The actual cost of a capital asset for the purpose of computing capital gains under section 12B(2) of the Income-tax Act, 1922 includes all expenses incurred by the assessee in acquiring the capital asset, but excludes expenses incurred for retaining or maintaining the capital asset.

( 1 ) THE following question has been REFERRED TO to this Court by the Income-tax Appellate Tribunal, Delhi Bench a , (hereinafter REFERRED TO to as the Tribunal) under section 66 (1) of the Income-tax Act, 1922 (hereinafter REFERRED TO to as the Act):-

"whether on the facts and in the circumstances of the case the interest amount of Rs. 16,878. 00 and the ground rent of Rs. 3,793. 00 constituted part of the actual cost of the plot to the assessee for the purpose of determining the capital gain?" The relevant facts as can be gathered from the statement of the case may be briefly stated. On 6-12-1957 Smt. Mithlesh Kumari (hereinafter REFERRED TO to as the assessee) purchased the perpetual lease-hold rights in an open plot of land from one H. R. Gandhi for a consideration of Rs. 95,000. 00. The sale deed, inter alia, provided that in addition to the payment of the price of Rs. 95,000. 00, the assessee shall deposit a sum of Rs. 5,000. 00 either in cash or security on account of building security in the Delhi Improvement Trust within 15 days of the sale deed and that the vendor will be entitled to take back refund of Rs. 5,000. 00 deposited by him with the said authority as building security. The sale deed further provided that under the terms of the perpetual lease under which the vendor held the plot from the Government, he was required to construct a plot on the said plot within a stipulated period which he had failed to do and that the vendor was not liable for any consequences whatsoever of the aforesaid default. As the vendor had committed a breach of the condition of the perpetual lease regarding the construction of a building within the stipulated period, the Government had imposed a penalty of Rs. 5,000. 00 upon the vendor under the terms of the said deed and had recovered the said penalty by appropriating the building security deposited by him. The vendor called upon the assessee to make good the said loss and the assessee complied by paying Rs. 5,000. 00 to the vendor. "the assessee had raised a loan from her mother-in-law, Smt. Ramawati Sanghi, for paying the price of the land. The assessee paid Rs. 16,878. 00 to her mother-in-law by way of interest on the amount borrowed by her. She also paid ground rent amounting to Rs. 3,793. 00. Ultimately, in November 1960 the assessee sold away the land to her mother-in-law for Rs. 1,50,000. 00. In her return for the assessment year 1961-62, the relevant previous year being the year ended on 31-3-1961, the assessee worked out her cost of the land as under :-Deducting this amount from the sale price of Rs. 1,50,000. 00. the assessee disclosed a sum of Rs. 27,829. 00 as capital gains resulting from the purchase and sale of the plot of land.

( 2 ) THE Income-tax Officer held that only the sum of Rs. 1,500. 00 representing the brokerage for the sale of the land could be added to the purchase price of Rs. 95. 000. 00 and that the other items claimed by the assessee could not be added to the cost of the land. He, therefore, computed the capital gains at Rs. 53,500. 00 The assessee preferred TO an appeal to the Appellate Assistant Commissioner against the order of the Income-tax Officer, but the Assistant Commissioner dismissed the appeal. The assessee thereupon preferred TO a second appeal to the Tribunal and the Tribunal held that the following items claimed by the assessee were also includable in the cost of the land :-

"interest Rs. 16,878. 00 Ground rent Rs. 3,793. 00 Penalty Rs. 5,000. 00"

( 3 ) THE Tribunal, therefore, determined the capital gains at Rs. 27,829. 00 as disclosed by the assessee. The Revenue have obviously not disputed the finding of the Tribunal with regard to the penalty of Rs. 5,000. 00 but are challenging the Tribunal s finding with regard to the other two items, namely, Interest-Rs. 16,878. 00 and Ground rent-Rs. 3,793. 00.

( 4 ) SECTION 12b (2) of the Act under which capital gains have to be computed reads as follows:-

"the amount of the cap