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Issues involved: Interpretation of cost of acquisition and cost of improvement u/s 48 and 55 of the Income-tax Act, 1961.
Summary: The High Court of Kerala addressed questions regarding the cost of acquisition and improvement of a capital asset under the Income-tax Act, 1961. The case involved an individual inheriting a share of property and incurring expenses to clear a mortgage. The Income-tax Officer treated the amount spent on clearing the encumbrance as the cost of acquisition. The Appellate Assistant Commissioner and the Income-tax Appellate Tribunal upheld this decision, denying the deduction claimed by the assessee for improvement costs. The Tribunal ruled that the expenditure on clearing the mortgage did not qualify as an improvement to the original asset. The Court referred to relevant sections including 45, 48, 49, and 55 of the Act to analyze the case. It was concluded that the amount spent did not represent the cost of acquisition or improvement as defined in the Act. The Court upheld the Tribunal's decision, denying the additional deduction claimed by the assessee. The judgment favored the department, and each party was directed to bear their respective costs.
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