TMI Blog2020 (12) TMI 1081X X X X Extracts X X X X X X X X Extracts X X X X ..... AS HIGH COURT] mortgage deed was never registered and State Bank of India, Pondicherry did not have a right to bring the property to sale. The assessee in the present case, continued to have title over the property along with her co-owners. They brought the property to sale through Bank - there was no diversion of sale proceeds by virtue of overriding title, but on the contrary, there was only a mere application by the owners themselves of the profits realized on the sale of land towards the discharge of loan obligations of same firm. We also hold that the assessee cannot claim any part of such application as cost of acquisition for the purpose of computing capital gains as per the provisions of Section 48. - Decided in favour of revenue. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uments dated 11-7-1980 and 4-2-1991. The assesses sold the same in September, 1994. The total capital gain arrived at was ₹ 1,63,54.490/- and the assessee's one third share came to ₹ 54,51,000/-. In the return filed originally after notice under section 148 the assessee declared income from house property alone. Regarding capital gain the contention of the assessee was that the entire sale consideration was directly paid towards loan amount of M/s.M.O.Hassan Kuthoos Marickar (P) Ltd. with State Bank of India, Pondicherry. This had happened because the company was unable to repay the loan and the co-owners including the assessee was asked by the bank to repay the loan payable by the company and for that purpose the assessee s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the assessee never incurred the expenditure wholly and exclusively in connection with such transfer. No doubt it has wider connotation than the expression for the transfer. In the decision of the Hon'ble jurisdictional High Court in the case of CIT vs. N.Vajrapani Naidu, 241 HR 560 a mortgage had been created by the vendor-assessee and the amount paid to the other creditors by the vendee was for the discharge of the debts which had been incurred by the assessee. The amount was paid as part of consideration to the sale. Hence the assessee's claim was held to be rightly rejected by the Income-tax Officer. Section 48 of the Income-tax Act clearly lays down the condition that to compute capital gain the expenditure must be incurred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tional High Court we set aside the order of the Commissioner (Appeals) and confirm the order of the Assessing Officer. 4. Both the learned counsels submitted that the controversy involved in the present Tax Case is covered by the Judgement rendered by a Division Bench of this Court in Tmt.D.Zeenath v. Income-tax Officer, Ward-I(1) Nagapattinam, in which one of us (Dr.Justice Vineet Kothari) was a party, wherein the Court has held as under:- 29. In our opinion, the ratio in R.M.Arunachalam (supra), squarely applies to this case. As held by the Hon'ble Supreme Court, such payment would go to reduce the cost of acquisition only where the mortgage had not been created by the assessee, but was created by the person from whom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... airman Muthurama Iyer Road, Madurai for a sum of ₹ 90,000 subject to incumbrance in the assessment year 1975-76 and for the same assessment year he sold plot Nos.1, 3 and half of plot No.4 in T.S. No.831/1 for a sum of ₹ 12,600. The Income-Tax Officer computed the capital gains in respect of the said properties at ₹ 68,400. The assessee questioned the computation of capital gains before the Appellate Assistant Commissioner and contended that the debts in respect of which mortgage had been executed were discharged by the buyer himself out of the sale proceeds, that the debts should be considered as increase in cost of acquisition of the properties and that in any event the debts may be treated as improvement to the property ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fecting his title or improving the property in any manner and, therefore, the amount paid for discharging the mortgage debt cannot be taken to be for the cost of acquisition as contended by the assessee. In Civil Appeals Nos.6098-6101 of 1983 [since reported as R. M. Arunachalam etc. v. CIT (1997) 141 CTR (SC) 348 filed against the judgment of the Full Bench of the Madras High Court in S. Valliammai Anr. v. CIT (supra) we have examined the correctness of the view of the Kerala High Court in Ambat Echukutty Menon v. CIT (supra) and have held that the said decision does not lay down the correct law in so far as it holds that where the previous owner had mortgaged the property during his life time the clearing off the mortgage debt by h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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