TMI Blog2015 (9) TMI 999X X X X Extracts X X X X X X X X Extracts X X X X ..... tion amount paid by the assessee cannot be claimed as deduction while computing the long-term-capital-gain, therefore, finding given by the CIT(A) is confirmed and accordingly ground raised by the assessee are dismissed. - Decided against assessee. Disallowance of interest - Held that:- The assessee’s interest income has already been held to be taxable under the head “income from other sources” and whatever amount which are attributable or is having direct nexus for earning of interest income has been allowed by the Assessing Officer. Over and above, we are of the opinion that so far as office expenses, telephone expenses and other expenses which are necessary for maintaining of corporate office, the same can be held to be allowable. Looking to the fact that overall interest income is less as compared to the expenditures claimed, therefore, in the interest of justice, we feel that out of the balance administrative expenses (after the disallowance by the Assessing Officer as well as CIT(A) at ₹ 7,48,108/-), we further allow the expenses of ₹ 2 lakhs, which can be held to be sufficient for the earning of the interest income. Accordingly, the balance amount of expenses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the offers. The prospective buyers had insisted on vacant possession of the premises before entering the sale deed. As we realized that without paying compensation the vacant possession would not have been received, it was decided not to loose the offer from the buyer and pay the amount of compensation . 4. The Assessing Officer held that there was no need to pay such a huge amount of compensation when monthly rent was only ₹ 9,000/-(Rs. 9,500/-). Further, there was a common Director who was signing the Balance sheet of both the company and assessee was also sharing its office with M/s Tex-Tube and also shared common expenses in the Profit Loss Account. The Income-tax Inspector, who was sent to make local enquiry regarding place of working of both the entity, submitted his report that they run there business from same premise. Thus, he held that under these facts and circumstances, the payment of compensation cannot be allowed as deduction and is colourable device to evade tax. 5. The Ld. CIT(A), noted down the sequence of various events and decided the issue in the following manner :- It is important to highlight the sequence of various events, in this re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on with such transfer and (ii) the cost of acquisition of the asset and the cost of improvement thereto. The maintenance expenses are not in nature of cost of improvement/wholly and exclusively in connection with transfer the same are not allowable . 6. Before us, the Ld. Counsel submitted that there is only one common Director between the two companies and very few shareholders have a common share holding. This he demonstrated through list of shareholders of both the companies as given in the paper book. He also drew our attention to the Deed of Cancellation between the assessee and M/s Tex-Tube Mfg. Co. P. Ltd. dated 18th February, 2005 wherein, it has been clearly stated that the assessee has negotiated sale of entire property including the premises occupied by the M/s Tex-Tube and, therefore, to vacate the premise, the assessee has to pay an amount of ₹ 38,45,000/- to the M/s Tex-Tube. This payment of compensation is thus flowing from the Deed of Cancellation. The transaction has to be seen between the two independent entities; one who wanted the premises to be vacated and other who was occupying the premises as a tenant who was running its business there a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y ₹ 1,08,000/- seems to be make-belief-arrangement. Hence such a compensation has rightly been held to be not allowable as deduction. 9. We have heard the rival submissions and perused the relevant finding given in the impugned order. The assessee has sold its land and factory building for ₹ 2,88,00,000/-. While computing the long-term-capital-gain, the assessee has claimed the deduction as a cost u/s 48 for a sum of ₹ 38,45,000/- paid to M/s Tex-Tube Mfg. Co. P. Ltd. as a compensation for vacating the premise. The assessee had given its factory building along with the machinery to M/s Tex-Tube Mfg. Co. P. Ltd. to run the factory on conductorship basis as per the Indenture of Conductorship dated 01.12.1995 for the period of five years. This agreement was uptil 20.11.2000. Thereafter, it is not borne out from the records as to whether this indenture of conductorship was continued or renewed further on paper. Thereafter, on 18.02.2005, the assessee had entered into cancellation of tenancy agreement dated 18.02.2005, wherein, the assessee agreed to pay ₹ 38,45,000/- for vacating the premise. Thereafter, the assessee entered into Conveyance Deed with M/s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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