.49 lakh as “individual impacts” and enabled the staying Rs. 20.23 lakh as genuine expense of enhancement, stressing that these expenses were essential to make your home habitable and had actually ended up being important to the structure itself.
Surana states: “Thus, the taxpayer won on the two major issues because he successfully demonstrated with credible builder-issued documentation and reasonable explanations that the expenses were genuine, capital in nature, directly connected to the acquisition and improvement of the property, and therefore allowable while computing capital gains. The Tribunal found no infirmity in these claims and viewed the AO’s disallowance as unjustified. Only the claim relating to travel and courier expenses was rejected, as it lacked nexus with the transfer. As such, the appeal was partly allowed in favour of the taxpayer.”
Findings of the earnings tax officer
This home (plot) offered by Mr. Israni is positioned in Adarsh Palm Retreat, Bengaluru and it was acquired collectively with his partner Ms. Israni in 2005 when it remained in a non-furnished/ worn out/ livable state. Mr. Israni declared that not long after purchasing the plot, he and his better half sustained capital investment on building and construction to make it habitable which therefore increased the worth of the home.
The tax officer had his objections. He observed that Mr. Israni had actually declared an expenditure of Rs 25 lakh (25,72,807) for individual products like roofing system leading solar plant, air conditioning unit, wall speakers, and a microwave, which had actually declared as enhancement expense. Hence the tax officer chose to prohibit this quantity as enhancement expense when computing the capital gains earnings for this home sale deal, because it was for individual impact.
Even more, the tax officer discovered that Mr. Israni declared Rs 5 lakh (4,99,000) for travel and carrier costs, identifying it as sale expenditures for capital gain computation. The Income Tax Act, 1961 does not enable travel expense to be declared as sale costs, observed the earnings tax officer. The tax officer likewise stated that Mr. Israni could not show that the travel was exclusively for offering the residential or commercial property. He stopped working to supply any supporting file to back up his claim for the Rs 5 lakh (4,99,000) in travel and carrier costs, leading to it being prohibited.
The tax officer observed that Mr. Israni while calculating the expense of acquisition had actually declared Rs 11 lakh (11,35,023) as “other charges” sustained on June 25, 2005. He neither produced any pertinent bank declarations nor any bills/vouchers and so on to validate the reliability of these expenditures.
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According to the tax officer’s observation the break-down of estimations offered by Mr. Israni simply offered an approximate cost and not the real last expenses. The tax officer stated that the estimations revealed it was simply a “prefinal expense”. Furthermore, there were no cheque numbers, costs numbers, or payment dates noted for any of the payments leading to disallowance of the Rs 11 lakh (11,35,023) declared as acquisition expenses.
The tax officer completed his evaluation and computation Mr. Israni’s overall earnings as Rs 1.2 crore (1,20,25,302) by including Rs 84 lakh (84,57,947) under heads of earnings– capital gains.
Aggrieved by the evaluation done under Section 143( 3) checked out with Section 144C (13) on January 22, 2025, Mr. Israni interested the ITAT Bangalore. On October 31, 2025, Mr. Israni had a partial success in the ITAT Bangalore, as they accepted a few of his expenses connected to enhancements on the plot, like home building and others costs, however they did not permit the Rs 5 lakh travel expense.
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Mihir Tanna, associate director, S.K Patodia LLP stated to ET Wealth Online: “Genuine reason is always considered by courts in various judgments. It would be difficult for Taxpayers to provide supporting documents for payment made through a bank account which was closed long back. Thus, other supporting documents like confirmation from the builder and registered documents, are acceptable.”
Tanna states that another problem talked about in the judgment is for offering costs declared versus the residential or commercial property moved. Any quantity of payment of which is definitely needed to effect the transfer will be an expense allowed as reduction. “Thus, expenses which are not incurred wholly and exclusively in connection with the transfer of property, will not be allowed as deduction.“
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ITAT Bangalore states this about bifurcation of expenditures sustained for building home on the plot
ITAT Bangalore in its judgement (IT( IT) A Nos. 607 & & 608/Bang/2025) outdated October 31, 2025 stated that Mr. Israni is an elderly person and non-resident obtaining his earnings under the heads of earnings– House home, capital gains and earnings from other sources.
Throughout the year under factor to consider, Mr. Israni in addition to his partner offered a residential or commercial property situated in Bangalore for Rs 4 crore (50% of Rs 8 crore). On going through the evaluation order, ITAT Bangalore took a note of the reality that the tax examining officer (AO) declined Rs 11,35,023 declared by him as expense of acquisition for the following factors:-
- I) The bifurcation produced by the assessee is simply an approximate expenditure and not the last costs.
- II) No cheque no. or expense no. or any date of payment is composed versus any of the payments. III) The table sent by the assessee reveals that it is simply a prefinal expense.
