Case Note & Summary
The case involves an appeal by the Revenue under Section 260A of the Income Tax Act, 1961, against the order of the Income Tax Appellate Tribunal (ITAT). The assessee, Shri Kamlakar Moghe, inherited a property under a Will executed by his mother, Kamlabai Moghe, which contained a clause providing an overriding title in favor of his sisters. To avoid future claims, the assessee entered into a family settlement and paid Rs.15 lakh each to his three sisters and Rs.5 lakh each to his three nieces, totaling Rs.60 lakhs. Upon sale of the property, the assessee claimed a deduction of Rs.45 lakhs under Section 48(1) as cost of acquisition and Rs.22 lakhs under Section 54EC for investment in REC Bonds. The Assessing Officer disallowed these deductions, but the ITAT allowed them. The Revenue appealed, raising two questions of law: whether the ITAT was justified in allowing deduction under Section 48(1) and under Section 54EC. The High Court, after hearing both sides, found that no substantial questions of law arose. The court noted that the payments to the sisters and nieces were made to clear the overriding title and thus constituted cost of acquisition. The investment in REC Bonds was within the prescribed period and met the conditions of Section 54EC. Consequently, the appeal was dismissed, upholding the ITAT's order.
Headnote
A) Income Tax - Capital Gains - Deduction under Section 48(1) - Cost of Acquisition - Assessee paid Rs.45 lakhs to his sisters and nieces to settle their overriding title in property inherited under a Will - Held that such payment is part of cost of acquisition and deductible under Section 48(1) (Paras 2-3). B) Income Tax - Capital Gains - Deduction under Section 54EC - Investment in REC Bonds - Assessee invested Rs.22 lakhs in REC Bonds within the prescribed period - Held that deduction under Section 54EC is allowable as the investment was made in specified bonds (Para 2).
Issue of Consideration
Whether the ITAT was justified in allowing deduction of Rs.45 lacs under Section 48(1) and Rs.22 lacs under Section 54EC of the Income Tax Act, 1961.
Final Decision
Appeal dismissed. No substantial questions of law arise. ITAT order upheld.
Law Points
- No substantial question of law
- Deduction under Section 48(1) as cost of acquisition
- Deduction under Section 54EC for investment in REC bonds
- Family settlement as overriding title
