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2011 (1) TMI 1172 - HC - Income TaxWhether the appellate authorities are correct in adopting for the purpose of computation of income from capital gains, the cost of inflation index for the financial year 1992-93 instead of index for the financial year 1987-88 in view of the provisions, of s. 48 r/w s. 45(2) of the Act market value on the date of transfer that is relevant and in arriving at that market value the index cost of acquisition as prescribed on the date of transfer is to be taken into consideration and not the date of conversion, the index cost of acquisition was 223 on the date of transfer in the year ending 1993 and the index cost of acquisition on the date of conversion is 161. Therefore, the AO committed a serious error in taking 161 as the index. The appellate authorities have rightly interfered with the said assessment and have taken 223 as correct index cost of acquisition, decision in favour of the assessee and against the Revenue Whether the appellate authorities are correct in allowing deduction claimed by the assessee as revenue expenditure in respect of the payment made to State Bank of Mysore as a guarantor in the face of the fact that the borrower, namely M/s Rudra Industries sister concern of the assessee, had assets to pay the liability which were offered as security by the borrower and the payment was prompted by extraneous considerations and not necessitated by commercial expediency – Held that:- assessee incurred this expenditure to discharge a debt borrowed by the sister concern and thus saved the property which he had offered as security and in turn was able to make out a marketable title in terms of the development agreement. It cannot be said that the payment of the said amount does not constitute business expenditure. Both the appellate authorities on appreciation of the aforesaid material rightly held that the assessee is entitled to a deduction under the head of business expenditure and have rightly set aside the order of the AO disallowing the said deduction. In that, view of the matter, the third substantial question of law is answered in favour of the assessee and against the Revenue, appeal dismissed
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