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January 2024

Capital Gains — Computation of — Deduction u/s. 48 — Determination of actual amount deductible — Tax payable by seller agreed to be reimbursed by the assessee seller — Is an allowable deduction in proportion to assessee’s share

By K. B. Bhujle | Ritu Punjabi, Advocates
Reading Time 2 mins

68 Smt. Durga Kumari Bobba vs. DCIT

[2023] 457 ITR 118 (Kar)

A.Y.: 2009–10

Date of Order: 4th July, 2022

S. 48 of ITA 1961

Capital Gains — Computation of — Deduction u/s. 48 — Determination of actual amount deductible — Tax payable by seller agreed to be reimbursed by the assessee seller — Is an allowable deduction in proportion to assessee’s share.

The assessee agreed to sell her shares in a company for a consideration of ₹2,70,32,278. Clause 7 of the agreement dealt with the payment of taxes, and it had been agreed between the parties that the seller would reimburse the tax that may be levied on the company up to the closing date. In substance, what the parties agreed was for consideration towards the sale of shares at ₹2,70,32,278 minus the tax component of ₹90,74,103. The assessee claimed deduction under the head “Capital gains” on the tax component u/s. 48 of the Income-tax Act, 1961. The Assessing Officer did not allow the claim for deduction.

The Commissioner of Income-tax (Appeals) allowed the appeal in part. The Tribunal dismissed the appeal of the assessee.

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