Case Law Details
Trimm Exports Private Limited Vs DCIT (Karnataka High Court)
The issue which arises for consideration in this appeal is whether an amount of Rs.1 Crore paid as compensation by the appellant to the lessee can be claimed as expenses incurred in connection with transfer of the capital asset. The assessee was the owner of land measuring 1,07,810 square feet. Out of the aforesaid land, the assessee had executed a lease deed in favour of the lessee on 22.02.1996 for a period of 40 years in respect of land measuring 29,845 square feet. The assessee in the previous years had offered income to tax under the head ‘House Property’, which was taxed by the Assessing Officer under the ‘Rental Income’. For the Assessment Year 2007-08, the assessee had offered a sum of Rs.10,05,000/- under the head ‘Income from House Property’, which was assessed to tax by the Assessing Officer. Thereafter, a deed of cancellation was executed between the assessee and the lessee on 23.03.2009. The lessee was paid a sum of Rs.1 Crore to cancel the lease and to hand over vacant possession of the property. Thereafter, by a registered sale deed dated 13.05.2009, the land measuring 29,845 square feet was sold for a consideration of Rs.2,50,00,000/- to third party. The aforesaid sale deed contains a reference to the lease deed executed in favour of the lessee as well as recital as to delivery of possession. The lessee is a consenting witness in the sale deed. The Assessing Officer had inspected the premises of the assessee. In the inspection report it was stated that assessee and the lessee were in occupation of remaining portion of land measuring 77,965 square feet. The aforesaid fact was also affirmed b y partner of the lessee that the lessee is in possession of the remaining portion of the land. The aforesaid inspection report no where discloses that the lessee is in possession of the land, which was sold vide registered sale deed dated 13.05.2009 to third parties. However, the Assessing Officer held that the claim of the assessee that the lessee was in possession in capacity as tenant in respect of 29,845 square feet of land and subsequent payment of compensation of Rs.1 Crore to the lessee, is not genuine. The aforesaid finding has been affirmed by the Commissioner of Income Tax (Appeals) as well as by the tribunal. However, it is pertinent to mention here that the assessee for the Assessment Year 2007-08 had offered an income of Rs.10,05,000/- from the lessee under the head of ‘House Property’, which was accepted by the Assessing Officer and the aforesaid rental income was taxed. Subsequently, it is not open for the Assessing Officer to deny the existence of the aforesaid transaction in the subsequent Assessment Year.
It is pertinent to note that lease deed was executed in the year 1996 in favour of the lessee and was cancelled in the year 2009 after a period of 13 years. The reference to the lease deed is found even in the registered sale deed dated 13.05.2009. The lessee had offered the amount received by it as income in its return. The amount was paid by the assessee and was an expenditure incurred wholly and exclusively for transfer of an asset and therefore, it is deductible under Section 48 of the Act.
FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT
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