9911796707
TMI Blog1984 (5) TMI 56X X X X Extracts X X X X X X X X Extracts X X X X ..... incurred wholly and exclusively in connection with such transfer. Accordingly, he computed the capital gain. 2. The assessee appealed to the Commissioner (Appeals). In the original grounds of appeal the ground relating to deduction of legal expenditure was not taken. But that ground was taken by way of additional ground which was admitted by the Commissioner (Appeals). Dealing with the additional ground on merits, he held that the sum of Rs. 58,064 being the legal expenditure incurred in connection with the determination of compensation is an allowable deduction in computing the capital gain. Accordingly, he directed the ITO. Against the same, the revenue has preferred this appeal. 3. In the grounds it is urged that the Commissioner (Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mprovement thereto." Under the above provision, the expenditure incurred wholly and exclusively in connection with such transfer and the cost of acquisition of the capital asset and the cost of improvement thereto is allowable as deduction from the full value of the consideration received. The question for consideration is whether the legal expenditure incurred by the assessee in respect of determination of the compensation in the civil court is an allowable deduction under section 48. In our view the claim of the assessee is allowable. Under section 48 the expenditure incurred wholly and exclusively in connection with transfer is an allowable deduction. The compensation awarded by the LAO was not accepted by the assessee and the matter w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs. 6. In V.A. Vasumathi v. CIT [1980] 123 ITR 94 the Kerala High Court considered the question whether the legal expenditure incurred in the civil court subsequent to the award in connection with enhancement of compensation is an allowable expenditure. The Kerala High Court held that where a reference is made under section 20 of the Land Acquisition Act, the litigation which results therefrom is a proceeding intimately and intrinsically connected with the acquisition and all expenditure wholly and exclusively incurred in connection with such litigation is, therefore, an expenditure within the meaning of section 48. The above decision was again approved by the same Court in CIT v. Dr. P. Rajendran [1981] 127 ITR 810. It was held by the D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that have to be applied are those which are a part of the commercial practice or which an ordinary man of business will resort to when making computation for his business purposes. In CIT v. Mohanbhai Pamabhai [1973] 91 ITR 393 the Gujarat High Court dealing with section 45 of the Act held that the object of charging provision is to tax 'profits or gains' and this expression means real or net profits or gains. The ratio laid down in the above cases squarely applies to the instant case. The legal expenditure incurred in litigation before the civil court in connection with enhancement of the compensation awarded by the LAO is an allowable expenditure under section 48 while computing the capital gains. The Commissioner (Appeals) was perfect ..... X X X X Extracts X X X X X X X X Extracts X X X X
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