Section 48 Compensation paid to clear title of land was deductible

Compensation paid to clear title of land was deductible as cost of improvement on its sale

[2015] 56 taxmann.com 292 (Delhi - Trib.)

IN THE ITAT DELHI BENCH 'F'

Assistant Commissioner of Income-tax, Circle 24 (1), New Delhi

v.

Pushkar Dutt Sharma

Expenses incurred to remove impediments or encumbrances in way of transfer of capital asset has to be allowed as deduction under head 'cost of improvement' while computing taxable amount of capital gain

Where in terms of registered sale deed what assessee actually transferred was not only lesser area under his exclusive ownership, but also common area on which he had joint ownership rights, his claim for deduction as indexed cost of acquisition in respect of both areas was to be allowed

I - Section 48 of the Income-tax Act, 1961 - Capital gains - Computation of (Expenses incurred) - Assessment year 2007-08 - Whether expenses incurred to remove impediments or encumbrances in way of transfer of capital asset has to be allowed as deduction under head 'cost of improvement' while computing taxable amount of capital gain - Held, yes - During relevant year, assessee sold a piece of land and declared certain amount as long-term capital gain - It was noted that assessee had entered into agreement to sell said land earlier to 'D' but final sale could not materialise - Subsequently, in terms of compromise deed, assessee had to pay certain amount as compensation to 'D' - Amount so paid was claimed as deduction under head 'cost of improvement' - Whether in view of aforesaid legal position, assessee's claim was to be allowed - Held, yes [Para 9] [In favour of assessee]

II - Section 48 of the Income-tax Act, 1961 - Capital gains - Computation of (Cost of acquisition) - Assessment year 2007-08 - Assessee while computing capital gain on sale of property, claimed certain amount of deduction as indexed cost of acquisition - In course of assessment, amount so claimed as deduction was enhanced on ground that assessee was owner of greater area of land which included his share in common area meant for use by all co-owners - Assessing Officer rejected assessee's claim of higher amount of deduction - Whether since in terms of registered sale deed, what assessee actually transferred was not only lesser area under his exclusive ownership, but also common area on which he had joint ownership rights, his claim for higher amount of deduction was to be allowed - Held, yes [Para 11] [In favour of assessee]

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