Kaushalya Devi Vs CIT (Delhi High Court)
The Delhi High Court considered an appeal under Section 260A of the Income Tax Act, 1961, concerning Assessment Year 1994-95. The dispute related to whether ₹25,00,000 paid by the assessee to a prospective purchaser under an earlier agreement to sell could be deducted under Section 48(i) while computing long-term capital gains arising from the subsequent transfer of the same property.
The assessee had purchased the immovable property in 1971 for ₹30,000. In 1989, she entered into an agreement to sell the property to Anil Kumar Sharma for ₹15,00,000 and received ₹7,50,000 as advance. The agreement stipulated that the assessee would provide vacant possession after getting the premises vacated from the tenant and execute the sale deed within three years. It further provided that, in the event of failure to execute the sale deed and hand over possession, the purchaser would be entitled to liquidated damages of ₹25,00,000.
Subsequently, the property was sold in 1993 through a tripartite agreement under which the purchaser paid ₹45,00,000 to the tenant to vacate the premises and ₹55,00,000 to the assessee towards transfer of ownership rights. The assessee treated ₹55,00,000 as the sale consideration. There was no dispute regarding this aspect.
