Cost of acquisition dispute over settlement payment and litigation expenses required fresh verification before capital gains computation.

Settlement payments made to clear title to immovable property and litigation expenses connected with the property dispute were considered for possible inclusion in the cost of acquisition for short-term capital gains. The dispute between the seller and the original agreement holder was pending and the suit had been dismissed on settlement outside court, but the relevant details and supporting evidence for the claim had not been furnished before the AO. As the assessee stated it could produce the documents and the record showed the claim required verification, the issue was sent back for fresh examination and decision in accordance with law.

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Issues: Whether the settlement amount paid to clear title to the immovable property and the litigation expenses incurred in connection with the property dispute were liable to be treated as part of the cost of acquisition for computing short-term capital gain.

Analysis: The dispute relating to the property was admittedly pending between the seller and the original agreement holder, and the suit was dismissed upon settlement outside the court. The assessment order recorded that the relevant details and evidences regarding the settlement payment and litigation expenses were not furnished before the Assessing Officer. Since the assessee expressed readiness to produce the supporting documents and the material on record showed that the claim required verification, the issue called for fresh examination by the Assessing Officer.

Conclusion: The matter was remanded to the Assessing Officer for verification of the supporting documents and for deciding the claim in accordance with law.

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