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2017 (4) TMI 1471 - AT - Income TaxDiversion of income through overriding title - Computation of capital gains - property which was sold by the assessee’s were offered by them as collateral security to M/s. Axis Bank for a loan raised by company as Assessee’s were directors of the said company - Since the company did not make the payment, possession of the property was taken by M/s. Axis Bank - HELD THAT:- No doubt by virtue of SARFAESI Act once the borrower takes possession of the secured asset, sale of such an asset could be effected only when the debtor agrees to pay the amount realized from the sale, against the outstanding dues. However, this in my opinion will not establish an overriding title to the borrower on the income arising out of the sale of the property. Offering a property as a collateral security and selling the property which was offered as a collateral security are two independent and different transactions. Just because the seller is duty bound to pay the proceeds to the borrower for the settlement of the loan, would not perse create an overriding title on the income arising from the sale of the property. It is not a pre-existing title on the income arising out from the sale of the property. The proceeds of the sale are only used to satisfy a debt. When proceeds of a sale is used to satisfy the debt, the debt cannot be set off against such proceeds while computing capital gains. It is only a application of income. Just because the property was offered as a collateral will not in my opinion change the complexion of the transactions. There was no transfer of ownership of the property to M/s. Axis Bank when the property was offered as collateral. Computation of capital gains was rightly done by the ld. Assessing Officer and confirmed by the ld. Commissioner of Income Tax (Appeals). - Decided against assessee.
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