1984 (12) TMI 45

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..... nd in the circumstances of the case, the Income-tax Appellate Tribunal is right in law in not agreeing with the Department's contention that the tenant's right purchased for Rs. 15,000 by the assessee formed a distinct asset, the transfer of which gave rise to short-term capital gains ? " The reference arises out of an order of assessment made on the assessee, an individual, for the assessment year 1976-77. The accounting year ended on March 31, 1976. The land belonging to the assessee was acquired by the Government. He received the entire compensation inclusive of the customary share which a tenant is ordinarily entitled to out of such compensation. The assessee had incurred legal expenses of Rs. 5,500 and had paid compensation of Rs. 15 .....

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..... asset the following amounts, namely: (i) expenditure incurred wholly and exclusively in connection with such transfer ; (ii) the cost of acquisition of the capital asset and the cost of any improvement thereto." There is no difficulty in accepting the claim of the assessee in regard to the legal expenses. The assessee undisputedly incurred legal expenses amounting to Rs. 5,500 for obtaining compensation for compulsory acquisition of his land. It can, therefore, be properly considered as an expenditure incurred wholly and exclusively in connection with such transfer under section 48(i). No assessee could be denied the legal expenses incurred for obtaining the compensation for compulsory acquisition of the property. Our view finds supp .....

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..... ection with such transfer. The transfer contemplated herein is only one transfer, i.e., a compulsory acquisition of property by the State and any payment made by the landlord to the tenant in regard to surrender of tenancy right cannot be considered as an expenditure incurred in connection with compulsory acquisition. Therefore, the Tribunal was not right in allowing Rs. 15,000 under section 48(i) of the Act. In the view that we have taken, the second question does not call for an answer, since the authorities have not assessed the short-term capital gains in the hands of the assessee. In the result, we answer question No. 1 in the affirmative so far as it relates to the deduction of the legal expenses of Rs. 5,500 and answer the questi .....

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