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The only effective issue involved in this appeal is as to whether the ld CITA was justified in confirming the disallowance of capital loss of 78,60,000/- which was set off against capital gain of 94,48,000/- received on sale of property at Gurgaon. The AO disallowed the loss of 78,60,000/- claimed by the assessee on the ground that the said loss had got nothing to do with the sale of property at Gurgoan and the liability incurred by the assessee by paying extra compensation to the trust amounting to 78,60,000/- is only his personal liability. Held that— we find that the assessee at the first instance had purchased a flat at Gurgoan for the purpose of usage of the trust activities only. But since the trust refused to accept any property other than in the fringe locality of Kolkata and due to heavy pressure applied by the said trust on the assessee to locate a property in Kolkata for pursuing its charitable objects, the assessee was forced to sell the flat at Gurgoan and utilize the proceeds thereon for purchasing a property at Rajarhat, Newtown in the name of the trust for a higher amount due to huge rise in real estate market and due to effluxion of time.
But it cannot be brushed aside that the assessee was having the said flat at Gurgoan together with an attached encumbrance of amounts drawn by him from the said trust which had to be compensated in future either in cash or in kind for the benefit of the trust. Hence there was an attached encumbrance in the form of a contractual obligation to be fulfilled by the assessee to the trust. As decided in COMMISSIONER OF INCOME TAX, KOL-XI VERSUS SATYABRATA DEY [2014] [CALCUTTA HIGH COURT] unless the assessee had settled the dispute, the sale transaction could not have materialised and the sale consideration had to be reduced by the amount of compensation paid – the expression used in section 48 of the Act, expenditure incurred wholly and exclusively in connection with such transfer has wider connotation than the expression, ‘for the transfer’ - the transfer would not have taken place and the payment has necessarily to be made for the transfer of the hotel - the sum was expended by the assessee wholly and exclusively in connection with the transfer of the capital asset and not de hors the transfer – Decided against Revenu

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Section 45, 48 of Income Tax act, 1961—Disallowance of capital loss— The only effective issue involved in this appeal is as to whether the ld CITA was justified in confirming the disallowance of capital loss of 78,60,000/- which was set off against capital gain of 94,48,000/- received on sale of property at Gurgaon.

The AO disallowed the loss of 78,60,000/- claimed by the assessee on the ground that the said loss had got nothing to do with the sale of property at Gurgoan and the liability incurred by the assessee by paying extra compensation to the trust amounting to 78,60,000/- is only his personal liability.

Held that— we find that the assessee at the first instance had purchased a flat at Gurgoan for the purpose of usage of the trust activities only. But since the trust refused to accept any property other than in the fringe locality of Kolkata and due to heavy pressure applied by the said trust on the assessee to locate a property in Kolkata for pursuing its charitable objects, the assessee was forced to sell the flat at Gurgoan and utilize the proceeds thereon for purchasing a property at Rajarhat, Newtown in the name of the trust for a higher amount due to huge rise in real estate market and due to effluxion of time.
But it cannot be brushed aside that the assessee was having the said flat at Gurgoan together with an attached encumbrance of amounts drawn by him from the said trust which had to be compensated in future either in cash or in kind for the benefit of the trust. Hence there was an attached encumbrance in the form of a contractual obligation to be fulfilled by the assessee to the trust.

As decided in COMMISSIONER OF INCOME TAX, KOL-XI VERSUS SATYABRATA DEY [2014] [CALCUTTA HIGH COURT] unless the assessee had settled the dispute, the sale transaction could not have materialised and the sale consideration had to be reduced by the amount of compensation paid – the expression used in section 48 of the Act, expenditure incurred wholly and exclusively in connection with such transfer has wider connotation than the expression, ‘for the transfer’ - the transfer would not have taken place and the payment has necessarily to be made for the transfer of the hotel - the sum was expended by the assessee wholly and exclusively in connection with the transfer of the capital asset and not de hors the transfer – Decided against Revenue.[JAMSHED ALI MOLLA VERSUS DCIT, CIRCLE-30, KOLKATA] [2018] [7] [ITCD Online] [30] [ITAT KOLKATA]