Case Law Details
Nitaben M. Patel Vs ACIT (ITAT Ahmedabad)
ITAT Ahmedabad held that the expenses incurred to remove impediments or encumbrances in way of transfer of capital asset has to be allowed as deduction under the head ‘cost of improvement’ while computing taxable amount of capital gain.
Facts- The appellant filed a return of income for the year under consideration on 17.10.2016 declaring total income. The appellant earned long term capital gain out of the transfer of non-agricultural land. The appellant purchased a plot of land measuring about 7113 sq.mtr by and under a deed of conveyance dated 23.03.2008.
Thereafter, the appellant entered into an agreement to transfer the right title interest of the part of the said land admeasuring about 1858 sq.mtr for a total consideration of Rs.90 Lakhs out of which Rs.45 Lakhs were duly paid by those two co-owners to the appellant at the time of execution of the said deed of agreement for sale.
The earlier agreement for sale stood cancelled as the assessee found a better and higher sale consideration from a third party in respect of the said property. However, for withdrawing the right in respect of Plot measuring about 1858 sq. mtr. of land, thee appellant has to pay Rs. 3,80,00,000/- to the earlier parties. Finally, the appellant sold out a plot of land measuring about 3188 sq. mtr. by and under the sale deed. The agreement had clause about the confirmation of land to be freed from any encumbrances and in order to get the land free from encumbrances, the appellant had to pay Rs. 3,35,00,000/- and returned Rs.45 Lakhs to the erstwhile purchaser of land measuring about 1858 sq.mtr. which was part of the total area of land of 3188 sq.mtr.
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