Capital gains deduction for settlement payments denied where no credible evidence showed nexus with property transfer.

Payments claimed as settlement expenses or enhanced transfer cost were rejected in capital gains computation because the assessee failed to prove a genuine, necessary nexus with the property transfer. The alleged settlement payment was unsupported by reliable evidence of any enforceable liability, while the compromise record indicated unconditional withdrawal of the suit and did not show that the payment improved title or was required for transfer. The claimed payment to another party was also unsubstantiated, as the material showed he had already received his share and no further entitlement was proved. The disallowance was upheld, and the amounts were not allowed as cost of acquisition or transfer-related expenditure.

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Issues: Whether the amounts of Rs. 36,00,000 paid to settle the suit filed by Kisan S. Kharat and Rs. 25,00,000 paid to Bharat B. Choudhari could be treated as deductible expenditure or enhanced cost connected with transfer of the land for computing capital gains.

Analysis: The payment claimed for settlement of the suit was not supported by reliable evidence showing that the assessee was under any enforceable liability to make such payment. The compromise record showed unconditional withdrawal of the suit and did not establish that the assessee's alleged payment was necessary for transfer of the property or that it improved title. The alleged installment payments were also inconsistent with the surrounding chronology and were found to be self-serving. As regards the payment to Bharat B. Choudhari, the material showed that he had already received his share in the property transaction, and no credible evidence established any further entitlement or any actual improvement in title or property. The claimed payments were therefore not proved to have been laid out wholly and exclusively in connection with the transfer.

Conclusion: The disallowance of the claimed expenditure was upheld and the amount of Rs. 61,00,000 was not allowed as cost of acquisition or transfer-related expenditure.

Ratio Decidendi: A claimed payment will not be allowed as part of the cost or transfer expenditure in capital gains computation unless the assessee proves a genuine and necessary nexus between the payment and the transfer, supported by credible evidence and not merely by a self-serving arrangement.

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