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2018 (11) TMI 868 - AT - Income TaxDisallowance of capital loss on sale of property at Gurgaon - Paying extra compensation to trust - forced transfer of property - assessee purchased a flat at Gurgoan for the purpose of usage of the trust activities only and due to heavy pressure applied by the said trust on the assessee to locate a property in Kolkata for pursuing its charitable objects, the assessee was forced to sell the flat at Gurgoan and utilize the proceeds thereon for purchasing a property at Rajarhat, Newtown for higher amount - attached encumbrance in the form of a contractual obligation. Held that:- The properties at Rajarhat, New Town were purchased from M/s Sunny Rock Estates and Developer P Ltd in the name of Al Habib Welfare & Charitable Trust by the assessee using his own funds. This was done by him as compensation for using the funds of the trust for his personal purposes in the past. From the various correspondences exchanged between the assessee and the said trust as detailed supra, we find that the assessee at the first instance had purchased a flat at Gurgoan for the purpose of usage of the trust activities only. But since the trust refused to accept any property other than in the fringe locality of Kolkata and due to heavy pressure applied by the said trust on the assessee to locate a property in Kolkata for pursuing its charitable objects, the assessee was forced to sell the flat at Gurgoan and utilize the proceeds thereon for purchasing a property at Rajarhat, Newtown in the name of the trust for a higher amount due to huge rise in real estate market and due to effluxion of time. But it cannot be brushed aside that the assessee was having the said flat at Gurgoan together with an attached encumbrance of amounts drawn by him from the said trust which had to be compensated in future either in cash or in kind for the benefit of the trust. Hence there was an attached encumbrance in the form of a contractual obligation to be fulfilled by the assessee to the trust. As decided in COMMISSIONER OF INCOME TAX, KOL-XI VERSUS SATYABRATA DEY [2014 (5) TMI 781 - CALCUTTA HIGH COURT] unless the assessee had settled the dispute, the sale transaction could not have materialised and the sale consideration had to be reduced by the amount of compensation paid – the expression used in section 48 of the Act, expenditure incurred wholly and exclusively in connection with such transfer has wider connotation than the expression, ‘for the transfer’ - the transfer would not have taken place and the payment has necessarily to be made for the transfer of the hotel - the sum was expended by the assessee wholly and exclusively in connection with the transfer of the capital asset and not de hors the transfer – Decided against Revenue.
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