Computation of Long Term Capital Gains : Amount Paid for Non – Fulfillment of Agreement : Deductible u/s 48 : Delhi High Court

KAUSHALYA DEVI (DECEASED) THROUGH LEGAL REPRESENTATIVES vs CIT

Is Amount Paid for Non-Fulfillment of Sell Agreement Deductible u/s 48? – Held Yes

The nature and character of the agreement, timing of the earlier agreement and payment claimed as expenditure and the date of transfer resulting in capital gains, are relevant aspects, which should be taken into consideration.

For example, an agreement-to-sell rescinded or cancelled and payment made long before the date on which immovable property was transferred resulting in capital gains, may not be expenditure incurred wholly and exclusively in connection with such transfer.

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.