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2022 (2) TMI 973 - AT - Income TaxDeduction u/s 48(i) - expenditure incurred wholly and exclusive in connection with the transfer of Long Term Capital Asset - Payment necessary to clear the encumbrance and perfect the title over the property - HELD THAT:- Any amount paid for removing encumbrance without which the sale or transfer could not be effected, is allowable as deduction u/s 48(i) of the Act. Similar is the view expressed by the Hon’ble Madras High Court in case of V Laxmi Reddy vs ITO [2010 (11) TMI 367 - MADRAS HIGH COURT]. In fact, the Hon’ble jurisdictional High Court in case of CIT VS Abrar Alvi [2000 (3) TMI 20 - BOMBAY HIGH COURT] while dealing with similar issue relating to payment by the father to his son to remove the encumbrance, held that the payment made is allowable under section 48(i) of the Act. In the facts of the present case, undisputedly, the payment made by the assessee to M/s Colo Colour Pvt Ltd is certainly for removing encumbrance and perfecting the title over the property sold. Otherwise, the transaction would have failed. Thus, considered in the light of the ratio laid down in the decisions cited before us, we are of the view that the amount paid by the assessee to M/s Colo Colour Pvt Ltd is an expenditure in connection with transfer of a capital asset as per section 48(i) of the Act; hence allowable.
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