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2023 (7) TMI 900 - AT - Income TaxDeduction of expenses from capital gain - Amount paid to avoid to litigation, claimed as deduction against the short-term capital gain - sham transaction or not - HELD THAT:- There is no allegation of the revenue based on the documentary evidence that the payment made by the assessee has come back to the assessee in any form directly or indirectly. Besides the company namely Frontline Financial Services Ltd has also given undertaking to the assessee that it will be solely responsible for the tax liability on the payment received by it. All these facts discussed above were very much available before the authorities below. Despite that no proceeding against the company has been initiated by the revenue by issuing a notice u/s 148 - It is not out of the place to mention that there are certain loopholes in the transaction carried out by the assessee with the company namely Frontline Financial Services Ltd but the same cannot be used against the assessee. It is also important to note that the company namely Frontline Financial Services Ltd by virtue of the MOU dated 15 April 2008 got the right which could have been enforced by way of suit for specific performance. Thus, it appears the assessee has made the payment to the company avoid such litigation. The assessee cannot be subjected to tax for the capital gain on the amount mentioned in such memorandum of understanding - Decided in favour of assessee.
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