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[2008] 172 Taxman 242 (Delhi)/[2009] 311 ITR 293 (Delhi)/[2008] 217 CTR 579 (Delhi) [2008] 172 TAXMAN 242 (DELHI) HIGH COURT OF DELHI A.S. Chhachhi* v. Commissioner of Income-tax, Delhi-IX, New Delhi MADAN B. LOKUR AND V.B. GUPTA, JJ. IT REFERENCE NO. 53 OF 1994â-  APRIL 25, 2008 Section 48, read with sections 53 and 54, of the Income-tax Act, 1961 - Capital gains - Computation of - Assessment year 1989-90 - Whether deduction under section 48(2) has to be allowed on amount calculated under section 48(1)(a) and before giving deduction under sections 53 and 54 - Held, yes FACTS In the relevant assessment year, the assessee sold a house. The transaction resulted in capital gains of Rs. 28,30,000. The assessee also purchased a residential flat for a consideration of Rs. 8,90,000 and invested a sum of Rs. 6 lakhs in the IDBI bonds. The assessee claimed that the deductions under section 48(2) should be first allowed to the extent of Rs. 14,20,000 and thereafter, the cost of the new residential flat and the bonds should be made deductible under sections 53 and 54. As per the assessee's computation capital gain came to nil. However, the Assessing Officer proceeded to first deduct the amount of investment made by the assessee under sections 53 and 54 and then computed taxable gain at Rs. 6,60,000. On appeal, the Commissioner (Appeals), accepting the assessee's claim, held that first deductions under section 48 were to be allowed and then provisions of sections 53 and 54 were to be applied. However, on the revenue's appeal, the Tribunal set aside the order of the Commissioner (Appeals) and upheld the findings of the Assessing Officer. On reference : HELD The deductions specified under sub-section (2) of section 48 are with reference to the gross capital gains calculated under clause (a ) of sub-section (1) only. Nowhere in the Act it is specified that this deduction is subject to and restricted to the deductions to be allowed under sections 53 and 54. [Para 12] This is so in order that the assessee would get the full benefit of the deduction on the gross capital gains, as otherwise the deduction would be allowed only after the capital gains have been computed as per…

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