1984 (3) TMI 98 - AT - Income Tax

Summary

Issues:
1. Allowance of expenses incurred in challenging compensation under section 48(i) of the Income-tax Act, 1961.
2. Entitlement to relief under section 54E(3) for additional compensation received.
3. Application of sections 155(7A) and 54E(3) to assessments involving additional compensation.

Detailed Analysis:

1. The first issue pertains to the allowance of expenses incurred by the assessee in challenging the compensation awarded. The Revenue contended that such expenses cannot be allowed under section 48 of the Act. However, the Tribunal disagreed, stating that section 48(i) permits expenditure incurred wholly and exclusively in connection with the transfer. The Tribunal emphasized that without the expenses incurred in challenging the compensation, the assessee would not have obtained a higher compensation. The Commissioner (Appeals) had initially directed the ITO to allow the expenditure under section 48(i), and the Tribunal saw no reason to differ from this decision.

2. The second issue revolves around the entitlement to relief under section 54E(3) for the additional compensation received. The Revenue argued that the assessee was not entitled to this relief and cited a previous decision. However, the Tribunal noted that the Commissioner (Appeals) had directed the allowance of expenses under section 48(i) but rejected the claim under section 54E(3). The Tribunal opined that the claim under section 54E(3) should be considered, especially considering the delays in compensation awards and the legislative provisions under sections 155(7A) and 54E(3). It held that the assessee was entitled to relief under section 54E(3) and directed the ITO to grant the same after verification.

3. The final issue involves the application of sections 155(7A) and 54E(3) to assessments involving additional compensation. The Tribunal highlighted the provision of section 155(7A), which mandates the rectification of assessments when the compensation is enhanced. It explained that section 54E(3) provides for exemption when the enhanced compensation is invested in specified assets. The Tribunal emphasized that these provisions apply to all assessments involving additional compensation, regardless of the year of acquisition. Consequently, the Tribunal dismissed the appeal filed by the Revenue, affirming the entitlement of the assessee to relief under section 54E(3) and directing the ITO to grant the same post verification.