Issues:

1. Whether the sale of the property by the assessee, which was acquired through a bequest under a Will, attracts short-term capital gains tax?
2. Whether the payments made by the assessee to others asserting rights over the property qualify for deduction under Section 55(1)(b)(2)(ii) of the Income Tax Act, 1961?
3. Whether the conversion of perpetual leasehold rights to complete ownership by the assessee can be considered as a cost of acquisition?
4. Whether the payments made by the assessee to remove encumbrances on the property can be considered as part of the cost of acquisition?
5. Whether the payments made by the assessee to the trust and the agreement-holder were genuine and valid?

Analysis:

In this case, the Revenue raised two main issues. Firstly, they argued that the sale of the property by the assessee, which was acquired through a bequest under a Will, attracts short-term capital gains tax. However, the court held that the acquisition of the property took place upon the bequest under the Will being effective, and the perfection of the title from perpetual leasehold rights to complete ownership was a cost of acquisition, not a separate acquisition. Therefore, the short-term capital gains tax did not apply.

Secondly, the Revenue contended that the payments made by the assessee to others asserting rights over the property did not qualify for deduction under Section 55(1)(b)(2)(ii) of the Income Tax Act. The court, however, recognized the principle established in a Supreme Court judgment that the discharge of encumbrances on a property can be considered as part of the cost of acquisition. Therefore, the payments made by the assessee to remove encumbrances on the property were considered as part of the cost of acquisition, subject to the assessment of the genuineness and validity of such encumbrances.

The court also mentioned that the genuineness and validity of the payments made to the trust and the agreement-holder could not be examined at this level, as matters of fact are not within the jurisdiction of the court. The Commissioner (Appeals) and the Appellate Tribunal were the final fact-finding authorities in this regard, and their concurrent opinion on the genuineness of the transactions had to be accepted.

Conclusion:

In conclusion, the court dismissed the appeal raised by the Revenue and upheld the decision of the Appellate Tribunal. The court held that the sale of the property by the assessee did not attract short-term capital gains tax, and the payments made by the assessee to remove encumbrances on the property qualified as part of the cost of acquisition. The genuineness and validity of the payments made to the trust and the agreement-holder were left to the determination of the Commissioner (Appeals) and the Appellate Tribunal.