Sale transferred ownership not tenancy; market value on specified earlier date is allowable cost for computing capital gains

HC affirmed the Tribunal's factual finding that the sale transferred ownership of the building, not mere tenancy rights, and that deduction for capital gains must be the cost of ownership. The Tribunal remanded to the AO to determine the market value of the building as on the specified earlier date and allow that as the cost of the asset for computing capital gains. The appellate authority's nominal valuation was set aside; no interference with the Tribunal's factual conclusion. Appeal dismissed.

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Issues involved: Determination of cost of acquisition for a property and deductibility of amount paid to remove encumbrance.

Cost of acquisition: The dispute centered around the cost of acquisition of a property sold via a sale deed dated May 2, 1992. The Assessing Officer initially valued the property at Rs. 750 per sq. ft. as of April 1, 1981, resulting in an acquisition value of Rs. 36,03,680 after applying the cost index. However, the appellate authority disagreed, considering the assessee as a tenant and valued the cost of acquisition at a nominal amount of Rs. 2,500. The Tribunal, upon appeal, determined that the sale deed transferred the building itself, not just tenancy rights, and remanded the matter to the Assessing Officer to ascertain the market value of the property as of August 4, 1983, for calculating capital gains. The Tribunal's factual finding was upheld, leading to the dismissal of the appeal.

Amount paid to remove encumbrance: Prior to the property sale in 1992, an amount of Rs. 8 lakhs was paid to the assessee's son to resolve a dispute and remove an encumbrance. The Tribunal, citing a relevant court judgment, allowed the deduction of this amount as it was spent to eliminate the encumbrance. The Tribunal's determination was upheld as a factual finding, with no grounds for interference found.

Conclusion: The High Court found no substantial question of law in the appeal and consequently rejected it. The factual findings regarding the cost of acquisition and deductibility of the amount paid to remove encumbrance were upheld, leading to the dismissal of the appeal.

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