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Issues Involved:
1. Whether the compensation received by the assessee can be treated as 'capital gains'. 2. Whether the right conferred upon the assessee by the agreement for sale is "property of any kind". 3. Whether there was a transfer of a capital asset. 4. Whether there was a cost of acquisition of the capital asset. Summary: Issue 1: Compensation as 'Capital Gains' The primary question was whether the compensation of Rs. 1,00,000 received by the assessee from Messrs. B. V. Dhuru and others could be treated as 'capital gains'. The court concluded that the amount of Rs. 82,086, after deducting the cost of acquisition and legal expenses, should be treated as a capital gain in the hands of the assessee. Issue 2: Right as "Property of Any Kind" The court examined whether the right conferred upon the assessee by the agreement for sale constituted "property of any kind" under section 2(14) of the Income-tax Act, 1961. It was determined that the right to obtain a conveyance of immovable property falls within this definition and is, consequently, a capital asset. Issue 3: Transfer of a Capital Asset The court held that when the assessee entered into consent terms and relinquished the right to claim specific performance, there was a transfer of a capital asset within the meaning of the Income-tax Act. This was supported by precedents such as CIT v. Tata Services Ltd. [1980] 122 ITR 594 and CIT v. Sterling Investment Corporation Ltd. [1980] 123 ITR 441. Issue 4: Cost of Acquisition The court agreed with the view that the payment of earnest money under the agreement for sale constituted the cost of acquisition of the capital asset. The Income-tax Officer had correctly deducted Rs. 17,500 as the cost of acquisition and Rs. 17,904 for expenses and legal charges, resulting in a capital gain of Rs. 82,086. Conclusion: The court answered the posed question by stating that the amount of Rs. 82,086 shall be treated as a capital gain in the hands of the assessee. There was no order as to costs.
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