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TMI Blog2020 (12) TMI 1081X X X X Extracts X X X X X X X X Extracts X X X X ..... admitted on 23.6.2008 on the following questions of law:- "i) Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in not appreciating that no part of the consideration for sale was received by the appellant and same was directly paid to the Bank by the purchaser in discharge of the mortgage amount and therefore no capital gains arises in the hands of the appellant? ii) Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in not holding that there was a diversion of the sale proceeds towards redeeming the interest of the mortgagor and therefore the amount so diverted was not liable to capital gains tax?" 3. The relevant portion of the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 61,72,231/-. While computing the capital gain the Assessing Officer deducted the cost of acquisition of the land and the cost of improvement which was in the nature of cost of compound wail and sand filling on site. Aggrieved, the assessee appealed to the Commissioner (Appeals) who found that the decision of the Hon'ble Kerala High Court in the case of CIT vs. Smt.Thressiamma Abraham, 227 ITR 802 will support the case of the assessee on the ground that the assessee has not received the payment as a result of transfer, which was paid directly to the bank by the purchasers of the above property. He, therefore allowed the claim of the assessee on this issue of capital gains. The Revenue is now aggrieved and in appeal before us. 4. We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e decision of the Hon'ble Supreme Court in the case of RM.Arunachalam vs. CIT, 227 ITR 222 is directly on the point at issue. However, the learned counsel for the assessee attempted to impress us that according to the aforesaid decision of the Hon'ble Supreme Court at page 225 of the decision the payment for the purpose of acquiring the interest of the mortgagee in the property by the heir was held to be regarded as cost of acquisition under section 48 read with section 55(2) of the Act. But in this case there is no liability attached to the succession. The assessee purchased the property without any encumbrance and the subsequent encumbrance created as a guarantee to the company M/s.M.O.H.(P) Ltd., has nothing to do and it cannot b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... andran (supra). The facts in that case were as follows. The facts and the judgment of the Hon'ble Supreme Court are extracted below: 'This appeal by the assessee is directed against the order dt. 25th July, 1984 passed by the Madras High Court in TC No. 145 of 1983 wherein the High Court on an application filed under s. 256(2) of the Act declined to direct the Tribunal to state a case and refer the following questions of law to the High Court : "1. Whether the Tribunal was right in holding that the levy of the capital gains of Rs. 68,400 is proper under the facts and circumstances of the case ? 2. Whether the Tribunal was right in holding that mortgage debts does not constitute diversion at source? 3. Whether the debts disch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n v. CIT (1(1978) 111 ITR 880 (Ker), and the decision of the Madras High Court in CIT v. V.Indira (1979) 119 ITR 837 (Mad) held that clearing of the mortgage debt could neither be treated as "cost of acquisition" nor as an "cost of improvement" made by the assessee. The Tribunal, therefore, held that the deduction of the capital gains was not justified. Since the Tribunal declined to refer to the High Court the questions referred to above, the assessee filed an application under s.256(2) of the Act before the High Court which has been rejected by the impugned order. The High Court has relied upon the decision of the Full Bench of the High Court in S. Valliammai & Anr. v. CIT (1981) 127 ITR 713 (Mad) and has held that by discharging the mort ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the mortgage was created by the assessee himself. It is not a case where the property had been mortgaged by the previous owner and the assessee had acquired only the mortgagors interest in the property mortgaged and by clearing the same he had acquired the interest of the mortgagee in the said property. The questions raised by the assessee in the application submitted under s. 256(2) of the Act do not, therefore, raise any arguable question of law and the said application was rightly rejected by the High Court. In the circumstances, even though we are unable to agree with the reasons given in the impugned order, we are in agreement with the order of the High Court dismissing the application filed by the assessee under s.256(2) of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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