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2023 (8) TMI 384 - ITAT AHMEDABADCapital gain computation - Disallowance of deduction of indexed cost of improvement - assessee claimed that expenditure incurred by him being the additional cost to effectuate the sale transaction is a capital expenditure and thus should be allowed in the light of Section 55(1)(2)(ii) - HELD THAT:- We find that the case made out by the assessee is this that the compensation was paid by the appellant to the parties with whom he initially entered into an agreement to sell the plot of land as the sale did not materialize. Such compensation is deductible while computing the capital gains arising from the sale of such plot to another party. We find substance in such submission made by the Ld. AR. As considered the judgment passed in the case of ACIT vs. Pushkar Dutt Sharma [2015 (6) TMI 844 - ITAT DELHI] wherein it has been clearly held that the expenses incurred to remove impediments or encumbrances in way of transfer of capital asset has to be allowed as deduction under the head ‘cost of improvement’ while computing taxable amount of capital gain. Also in the case of Kaushalya Devi [2018 (4) TMI 1137 - DELHI HIGH COURT] wherein payment of certain liquidated damages in terms of earlier agreement to sell which did not materialize has been ultimately held to be treated as expenditure incurred wholly and exclusively in connection with transfer of immovable property and thus found to be allowable as deduction under Clause (1) of Section 48 of the Act. Thus the expenditure incurred solely and exclusively on the immovable property as an expenditure to be deducted while computing capital gains. Link and connection with the transfer of a capital asset and the expenditure must be inextricable which has been found to be established by the appellant before us. We, thus, do not hesitate to hold that the impugned amount paid by the appellant to the erstwhile owners requires to be allowed under the head “cost of improvement” while computing taxable amount of long term capital gain - Decided in favour of assessee.
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