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Issues Involved:
1. Deduction of Rs. 2,00,000 retained by the buyer-society. 2. Deduction of Rs. 1,00,000 claimed as commission by the assessee. Issue-wise Detailed Analysis: 1. Deduction of Rs. 2,00,000 retained by the buyer-society: The assessee, a private limited company dealing in lands, entered into an agreement with the Delhi School Teachers' Co-operative House Building Society to lease 500 bighas of land for Rs. 4,00,000. The agreement stipulated that the assessee would be responsible for evicting tenants from 200 bighas of land. Due to the Delhi Tenants' Relief Act, 1961, and the tenants' rights under it, the society retained Rs. 2,00,000 from the sale price to cover potential eviction costs. For the assessment year 1962-63, the assessee claimed this Rs. 2,00,000 as a deductible expense. The ITO allowed Rs. 1,60,000 and disallowed Rs. 40,000, which was upheld by the Tribunal. The Tribunal, applying the principle from Calcutta Co. Ltd. v. CIT [1959] 37 ITR 1, held that the liability to evict the tenants was an accrued liability and thus deductible. However, the Tribunal restricted the deduction to Rs. 1,60,000, considering it a fair estimate based on the sale price of the land. The High Court upheld this conclusion, stating that the assessee is entitled to a deduction of Rs. 1,60,000 for the assessment year 1962-63. 2. Deduction of Rs. 1,00,000 claimed as commission by the assessee: The assessee claimed a deduction of Rs. 1,00,000 as commission payable to brokers for facilitating the land transaction. The ITO doubted the genuineness of the transaction and disallowed the claim. Upon appeal, the AAC remanded the matter to the ITO, who later conceded the transaction's genuineness but allowed only Rs. 14,814 as commission, based on the instalments received during the accounting year. The Tribunal upheld this view, agreeing that the liability for commission arose only as and when instalments were received. The High Court, however, found that since the entire sale price of Rs. 4,00,000 was taxed, the assessee was entitled to deduct the full commission of Rs. 1,00,000. The Court emphasized that the commission liability was an accrued liability, similar to the eviction costs, and should be fully deductible. Conclusion: The High Court concluded that the assessee is entitled to a deduction of Rs. 1,60,000 for eviction costs and the full Rs. 1,00,000 claimed as commission. The judgment underscores the principle that liabilities accrued under mercantile accounting, even if payable in the future, are deductible when computing taxable income. The Court's decision aligns with the principles established in Calcutta Co. Ltd. v. CIT and reinforces the doctrine of real income, ensuring that income is taxed only after accounting for all related liabilities.
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