Mr. Israni, by method of composed submissions before the both the authorities listed below had actually sent that stated expenditures are quite genuine and raised by the contractor M/s. Akash Infotech and Infrastructure. Even More, ITAT Bangalore took a note of the truth that the assessee declared to have actually sent the total payment information together with the submissions.
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ITAT Bangalore even more stated that the DRP-2, Bangalore kept in mind that Mr. Israni had actually sustained the stated expenses connected to the civil work, pipes and electrical charges for enhancement of home, nevertheless as the assessee had actually not sent any evidence with regard to these expenditures before the tax officer, the DRP-2 appropriately held that the method of the tax officer is right in prohibiting the very same.
ITAT Bangalore stated that they are of the thought about viewpoint that both the authorities listed below stopped working to value that the overall payment of Rs 22 lakh (22,70,045) (Mr. Israni’s share Rs 11 lakh) were paid to the home builder itself connecting to civil work, pipes and electrical charges.
Mr. Israni had actually likewise produced the declarations of payments to contractor marked as Annexure-1. ITAT Bangalore stated that they likewise kept in mind the reality that before the tax officer, Mr. Israni had actually likewise sent the bifurcation of stated expenditures in a tabular kind. Mr. Israni had actually likewise sent the copies of all the invoices provided by the builders/contractor which remained in his ownership.
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Even More, ITAT Bangalore stated that they discover it legitimate contention that Mr. Israni might not send bank declarations due to closure of his savings account more than 10 years back.
ITAT Bangalore stated: “We are likewise of the thought about viewpoint that the home builder will provide the belongings certificate just after getting all his factors to consider and for that reason, we discover no imperfection in declaring of Rs 11,35,023/-( 50% of 22,70,045) as expense of acquisition and appropriately, we enabled this ground of appeal of the assessee.”
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ITAT Bangalore stated this about the expense of enhancement sustained for your house
ITAT Bangalore stated that with regard to the disallowance of Rs 25 lakh (25,72,807) declared towards expense of enhancement, the tax officer from the calculation of earnings saw that Mr. Israni made a cost of Rs 25 lakh (25,72,807) towards products of individual impact such as roofing leading solar plant, ac system, wall speakers, microwave etc. which he declared as expense of enhancement and consequently declared the indexation on the stated products.
The officer held that because Mr. Israni had actually made expenditures of Rs 25 lakh (25,72,807) towards products of individual impact, the AO appropriately, prohibited the like expense of enhancement while calculating the capital gain.
ITAT Bangalore stated that the D.R.P-2, Bangalore kept in mind that the assessee had actually not sent any extra proof with regard to stated claim. Even more, ld.D.R.P2, Bangalore kept in mind that Mr. Israni had actually made the above expense for making use of individual results and which are not categorised under the expense of enhancement/ building of structure and appropriately did not discover any imperfection in the method of the tax officer in prohibiting the exact same.
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ITAT Bangalore stated that Mr. Israni before both the authorities listed below sent that while offering and handing out the belongings of your home, he did not take a part of these products or get rid of the stated products from your home and home was offered on “as is where is basis”.
Even More, Mr. Israni declared that all these expenses were sustained in order to make your house habitable and appropriate for living conditions without which no structure might ever be categorised as a liveable home.
Mr. Israni the whole time pleaded that the purchase of numerous products was made in order to make your home habitable and correct for living conditions which is really regular and would be sustained by every person who is buying a home from a contractor.
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Mr. Israni in his written submission specified that without sustaining the impugned expenditures declared as expense of enhancement, your home built by him would not be habitable at all and appropriately declared that the aforementioned expense would form an important part of the overall quantity invested for acquisition of your home residential or commercial property.
ITAT Bangalore stated that the tax officer just dismissed the whole contention of Mr. Israni by specifying that the impugned expenses were sustained just on account of individual results and the exact same would not be qualified as expense of enhancements and as a result not qualified for reduction while calculating the capital gains.
ITAT Bangalore stated that on going through the list of expenses as detailed in a tabular kind sent before both the authorities listed below, they remain in total contract with the arguments advanced by Mr. Israni before both the lower authorities in regard of aforesaid costs that these expenditures are sustained just in order to make your house habitable.
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ITAT Bangalore stated that from the perusal of the list of costs sustained, they discover that bulk of the products are ingrained to the wall and end up being part and parcel of the structure itself which is subject of sale by Mr. Israni and his spouse.
ITAT Bangalore stated that they likewise have actually remembered of the truth that in the stated list products like a/c, Girias home appliances- 2 and so on would definitely fall under the ambit of “individual results” not responsible for reduction. In regard of staying products, Mr. Israni would definitely be qualified for reduction as it ends up being an important part of the structure.
