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2018 (4) TMI 1137 - DELHI HIGH COURTDeduction to Section 48 while computing capital gains - expenditure of ₹ 25,00,000/- incurred by the assessee by way of liquidated damages paid to the first purchaser incurred in connection with the transfer of the property - whether be deducted from the sale consideration for computing the long term gain? - Held that:- There was a close nexus and connect between the payment of ₹ 25,00,000/- and the transfer of the property to the purchaser resulting in income by way of capital gains. There was proximate link and the expenditure incurred was in furtherance and to effectuate the transfer/sale of the property and was not remote and unconnected. Expenditure of ₹ 25,00,000/-, therefore, has to be treated as expense incurred wholly and exclusively in connection with the transfer of immovable property and, hence, allowable as a deduction under clause (i) of Section 48 of the Act. As we would like to clarify that ₹ 7,50,000/- which was paid by Anil Kumar Sharma and subsequently refunded, cannot be allowed as a double deduction. Refund of ₹ 7,50,000/- would mean that the earlier payment made by Anil Kumar Sharma was squared off. The assessee had in fact incurred expenditure of ₹ 25,00,000/- which was paid to Anil Kumar Sharma to forego and give up his right under the agreement to sell dated 10th April, 1989. Wherever an assessee has paid an amount under an earlier agreement-to-sell in terms of the settlement or even a court decree, the said amount would be treated as expenditure wholly or exclusively in connection with the transfer, the subject matter of capital gains. The words used in clause (i) do not permit and allow expenditure incurred wholly and exclusively on the immovable property as an expenditure to be deducted while computing capital gains. Link and connection with the transfer of a capital asset and the expenditure must be inextricable and should be established. ₹ 25,00,000/- paid by the assessee would be deducted under clause (i) to Section 48 of the Act while computing capital gains. Answer the substantial question of law in favour of the appellant-assessee and against the Revenue.
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