1999 (3) TMI 67

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....h the sale of the property of the business of the assessee allowable under section 48(i) of the Income-tax Act, 1961 ?" The material facts giving rise to this reference are as under : The assessee, who was carrying on the business of exhibiting films, closed its business in March, 1972, and the property consisting of land and building was sold. The assessment which was originally made on September 18, 1978, was set aside and fresh assessment was made. The Income-tax Officer, who was asked to make a fresh assessment, referred the matter for valuation of the property to the Valuation Officer. On the basis of the valuation report, the Income-tax Officer took the value of the property as on January 1, 1954, at Rs. 7,31,000 and assessed the c....

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....paid by the assessee to its employees was expenditure wholly and exclusively incurred in connection with the agreement of sale and hence allowable as a deduction under section 48(i) of the Act. Hence, this reference at the instance of the Revenue. We have heard Mr. R. V. Desai, learned counsel for the Revenue, who submits that the retrenchment compensation paid by the assessee to its former employees was not in connection with the transfer of the assets by the assessee to the purchasers but it arose out of the decision taken by the assessee to close down its business. The stipulation in the agreement, which makes it obligatory on the part of the assessee to clear all its liabilities to its employees including liabilities on account of gr....

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....sessee to its former employees can be regarded as an expenditure incurred wholly and exclusively in connection with the transfer of land and building by the assessee to the purchaser. The expenditure incurred wholly and exclusively in connection with the transfer can be expenditure like commission paid to the broker and/or similar other expenditure, The retrenchment compensation paid by the assessee to its employees, in our opinion, has no connection whatsoever with the transaction of sale of the land and building. It is connected only with the closure of the business of the assessee in March, 1972. Such an expenditure by no stretch of imagination can be regarded is expenditure incurred wholly and exclusively for the purpose of the transact....