1979 (1) TMI 131 - AT - Income Tax

Summary

Issues:
- Contention regarding exclusion of expenses incurred by the assessee forming part of the cost of acquisition of the property and cost of improvement while calculating capital gains.

Analysis:
The judgment revolves around the exclusion of various expenses incurred by the assessee that are considered part of the cost of acquisition of the property and the cost of improvement. The assessee purchased a plot in an auction and incurred expenses for constructing a building on it before selling it. The Income Tax Officer (ITO) and the Appellate Authority confirmed the exclusion of certain expenses, leading to the appeal before the Tribunal.

The first item in question was an expenditure of Rs. 2,412 incurred for obtaining a warrant for possession and other related expenses. The Tribunal disagreed with the lower authorities' decision to disallow the entire amount, estimating that Rs. 1,000 should be disallowed, and the balance considered for calculating capital gains.

The next item was Rs. 100 claimed to have been paid to a specific authority, which lacked proof of payment. The Tribunal excluded this amount from consideration due to the absence of evidence.

Another item of Rs. 1,262 related to ground rent payments for different periods. The ITO disallowed it for not being related to the assessment year under consideration. However, the Tribunal held that the expenditure before acquiring possession of the plot should be considered as the cost of acquisition, directing the deduction of Rs. 480 while disallowing Rs. 782.

Furthermore, penalties paid for non-construction of the building and house tax amounts were also contested. The Tribunal directed the inclusion of penalties paid to the authority and a portion of the house tax in the computation of capital gains, considering them as part of the cost of acquisition or improvement.

The judgment also addressed the salary of a Chowkidar and various other expenses, reducing the disallowed amounts based on the nature and circumstances of the expenses. Ultimately, the Tribunal partly allowed the appeal, directing specific amounts to be considered as the cost of acquisition and improvement in calculating capital gains.