INCOME TAX ACT, 1961

Section 48(ii)

Capital gains - Expenses in connection with transfer - -

Assessee while computing capital gain on sale of agricultual land claimed deduction of Rs. 36 lakhs as selling expenses. Assessee's case was that one 'K' had instituted civil suit for specific performance of agricultural land and to get released from encumbrances amount of Rs. 36,00,000 was paid, otherwise land could not have been transferred and transaction would have been frustrated. Hence, payment to 'K' was absolutely essential and to affect transfer and was part and parcen of cost of acquisition.Held: From perusal of concerned compromise document, it was crystal clear that suit was withdrawn by 'K' unconditionally and there was no reference of making of payment by assessee. Also, besides assessee there were other co-defendants in the suit and it was not clear which of the defendants had entered into compromise with the plaintiff. Moreover, in sale document, there was clear stipulation that property was free from any kind of encumbrances. Further, impugned amount of Rs. 36 lakhs was allegedly paid in cash and assessee had not been able to disclose source for making said payment and hence there was violation of section 269SS. Moreover, part of the amount was paid even prior to institution of the suit by 'K', which was beyond acceptance. Accordingly, AO was justified in denying deduction while computing capital gain.

REFERRED :

FAVOUR : Against the assessee

A.Y. : 2013-14

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