Law: Income Tax Act, 1961

Section: 48,55

Income-tax---Capital gains---Deductions---Cost of improvement---Property sold to Bombay Municipal Corporation---Compensation paid for eviction of hutment dwellers from land---Removal of hutment dwellers improved value of lands---Expenditure incurred for vacating land amounted to cost of improvement under S.48(ii)---Expenditure allowable -Indian Income Tax Act, 1961, Ss. 48 & 55. The assessee, and other co-owners owned a certain piece of land at A. The property was notified for a public purpose under the Maharashtra Regional Town Planning Act, 1966, read with the Land Acquisition Act, 1894, and the property was subsequently sold to the Bombay Municipal Corporation by negotiation-cum-acquisition. The property was taken over by the Bombay Municipal Corporation for a consideration of Rs.14,33,190. In the computation of capital gains, the assessee claimed deduction of the expenditure incurred as compensation to the hutment dwellers for vacating the land. The Commissioner of Income-tax exercising his powers under section 263 of the Income Tax Act, 1961, disallowed the expenditure granted by the Income-tax Officer. The Tribunal held that it was allowable. On a reference: Held, that by eviction of the hutment dwellers from the land, the value of the land increased and, therefore, the expenditure incurred for vacating the lands certainly amounted to cost of improvement. Accordingly, the expenditure incurred on payment of compensation was an allowable deduction. CIT v. Shakuntala Kantilal (1991)' 190 ITR 56 (Bon.) and Hardiallia Chemicals Ltd. v. CIT (1996) 218 ITR 598 (Bon.) fol. JUDGMENT At the instance of the Department, the Tribunal has referred the following question for the opinion of this Court for the assessment year 1975-76: "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the amount of Rs.2,30,000 being compensation paid by the assessee and other co-owners to the hutment dwellers for vacating the land was an allowable expenditure within the meaning of section 48 read with section 55 of the Income Tax Act, 1961, in the assessment year 1975-76?" The assessee and other co-owners owned a certain piece of…

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