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2016 (5) TMI 1147 - ITAT DELHI

2016 (5) TMI 1147 - ITAT DELHI - TMI - Repayment 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 2 .....

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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 asse .....

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mble, Judicial Member For the Appellant : Shri P.D.Mittal, A.R. For the Respondent : Ms. Anima Barnwal, Sr.D.R. ORDER Per J. Sudhakar Reddy, Accountant Member These two appeals are filed by the Assessee are directed against the order dated 31.10.2011 of Ld.CIT(A)-XXI, New Delhi pertaining to the Assessment Year (hereinafter referred to as the A.Y.) 2007-08 and order dt. 11.2.2013 pertaining to the A.Y. 2009-10. 2. Facts in brief:- The assessee is a Chartered Accountant by profession. He derives .....

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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 liabil .....

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e assessee has borrowed funds approximately to the tune of ₹ 1.50 crores for discharging the liabilities attached to the said property and that the balance of such liabilities which were attached to the property and were repaid were met out of the own funds belonging to the assessee. It is claimed that he had incurred interest of ₹ 20,84,422/- on these borrowed funds and that the same is allowable u/s 24(b) of the Act. The A.O. rejected the contention of the assessee that the funds b .....

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further pointed out that the claim of the assessee that he had incurred expenditure towards repayment of loans and liabilities to the tune of ₹ 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 borrowe .....

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as well as ld. CIT Appeal are wrong while not accepting the fact that the funds borrowed for the purpose of repayment of liabilities created by the previous owner is a part of cost of acquisition as defined U/s 55(2) of the Il.T Act, 1961. 3. That the entire Assessment Order is wrong, arbitrary, illegal, unjust against the facts as well as against the Law. 4. That the appellant craves leave to amend any one or more of the grounds. 3.1. ITA 2167/Del/2013 Assessment Year 2009-10: 1. That the Ld. A .....

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ted by the previous owner is a part of cost of acquisition as defined U/s 55(2) of the Il.T Act, 1961. 3. That the entire Assessment Order is wrong, arbitrary, illegal, unjust against the facts as well as against the Law. 4. That the appellant craves leave to amend any one or more of the grounds. 4. We have heard Shri P.D.Mittal, the assessee 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 .....

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t expenditure incurred on funds borrowed for cost of improvement of the property is allowable u/s 24(b) of the Act. (i) Shri Shyam Gopal in ITA 4894/Del/2004 Delhi E Bench of the ITAT order dt.November, 2006. (ii) RM Arunachalam vs. CIT (SC) 227 ITR 222 (iii) CIT vs. Daksha Raman Lal (Gujarat) 197 ITR 123 judgement dt.Feb.25, 1992 6.1. The Ld.Sr.D.R. submitted that, the valuation of the property in the gift deed was only ₹ 47,62,000/- and that the assessee has not lead any evidence in supp .....

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n the case of RM Arunachalam vs. CIT the Hon ble Supreme Court has approved the judgement of the Hon ble Gujarat High Court in the case of CIT vs. Daksha Ramanlal, wherein it is held that the payment made by the person for the purpose of clearing the mortgages created by the previous owner, is to be treated as cost of acquisition. The interest of the mortgagee in the property is acquired at a cost and this is deductible u/s 48 of the Act. The Hon ble Gujarat High Court has held as follows. Held, .....

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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 ble Supreme Court to the facts of the case, we have to hold that the mortgage loan and other liabilities repaid by the assessee, to the extent it has improved his right to title and interest in the .....

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