Land development

Mr. Chinatmani bought a piece of land in F.Y. 2001-2002 at Rs. 1,10,000.00 and showed this land as his asset in his Balance Sheet.

Over the years, he built few rooms over the land, but didn't show the increased value of the land in the Balance Sheet. In fact, he debited the expenses incurred in construction from his personal capital account, as part of general expenditures.

Over 15 years, he spent about Rs. 7 Lakhs in the land.

In F.Y. 2016-17, the land was acquired by the government for some highway project, and Mr. Chintamani received Rs. 20 Lakhs as compensation of Residential land.

Even after indexing the cost of purchase of land with the CCI values of respective years, the Capital Gains is a very high proportion of the compensation received.

Can Mr. Chintamani deduct the cost of the construction incurred by him over the years from the Capital Gains?