1979 (6) TMI 57 - AT - Income Tax

Summary

Issues:
1. Disallowance of claims under s. 54D of the Act and deduction of Rs. 1 lakh in the computation of capital gains.

Detailed Analysis:
The appeal was filed by the assessee against the order of the AAC of Income-tax, Bangalore, disallowing two claims. The first claim was under s. 54D of the Act, and the second claim was for the deduction of Rs. 1 lakh in the computation of capital gains. The assessee, a private limited company, owned land and buildings in Bangalore, a portion of which was acquired for road widening purposes. The assessee received compensation, damages, and statutory allowance totaling Rs. 3,57,026. The ITO and AAC rejected both claims, leading to the appeal.

During the appeal hearing, the assessee did not press for relief under s. 54D as some conditions were not met, confirming the lower authorities' decision on this issue. However, the assessee pressed the claim for the deduction of Rs. 1 lakh, arguing that the tenant was entitled to compensation under the Land Acquisition Act, and a proportionate amount should be allowed as a deduction.

The Departmental Representative contended that the assessee had no obligation to pay the tenant and that s. 48 was not applicable as the payment was not an expenditure connected with the transfer. The counsel for the assessee argued that the tenant had a right to compensation, and the amount paid to the tenant should be deducted from the capital gains.

The Tribunal agreed with the assessee's counsel, citing legal principles that in cases of land acquisition, where one party receives more compensation than their share, they must account to the other party. The Tribunal noted that the tenant, being a person interested in the acquired property under the Land Acquisition Act, was entitled to compensation.

The Tribunal found that the tenant was entitled to compensation and held that the assessee should pay a reasonable amount as compensation. The Tribunal determined that the tenant was entitled to at least Rs. 75,000 as compensation, and this amount should be deducted from the capital gains. Consequently, the assessee's appeal was allowed in part.