Law:

Section:

Section 48 of the income-tax act, 1961-Capital gains-Computation of-Assessee sold lands by converting them into plots, and for this purpose, maintained separate office for preparing lay-out plans, etc.-Assessee claimed deduction of expenditure incurred on travelling, stationery, salary and repairs to office premises, in computing capital gains-Whether impugned expenses could be considered as solely incurred in connection with transfer of land and were accordingly deductible-Held, yes. Section 256, read with section 48, of the Income-tax Act, 1961-Reference-Question of fact-Whether, on facts mentioned under head 'capital gains-computation of', any referable question would arise out of tribunal's decision allowing assessee's claim-Held, no. Facts The assessee sold certain lands after converting them as house sites and for this purpose, maintained an office for preparing lay-out plans and for locating prospective purchasers. In the computation of capital gains, the assessee claimed deduction of expenditure incurred on travelling, stationery, salary and repairs to office premises. The ITO held that the deduction was not allowable, either as cost of improvement or as expenses incurred solely in connection with the transfer of the land. Though the Commissioner (Appeals) held that the assessee will be entitled to deduction of fifty per cent of the expenses incurred, the Tribunal allowed the claim in full. It also rejected the revenue's reference application under section 250(1). On an application under section 256(2): Held It was not the dispute that the assessee had in fact prepared lay-outs and got them approved from the requisite authority and sold the lands as house plots. The sale of the lands as it would not have fetched such a price which the assessee actually got now after converting the lands into house sites. Therefore, all the expenses incurred in connection with the preparing of the lay-outs and getting them sanctioned should be taken to be expenses solely incurred for the transfer of the land for a better price. The other expenses such as salary paid to the clerk who was attending to the preparation of the lay-outs and also for finding suitable purchasers…

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