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January 2024

Capital gains — Capital loss — Capital asset — Leasehold rights in land is a capital asset — Lease of land granted by State Government with permission to build thereon or sub-lease it — Compensation on subsequent cancellation of lease — Loss sustained was a capital loss

By K. B. Bhujle | Ritu Punjabi, Advocates
Reading Time 3 mins

69 Principal CIT vs. Pawa Infrastructure Pvt. Ltd.

[2023] 457 ITR 392 (Del)

A.Y.: 2013–14

Date of Order: 18th November, 2022

S. 2(14) of ITA 1961

Capital gains — Capital loss — Capital asset — Leasehold rights in land is a capital asset — Lease of land granted by State Government with permission to build thereon or sub-lease it — Compensation on subsequent cancellation of lease — Loss sustained was a capital loss.

The petitioner, a real estate developer, was allotted a plot of land in Goa by the Government in September 2006. The lease deed was executed and registered in favour of the assessee for an initial period of 30 years which could be further extended by 60 years. The assessee had shown the property as a Fixed Asset in its books of account. Due to a change in the policy, the allotment was subsequently cancelled, and the assessee received ₹28,03,68,246. The said amount included compensation of ₹9,86,07,762. After reducing the indexed cost of cancellation of ₹30,49,54,129, the assessee claimed a long-term capital loss of ₹2,45,85,883 in the return of income filed for the A.Y. 2013–14. On scrutiny as

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