TMI Blog1987 (2) TMI 44X X X X Extracts X X X X X X X X Extracts X X X X ..... ent in respect of which certain amounts were paid by way of compensation. The lands were under the occupation of protected tenants. The assessee, in each of the five cases, paid a consideration of Rs. 60,000 to each of the protected tenants in order to " perfect his title ". This amount of Rs. 60,000 was claimed by each of the assessees as admissible deduction under section 48(ii) of the Income-tax Act for the purpose of computation of capital gains under section 45. The Income-tax Officer disallowed the claim on the ground that the expenditure incurred was not in connection with the acquisition of the lands. On appeal, the Appellate Assistant Commissioner agreed with the view taken by the Income-tax Officer. On further appeal to the Income-tax Appellate Tribunal, the assessee succeeded. The Tribunal was of the view that: "any expenditure incurred in order to make the title perfect would constitute an expenditure incurred for the purpose of acquiring the property and, therefore, it would necessarily have to be treated as forming part of cost of acquisition. " At the instance of the Revenue, all the five cases were referred to this court. Sri Suryanarayana Murthy, learned s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w. " Under section 45, any profits or gains arising from the transfer of capital asset are chargeable to income-tax under the head " Capital gains ", and shall be deemed to be the income of the previous year in which the transfer took place. The modus of computation and deductions are dealt with under section 48 which reads thus: " The income chargeable under the head 'Capital gains' shall be computed by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset the following amounts, namely: (i) expenditure incurred wholly and exclusively in connection with such transfer; (ii) the cost of acquisition of the capital asset and the cost of any improvement thereto. " The expressions " cost of any improvement " and " cost of acquisition are defined in sections 55(1)(b) and 55(2), respectively, as follows: Section 55(1)(b):"'cost of any improvement', in relation to a capital asset, (i) where the capital asset became the property of the previous owner or the assessee before the 1st day of January, 1964, and the fair market value of the asset on that day is taken as the cost of acquisition at the option of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eliver possession to the competent authority. Under section 7, if the Central Government is of the opinion that it is necessary to requisition the property, it may acquire the property. Section 2(c) defines " landlord " as any person who, for the time being, is receiving or is entitled to receive the rent of any premises, if the premises were let to a tenant. The expression "person interested" is defined in clause (d) of section 2 as including all persons claiming or entitled to claim an interest in the compensation payable on account of the requisitioning or acquisition of any property under the Act. Under section 40 of the Andhra Pradesh (Telengana Area) Tenancy and Agricultural Lands Act, 1950, all rights of protected tenants are heritable. Section 40(4) lays down that the interest of a protected tenant in the land held by him as a protected tenant shall form sixty per cent. of the market value of all the interest in the land and that of the landholder and persons claiming under the landholder shall be limited to the remaining forty per cent. By the date of the acquisition, the protected tenants, by virtue of section 40(4) of the A.P. (T.A.) Tenancy and Agricultural Lands Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 55(2) is exhaustive and the language employed is peremptory. It is not open to us to introduce any other facets of meaning to the expression " cost of acquisition ". It would be totally unrealistic to say that the expenditure incurred by the assessees answers the description of " cost of acquisition " under section 55(2). The expenditure in question is totally outside the ambit of section 55(1)(b). The Tribunal, in our opinion, committed an error in thinking that the expenditure incurred by the assessees for perfecting their title would constitute expenditure incurred for the purpose of acquiring the property. What the assessees did was only purchasing the rights of the tenants to enable them to acquire exclusive rights to receive the compensation amount. As already stated by us hereinbefore, if the protected tenants had not relinquished their rights, they would have received a major share of the compensation amount, viz., to the extent of 60%. The Tribunal relied upon the decision of the Calcutta High Court in CIT v. Bengal Assam Investors Ltd. [1969] 72 ITR 319. In that case, an expenditure of Rs. 1,07,210 was incurred by the assessee for defending his title to th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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