Case Law Details
Prime Maxi Promotion Pvt. Ltd. Vs ACIT (ITAT Delhi)
In the case of Prime Maxi Promotion Pvt. Ltd. Vs ACIT, the Income Tax Appellate Tribunal (ITAT) Delhi ruled in favor of allowing capital gain deduction for additional compensation paid to vendors for land acquisition costs. The decision came after a thorough examination of the dispute arising from the sale of land and the computation of capital gains.
The dispute revolved around the additional compensation of Rs. 25 lakhs paid by Prime Maxi Promotion Pvt. Ltd. to the vendors of the land during the financial year 2007-08. The company had acquired land through its sister concern and subsequently sold it. The Assessing Officer disallowed the claim of the additional compensation while computing the capital gains on the sale of lands. However, it was argued that the payment was genuine and made through regular banking channels, supported by receipts on stamp papers.
The ITAT carefully examined the evidence presented, including the receipts issued by the vendors, which clearly indicated the payment of additional compensation. Moreover, the amount had been reflected in the balance sheet of the sister concern since 2008, and there was no dispute regarding the sale consideration reported by the assessee.
Drawing parallels from similar cases and legal precedents, the ITAT concluded that the additional compensation paid should indeed be considered as part of the cost of acquisition of the lands. Therefore, it directed the Assessing Officer to grant deduction of Rs. 25 lakhs while computing the capital gains on the sale of lands.
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