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2014 (11) TMI 1161 - AT - Income TaxDisallowances in respect of capital gains - allowable expenditure u/s 48 - legal right in the compensation amount - Diversion By Overriding Title - Held that:- It is an obligation created as part of the agreement and there is no dispute that the amounts are collected from the buyers and paid to the developer. Since, these amounts are included in the sale consideration, assessee can certainly claim the amount in order to arrive at full value of consideration. Since, there is contractual obligation to pay the above amounts, Ld. CIT(A) is correct in allowing the amounts. Hon’ble A.P. High Court in the case of CIT vs. Manohar Rao, Managing Director [1984 (10) TMI 35 - ANDHRA PRADESH High Court] considered the scope of full value of consideration in a case and held that capital gain had to be computed by taking into account only the amount which was actually received by assessee. In that case, assessee owns 4.27 gts of land, had entered into an agreement to sell the land at ₹ 25,000 per acre. Subsequent to that, the land was acquired by Government and only an amount of ₹ 2,20,220 was received by assessee. As assessee has entered into agreement, assessee paid an amount of ₹ 1,05,220 immediately on receipt of compensation to the agreement holder and offered the balance amount of ₹ 1,20,000 as capital gain. Considering the facts of the case and the fact that there is a legal right in the compensation amount, Hon’ble High Court held that this is a case of diversion of income by overriding title. Since, in assessee’s case also there is contractual right in paying amounts, we confirm the order of Ld. CIT(A) and dismiss Revenue grounds.
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