Law:

Section:

Section 48 of the Income-tax Act, 1961 - Capital gains - Computation of - Land of assessees were acquired by government under provisions of requisitioning and acquisition of immovable property act, 1952, which was under occupation of protected tenants - Under said act, protected tenant was entitled to 60 per cent of compensation amount, if he does not relinquish his right - Certain amounts were paid by assessees to their protected tenants to relinquish their rights - Whether said expenditure was deductible under section 48 in computation of capital gain - Held, no Facts Certain lands belonging to the assessees were acquired by the Government. The land was under the occupation of protected tenants who would be entitled to 60 per cent of the compensation amount, under the provisions of the Requisitioning and Acquisition of Immovable Property Act, 1952. The assessees, in order to receive full amount of compensation, paid certain amount to the tenants who relinquished their rights. It was, however, not obligatory on the assessee to make over vacant possession of land to the Government. The assessees claimed deduction under section 48(ii), in respect of the amount paid to said tenants which was disallowed by the ITO on the ground that the expenditure, incurred was not in connection with the acquisition of lands nor was it an expenditure incurred in connection with the transfer. On appeal, the Tribunal, however, held that any expenditure having been incurred in order to make the title of the assessee perfect would constitute an expenditure incurred for the purpose of acquiring property and, therefore, it would necessarily have to be treated as forming part of cost of acquisition. On reference: Held There was no obligation under the provisions of the Requisitioning and Acquisition of Immovable Property Act for the assessee to hand over the vacant possession of the land to the Government. The protected tenants, but for the relinquishment of their rights, would have been entitled to notice, in the compensation proceedings. Had the protected tenants not relinquished their rights in respect of the land in question, they would have been entitled to 60 per cent of the…

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