Before the ITAT Bangalore, Mr. Israni by method of composed submission and with the objective of solving the disagreement in a spirit of co-operation with the department and to purchase assurance provided to think about an amount of Rs 5 lakh (5,49,644) out of the overall of Rs 25 lakh (25,72,807) as product of “individual impacts” and appropriately plead that balance amount of Rs 20,23,163 might be permitted of expense of enhancements being long-term components and wall/ ground ingrained.
ITAT Bangalore stated: “We concur with the contention of the assessee as we currently held that the expense sustained which are long-term component, wall/ ground ingrained are sustained just in order to make your house habitable and it ends up being the part and parcel of constructing itself which is topic of sales by the assessee. Appropriately, we direct the AO to prohibit Rs 5,49,644 out of overall expense of enhancements totaling up to Rs 25,72,807/-. Appropriately, this ground of the assessee is partially enabled.”
ITAT Bangalore stated this about Rs 5 lakh travel and carrier costs
ITAT Bangalore stated that on going through the evaluation order, they remember of the truth that Mr. Israni had actually declared an expenditures of Rs 5 lakh (4,99,000) for travel and carrier and declared it as sale expenditures for the function of calculation of capital gain.
The tax officer is of the view that there is no such arrangement in the Income Tax Act, 1961 to declare taking a trip expense as sale expenditures. The tax officer likewise stated that even more, there is no other way Mr. Israni can validate that the taking a trip was made exclusively for the sale of stated home.
The tax officer likewise stated that Mr. Israni had actually likewise not supplied any supporting submission to corroborate the sale costs and appropriately, he prohibited the amount of Rs 5 lakh (4,99,000) declared as travel and carrier expenditures.
The D.R.P-2, Bangalore discovered legitimate thinking with the tax officer’s order for prohibiting the claim of Mr. Israni totaling up to Rs 5 lakh (4,99,000).
Mr. Israni by method of composed submission specified that area 48(i) permits the reductions of all the expense sustained entirely and specifically in connection with such transfer.
ITAT Bangalore stated that on going through the information of combined expenditures sustained by Mr. Israni and his partner declared to have actually been sustained completely and specifically in connection with the transfer of home home, they take a note of the reality that he had actually declared air tickets, boarding expense at Bangalore and Mumbai, meals, regional journeys and various expense, carrier charges and so on and declared the like sustained in connection with such transfer.
ITAT Bangalore stated: “We are of the thought about viewpoint that up until now as provision (i) of area 48 is worried, the expression utilized by the legislature in its knowledge is broader than the expression “for the transfer”. The expression “in connection with such transfer” indicates fundamentally associated to move and it is definitely larger than the expression “for the transfer”.”
ITAT Bangalore stated that any payment of which is definitely required to effect the transfer will be an expense covered by this stipulation. Even more, the words “entirely and solely” need and mandate that the expense must be authentic and expression “in connection with the transfer” need and mandate that expense needs to be linked and for the function of transfer.
The ITAT Bangalore stated that the expense which is not authentic or sham is not to be permitted as reduction. It is an undeniable truth that the assessee offered a home collectively with his better half at Bangalore.
ITAT Bangalore stated that in today case they discover that the assessee (Mr. Israni) had actually declared air tickets from Mumbai to Bangalore and return in addition to the boarding expense, meals, various expense and so on as expense sustained completely and solely in connection with the transfer of home residential or commercial property which is totally inappropriate.
ITAT Bangalore stated: “If the sole intention of assessee for concerning India was the sale of stationary home located at Bangalore, then we might not comprehend why the assessee will sustain boarding expense for one week at Mumbai and claim Rs 64,000 as boarding expense sustained at Mumbai for the sale of home at Bangalore.”
ITAT Bangalore stated that they likewise might not comprehend how the meals taken by Mr. Israni and regional travel like cars and trucks and taxis and so on sustained relate to the expense sustained completely and specifically in connection with the transfer of the home at Bangalore.
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ITAT Bangalore stated: “The claim of the assessee that the sole and particular function of the see to India was to get rid of your home is not plainly developed. Even more, we are of the thought about viewpoint that the Air Freight, meals, regional travel, boarding expense etc. are no other way linked to the transfer of stationary residential or commercial property and appropriately the very same can not be permitted as costs entirely and specifically sustained for transfer of home and appropriately this ground of the assessee is dismissed.”
ITAT Bangalore judgement: “In the outcome, the appeal submitted by the assessee is partially permitted. Now we use up assessee’s appeal in IT(IT)A No. 608/Bang/2025. Because similar premises have actually been taken by the assessee in this appeal for the Assessment year 2022-23 and the truths consisting of the quantities in disagreement being comparable, the thinkings provided in ITA No. 607/Bang/2025 will use mutatis mutandis to the present case of the assessee and appropriately, we partially permit the appeal of the assessee for the asst. year 2022-23. 10. In the outcome, the appeal submitted by the assessee is partially enabled. In the combined outcome, both the appeals submitted by the assessee are partially permitted. Order pronounced outdoors court on 31st Oct, 2025.”