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Issues:
1. Deduction of amounts of Rs. 20,000 and Rs. 35,000 in computing capital gains. Detailed Analysis: The case involved an appeal by the Revenue regarding the assessment year 1982-83, where the assessee, an individual, executed a deed of sale for a property in Madras. The deed detailed various financial aspects, including the retention of Rs. 20,000 and Rs. 35,000 for discharging mortgage liabilities and legal expenses, respectively. The Income Tax Officer (ITO) did not allow these amounts as deductions in computing capital gains, resulting in a capital gain of Rs. 49,950. The assessee appealed, and the Appellate Authority Commissioner (AAC) allowed both amounts as deductions. The Revenue challenged this decision. Regarding the deduction of Rs. 20,000, the departmental representative argued that it was not justified as it was the amount due to the assessee, which the purchaser was to collect. However, the counsel for the assessee contended that since rental income had been assessed annually, there was no basis for taxing the Rs. 20,000 amount again. The Tribunal held that the Rs. 20,000 was part of the consideration for the property sale, assigned to the purchaser for recovering rent, and thus not eligible for deduction. The Tribunal reinstated this amount in the capital gains computation. Concerning the deduction of Rs. 35,000 for legal expenses, the departmental representative claimed that these expenses were not quantified or expended exclusively for the transfer, citing a relevant court case. However, the Tribunal analyzed the situation, noting that the property was occupied by a tenant for several years, and the amount was provided to the purchaser for potential litigation expenses to secure vacant possession. The Tribunal found the Rs. 35,000 to be a justifiable expenditure incurred by the assessee in connection with the transfer, essential for selling the property free of encumbrances. Consequently, the Tribunal upheld the AAC's decision to allow the deduction of Rs. 35,000. In conclusion, the Tribunal partially allowed the appeal, reinstating the Rs. 20,000 amount in the capital gains calculation but upholding the deduction of Rs. 35,000 for legal expenses incurred in connection with the property transfer.
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