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2018 (7) TMI 1820 - HC - Income TaxCapital Gains - Short-term capital gain or not - transfer of leasehold rights - Revenue claims that since the acquisition of the full ownership pertaining to the property preceded the transfer thereof by the assessee by a few months - Held that:- Since the assessee in this case inherited the relevant immovable property under a Will and the perfection of the title from perpetual leasehold rights to complete ownership did not amount to the acquisition of the property by the assessee; the acquisition took place upon the bequest under the Will being effective. The perfection of the title from perpetual leasehold rights to complete ownership had, in such circumstances, to be regarded as a cost of acquisition within the meaning of such expression in Sections 48 and 55 of the Act. Indeed, the assessee in this case was no longer transferring the leasehold rights to the assessee’s transferee; the assessee was transferring complete ownership rights therein. As to the second issue, it will be governed by the same legal principle as in the recognition by the Supreme Court in R.M. Arunachalam [1997 (7) TMI 5 - SUPREME COURT] that the discharge of a mortgage debt created by the predecessor-in-interest of the assessee had to be regarded as a part of the cost of acquisition. The encumbrances to the property in this case were created by the Will and the conduct of the assessee’s predecessor-in- interest. These encumbrances were got rid of by the assessee by payment. A better title to the property was acquired by the assessee and transferred to the assessee’s transferee. For the same principle as recognised in the Supreme Court judgment, the cost of getting rid of such encumbrances in any immovable property has to be accepted as a part of the cost of acquisition of the property, subject, however, to the assessment as to the genuineness and validity of such encumbrances. To spell it out in more clear terms, merely because an assessee seeks deductions by adding to the cost of acquisition upon citing payments to other claimants in respect of the property may not pass muster unless, on facts, the claims are found to be genuine and the transactions discovered to be at arm’s length.
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