Monday, October 24, 2016

Sum paid to brothers for vacating house held as cost of improvement of house

Facts:

a) The assessee had shown income from long-term capital gain from sale of house property.

b) It claimed deduction of certain amount paid to brothers for vacating the house as expenditure incurred for improvement of asset.

c) The Assessing Officer declined such claim on the ground that the assessees were the sole occupant of their property and brothers were neither living in capacity of a tenant nor were paying any rent.

d) On appeal, the CIT (Appeals) affirmed the findings of the Assessing Officer. The aggrievedassessee filed the instant appeal.

The Tribunal held as under:

1) In the present appeals, situation was required to be appreciated, keeping in mind social circumstances and the relationship of the brothers. What was their settlement while residing together? What was feeling of elder brother towards their younger brother, when they displaced them from a property where they were residing for last more than 24 years?
2) If both the brothers, who were residing in the house refused to vacate the house, then, what would be the situation before assessee? The assessee has to file a suit for possession which would consume more than ten to fifteen years. The prospective buyers may not be available in such circumstances.

3) Thus, it could be said that the payments were made for improvement of title of the property and assessee was entitled to claim deduction while computing capital gains on sale of property. - [2016] 74 taxmann.com 113 (Ahmedabad - Trib.)
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