Surplus arising after termination of a development arrangement...

Surplus arising after termination of a development arrangement and transfer of consolidated property rights is distinguished from compensation for destruction of a profit-making apparatus. Where contractual restraints prolonged the commercial sterilisation of rights, termination restored pre-existing rights and acquisition of reversionary rights completed a transferable bundle; on these facts, the surplus was treated as taxable capital gains rather than a non-taxable capital receipt or business income. A business-income disallowance under section 40(a)(ia) was considered inapplicable to capital-gains computation. Expenditure or liability directly connected with removing encroachments and resolving boundary disputes may be allowable when genuinely incurred and sufficiently crystallised, subject to verification of documents, quantum, and nexus with the transfer.

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