Law:

Section:

Section 48 of the Income-tax Act, 1961 - Capital gains - Computation of - Assessment year 1974-75 - Assessee sold two properties and claimed deduction from capital gain for amount paid under terms of compromise decree in respect of another property which had no connection with properties sold by him -Whether assessee's claim was rightly disallowed by authorities below - Held, yes FACTS The assessee sold two properties for a total consideration of Rs. 85,000. In the course of the assessment proceedings, the assessee claimed deduction of a sum of Rs. 40,000 paid to one 'M' as per the terms of the compromise decree in respect of another property C which belonged to the assessee's wife under the will of her father. The ITO took the view that the sum of Rs. 40,000 paid by the assessee in respect of the property C did not form part of the cost of acquisition of the properties sold by the assessee and, hence, was not deductible. On appeal by the assessee, the AAC took the view that the deductions claimed by the assessee were not admissible. On further appeal before the Tribunal, it went into the factual details relating to the acquisition of the properties sold by the assessee as well as the property belonging to the wife of the assessee and finally confirmed the order of authorities below. On reference : HELD Under section 48 the income chargeable under the head 'Capital gains' shall be computed by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset the following amounts, namely, (i) expenditure incurred wholly and exclusively in connection with such transfer; and (ii) the cost of acquisition of the capital asset and the cost of any improvement thereto. Insofar as the claim of the assessee for deducting the payment of Rs. 40,000 made to 'M' was concerned, that payment had absolutely no connection whatever with the properties acquired by the assessee, which were also later disposed of by him and which had led to the arising of the capital gains. Even under the terms of the compromise decree, the amount of Rs. 40,000 was payable not by the assessee but by his wife. In other words, with reference to…

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