23 April 2011
1. In ITO v. G. Thangavel Gounder (1981) 12 TTJ (Mad-Trib) 273, the expenditure in getting the property vacated was held to be an allowable deduction under section 48(i). In this case the assessee owned a shop. He incurred certain expenditure in getting it vacated from the tenant. The assessee sold the shop and claimed that the sum of Rs. 17,000 paid to the tenant for vacation was allowable as deduction in the computation of capital gains. It was held that the payment was made wholly and exclusively in connection with the sale. Also see CIT v. Shakuntala Rajeshwar (1986) 160 ITR 840 (Del). In CIT v. A. Venkataraman (1982) 137 ITR 846 (Mad), the amount paid to tenants for vacating the property was held to be deductible. Also refer to Naozar Chenoy v. CIT (1998) 234 ITR 95 (AP). 2. (i) The tenancy right is a capital asset and as there is no prohibition against transfer of such right, the consideration received by assessee, as tenant for surrendering that right was taxable as capital gains, attracting section 45. (ii) Tenancy right is transferable property and its surrender would result in the right being extinguished and would, therefore, amount to transfer of capital asset within the meaning of the IT Act. (iii) Consideration received in lieu of surrender of tenancy rights is a capital receipt assessable under the head ‘Capital gains”.—Vide CIT v. Mahendra R. Divecha (2006) 192 Taxation 319 (Guj) : (2005) 199 CTR (Guj) 721. CA MANOJ GUPTA JODHPUR 09828510543
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