Security guard expenses disallowed as deduction from capital gain from sale of plot

ITAT upheld disallowance of security guard expenses as deduction from capital gain arising from sale of plot

In a recent judgment, the ITAT Jaipur has held that security guard expenses to protect the Plot from trespassing by miscreants claimed by the assessee as deduction towards capital gain was not allowable as there is no need to deploy the guard on barren land.

ABCAUS Case Law Citation:
4814 (2025) (10) abcaus.in ITAT

In the instant case, the assessee had challenged the order passed by the CIT(A) National Faceless Appeal Centre in confirming disallowance of capital gain deductions claimed.

The assessee had not filed return of income for the relevant Assessment Year. The Department received information and details available on Insight Portal, that the assessee had sold immovable property and the taxability of above transactions remained unverifiable.

A Notice u/s 148 of the Act was issued. In response to the notice, the assessee filed return of income showing income as Capital Gain from the sale of the Property.

The AO noticed that the assessee had sold the plot for the sale consideration for less then stamp valuation and therefore the provisions of Section 50C were attracted. Accordingly, he issued notice u/s 142(1) of the Act.

The assessee in response to notice revised his computation of income as well as calculation on long term capital gain. The assessee adopted the consideration value as per provisions of Section 50C and increased the expenses incurred on boundary wall as claimed in original computation and land filling as claimed in original computation added a new expenses shown to Security Guard on bare plot year- wise for seven years with indexation.

The AO noted the bills/receipts submitted by the assessee on boundary wall and mittibharai were fake bills as the assessee could not prove the genuineness of expenses. The AO further noted that the expenses incurred on security guard cannot be regarded as capital asset or cost of improvement to capital asset.

In view of the above the AO disallowed the expenses claimed and made impugned addition as towards Long Term Capital Gain in the hands  of the assessee.

The Tribunal observed that the assessee had submitted 31 supporting vouchers which were not disputed. He also submitted 31 confirmation of having incurred the expenditure. Therefore, all these expense incurred for the improvement on the capital assets were not doubted.

However, the Tribunal held that  the security guard expenses claimed by the assessee allegedly to protect the Plot from being trespassed and occupied by the miscreants were not allowable as there is no need to deploy the guard on barren land but constructing boundary wall and mittibharai is reasonable cause to cover the piece of land and thereby the expenditure incurred on it cannot be denied and the assessee submitted proof of having incurred those expenses.

As a result, the appeal of the assessee was partly allowed.

Download Full Judgment Click Here >>

• Object of assessment proceedings is not to find empirically correct solution on every fact issue – HC
• Penalty u/s 270A deleted as assessee filed revised computation during scrutiny
• Penalty u/s 271B for unfilled column 40 in Tax Audit Report Form 3CD deleted by ITAT
• Merely ex-parte rectifying computation without amending assessment order not make it nullity- ITAT
• Once assessee discharges primary onus, it shifts to AO to bring evidence to contrary – ITAT