TMI Blog2016 (5) TMI 1147X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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 r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which were utilised for acquiring one of the properties. On a query from the Assessing Officer (hereinafter referred to as the AO), the assessee submitted that property bearing no.20, Block No.1, situated at Asaf Ali Road (Ajmiri Gate Extension), New Delhi (hereinafter called the property ), built on a plot of land measuring 427.35 square metres and bearing municipal no.3428, Ward no.VIII, was gifted to him by his aunty Smt.Shantha Jain, W/o Late Sh.Amarchand Jain, vide gift deed dt. 29.8.2002. At page 20 of this gift deed it is stated as follows: However, there are certain liabilities including property tax etc. on the said property of which DONEE is well aware of and also handling the same and shall discharge the same as such the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2,22,38,664/-, for value of a property worth only ₹ 4,76,20,000/- is not acceptable. Aggrieved the assessee carried the matter in appeal. The First Appellate Authority came to a conclusion that the amount of ₹ 2,22,38,664/- was not paid for acquiring assets worth ₹ 47,62,000/- only. He further gave factual finding that the borrowed capital was not utilised for acquiring the property. 3. Aggrieved the assessee is before us on the following grounds. 1. That the Ld. A.O. as well as Ld. CIT (Appeal) have eared while disallowing the claim of interest of ₹ 2084422/- against the property income in spite of the fact that the interest has been paid on the borrowings made for the purpose of payment of liabilities to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee in person and Ms. Anima Barnwal, Ld. Sr.D.R. on behalf of the Revenue. 5. On a careful consideration of the facts and circumstances of the case, perusal of material on record, orders of the lower authorities and case laws cited, we hold as follows. 6. The assessee contends that the value of the property in the gift deed to the tune of ₹ 47,62,000/-, was made, after considering the depressing factors being mortgage and loan liabilities. He relied on the following case laws in support of his contention that the repayment of liabilities attached to this gifted property, should be considered as cost of improvement and consequentially the interest expenditure incurred on funds borrowed for cost of improvement of the property is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee, what he had transferred to the assessee was the right, title or interest which he had in that property. When the assessee discharged the mortgage by paying ₹ 25,000 to the mortgagee, what he did was to purchase that right or interest which the mortgagor did not then possess and which the mortgagee had in the property. When the assessee sold the property, he did not merely sell the right, title or interest which he had received from the donor, but also the right, title or interest which he had purchased from the mortgage. For this reason, the case would not be covered by section 49(1)(ii) nor by section 55(2)(ii) for the purpose of computation of the capital gains. 6.4. Applying the propositions laid down by the Hon b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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