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2016 (5) TMI 1147 - AT - Income TaxRepayment of liabilities of the donor - allowability u/s 24(b) - whether borrowed capital was not utilised for acquiring the property? - Held that:- Mortgage loan and other liabilities repaid by the assessee, to the extent it has improved his right to title and interest in the property should be considered as cost of improvement incurred by the assessee. The government valuer has fixed the value of the property at ₹ 47,62,000/-, as mentioned at page 29 para 9 of the registered gift deed. The factors which went into the valuation are not known. The principle laid down by the Hon’ble Supreme Court in RM. Arunachalam Versus Commissioner of Income-Tax [1997 (7) TMI 5 - SUPREME Court ] that, amounts paid by the donee to discharge the liabilities which resulted in his right, title and interest of the assessee in the property being improved has to be taken as cost of improvement is to be applied and this ground of the assessee should be allowed. No contrary decision is brought to our notice by the Ld.D.R. Submissions made by the assessee that the loans and liabilities repaid was only to improve and perfect his title to the property, and not otherwise, and that all these loans and other liabilities are attached to this property is not factually disputed by the Revenue. Keeping in view the legal position laid down by the Hon’ble Apex Court, we direct the A.O. to consider the repayment of liabilities of the donor, made by the assessee as that which is incurred to perfect his title of the property and thus it is cost of improvement and consequentially the borrowings made for the same is to be taken as that which is for incurring the cost of improvement of the property and consequentially the interest expenditure incurred should be allowable u/s 24(b) of the Act. - Decided in favour of assessee.
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