COMMISSIONER OF INCOME TAX Vs. PIROJA C PATEL

JUDGEMENT

(1.) AT the instance of the Department, the Tribunal has referred the following question for the opinion of this Court for the asst. year 1975 -76 :

(2.) THE assessee and other co -owners owned a certain piece of land at Andheri admeasuring 10,577 sq. mtrs. The property was notified for a public purpose under the Maharashtra Regional Town Planning Act, 1966, r/w the Land Acquisition Act, 1894. The property was subsequently sold to the Bombay Municipal Corporation by negotiation -cum -acquisition. This was under the provisions of the Maharashtra Regional Town Planning Act, 1966, r/w the Land Acquisition Act, 1894. The property was taken over by the Bombay Municipal Corporation on 14th June, 1973, on payment of total consideration of Rs. 14,33,190. On the property, there were 23 hutment dwellers. They claimed occupancy rights over the land. By an agreement dt. 8th March, 1973, the hutment dwellers agreed to vacate the land on payment of Rs. 2,30,000. The assessee and other co -owners sought deduction of this amount together with other expenditure incurred by way of legal expenses from the capital gains as expenditure incurred on account of transfer of the property. The AO allowed this expenditure. The CIT came to the conclusion that the deduction was erroneous and prejudicial to the interests of the Revenue. Accordingly, the matter was taken up in revision under S. 263 of the IT Act. After notice to the assessee, the CIT disallowed the expenditure. Being aggrieved by the order of the CIT, the assessee preferred an appeal before the Tribunal. Following an earlier ruling of the Tribunal, the appeal preferred by the assessee came to be allowed. The Tribunal came to the conclusion that giving vacant possession of the land to the Municipal Corporation was a condition precedent under the terms of the negotiation -cum -acquisition agreement and that by removing hutment dwellers, the property improved in value. On the above facts, the question stated hereinabove has been referred to this Court for opinion.