Vacant possession payments may count as transfer cost in capital gains where supported by documentary evidence.

Payments made to occupants or tenants to secure vacant possession for sale may be treated as part of the transfer cost in computing capital gains where the sale deed contemplates delivery of vacant possession and the record shows supporting material such as cheques, receipts, affidavits, an agreement, and bank entries. On those facts, the expenditure was considered incurred wholly and exclusively in connection with the transfer, and it could not be rejected merely on suspicion or in the absence of rebuttal evidence. The eviction payments were therefore allowable in the capital gains computation, and the addition could not be sustained.

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Issues: Whether payments made to occupants/tenants for vacating the property are allowable in computing capital gains as cost of acquisition or expenditure incurred wholly and exclusively in connection with the transfer.

Analysis: The sale deed recorded that vacant possession was to be handed over and preserved the transferee's right to evict occupants through law or negotiation, supporting the assessee's claim that payments were made to secure an encumbrance-free transfer. The payments were supported by contemporaneous cheques, receipts, affidavits, an agreement, and bank entries, and the material on record did not show rebuttal through further inquiry or contrary evidence. In such circumstances, the payments could not be rejected merely on suspicion, and where money is paid to persons in occupation to enable an alienable title to be transferred, the amount is to be treated as part of the transfer cost.

Conclusion: The claim for deduction of the eviction payments was able in the computation of capital gains, and the addition sustained by the first appellate authority could not stand.

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