TaxTMI 
TaxTMI 
2015 (9) TMI 999
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....f section 48, amounting to Rs. 38,45,000/-. In the ground no. 4, the assessee has challenged the disallowance of interest of Rs. 7,46,108/-. 3. Brief facts are that, the assessee in the computation of capital gain has claimed an amount of Rs. 38,45,000/- on account of compensation paid to tenant as cost of transfer of capital asset. On the verification of the details filed by the assessee, the Assessing Officer noticed that the assessee has given its factory building along with Plant and machinery to a company named as, M/s Tex-Tube Mfg. Co. Pvt Ltd to run the factory on a conductorship basis. The Assessing Officer further noted that in the "indenture of conductorship", there was no clause for compensation which was required to be paid t....
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....t of both the company and assessee was also sharing its office with M/s Tex-Tube and also shared common expenses in the Profit & Loss Account. The Income-tax Inspector, who was sent to make local enquiry regarding place of working of both the entity, submitted his report that they run there business from same premise. Thus, he held that under these facts and circumstances, the payment of compensation cannot be allowed as deduction and is colourable device to evade tax. 5. The Ld. CIT(A), noted down the sequence of various events and decided the issue in the following manner :- "It is important to highlight the sequence of various events, in this regard, i Date of cancellation of the tenancy agreement With M/s Tex-Tube Mfg. Co. P....
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.... 7- 10-05 took place. Accordingly, the amount of Rs. 38,45,000/- claimed by appellant as cost of transfer and disallowed by AO is upheld. The appellant has claimed that the maintenance expenses of the property should have been allowed towards the cost of transfer for purpose of capital gain on sale of land & building is not maintainable. Section 48 which prescribes the mode of computation of capital gains allows only the following expenditure to be deducted from full value of consideration as received or accrued as a result of transfer of capital asset, viz. (i) expenditure incurred wholly and exclusively in connection with such transfer and (ii) the cost of acquisition of the asset and the cost of improvement thereto. The maintena....
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.... 35 ITD 285 (Bom) 4 Ketan Bolinjkar vs Asst. CIT 2 SOT 868 (Mum) 5 CIT vs Pitty Bros P Ltd. 1 taxman 252 (Bom) 7 Regarding issue raised in ground no. 4, with regard to disallowance of claim of deduction of office and administrative expenditure amounting to Rs. 7,46,108/-, it is seen that, authorities below have noted that the assessee's only source of income was capital gain and interest income and no business was carried out by the assessee for last several years. The surplus funds have been invested for earning of interest income and no business activity as such was carried out. The Assessing Officer has already allowed certain expenses, which have nexus with the earning of 'interest income'. Thus, the Asse....
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....ilding along with the machinery to M/s Tex-Tube Mfg. Co. P. Ltd. to run the factory on conductorship basis as per the "Indenture of Conductorship" dated 01.12.1995 for the period of five years. This agreement was uptil 20.11.2000. Thereafter, it is not borne out from the records as to whether this indenture of conductorship was continued or renewed further on paper. Thereafter, on 18.02.2005, the assessee had entered into "cancellation of tenancy agreement" dated 18.02.2005, wherein, the assessee agreed to pay Rs. 38,45,000/- for vacating the premise. Thereafter, the assessee entered into Conveyance Deed with M/s Pravin Wipers and Ancilary Pvt Ltd. for transferring the property whereby a consideration of Rs. 2,88,00,000/- (which consists of....
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....g the premise. This is more so here in this case when the main Director of both the companies is common. Under facts and circumstances as noted by the AO & CIT(A), we find that such a compensation amount paid by the assessee cannot be claimed as deduction while computing the long-term-capital-gain, therefore, finding given by the CIT(A) is confirmed and accordingly ground No. 1, 2 & 3 raised by the assessee are dismissed. 10. Regarding second issue, we find that the assessee's interest income has already been held to be taxable under the head "income from other sources" and whatever amount which are attributable or is having direct nexus for earning of interest income has been allowed by the Assessing Officer. Over and above, we are of t....