Law: Income Tax Act, 1961

Section: 45,48

Income-tax---Capital gains---Deduction---Sale of building---Expenditure incurred in getting tenants to vacate property---Deductible---Amount embezzled by person who assisted in sale---Loss incurred by transferor as owner and not in the course of sale transaction---Not deductible---Indian Income Tax Act, 1961, Ss.45 & 48. The assessee sold property and received a consideration of eighteen lakhs of rupees. In computing the capital gains, he claimed a deduction of Rs.2,04,107 which consisted of Rs.63,000 which was embezzled by the power of attorney holder who was entrusted with the job of selling the property, Rs.43,107 being the interest paid on amounts borrowed in connection with the sanction of plans and building permit as per the. agreement under which the building was sold: Rs.34,200 being the interest paid to TNP for cancellation of agreement; Rs.60,000 being the amount paid to the tenant for vacating the premises and Rs.3,800 being the interest paid to OB on the moneys borrowed to repay advances received from earlier proposed vendees. The Tribunal disallowed these amounts. On a reference: Held, (i) that as regards the amount of Rs.63,000 which 'was embezzled by the person who was entrusted with the job to assist the agent of the assessee in selling the property, the assessee was not entitled to the deduction of the said amount as he lost the amount in the capacity as an owner and not in the course of the transaction and it was also not incidental to the transaction. Mrs. G. Y. Chenoy v. CIT (1998) 234 ITR 89 (AP) fol. (ii) That the expenditure in getting the tenants vacate the premises had '< nexus with the transaction as without the tenants vacating the premises, the building could not be sold. The assessee was entitled to the deduction of Rs.43,107, Rs.34,200, Rs.60,000 and Rs.3,800. JUDGMENT MS. S. V. MARUTHI, J.---At the instance of the assessee, the following questions are referred by the Tribunal: "(1) Whether, on the facts and in the circumstances of the case, the assessee is entitled to the deduction of the sums of Rs.43,107; Rs.34,200; Rs.60,000; Rs.63,000 and Rs.3,800 (in all aggregating to Rs.2,04,107) as deduction in computing the capital…

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