Regarding indexation benefit in case of cost of improvement

Hello Arpit

The Long Term/ Short Term nature of capital asset is determined based on the date of acquisition. In the absence of information,it is presumed that the asset is long term asset, so there is no reason why indexation should be denied on cost of improvement.

However,you should be careful in claiming the indexation and should be able to substantiate with supporting evidence that improvement is not counted as an expense incidental to sale (that is without improvement sale is not possible).If such is the case then you can claim only the deduction of cost of improvement without indexation as an incidental expense.

Regards

CA Kedar  

Thanks Kedarji for your prompt reply. The asset is a long term asset. Further the only issue is for indexation of cost of improvement. In our case we constructed 3 more floors on the house and it took 3 years to complete and it finally concluded in year 2012-13 and after that we sold it. So department may take a stand stating that we may not get the indexation benefit for cost of improvement. So do you have any case law which is in our favour or may be in department favour.

Regards,

Arpit

Improvement made in the house also require 3 years gap before selling the property for indexation. If the improvement has been done before 3 years, then indexation shall be available.