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2020 (10) TMI 93 - HC - Income TaxComputation of capital gain - computation of cost of acquisition - FMV determination - sanctity of SRO s guideline value for the understanding/for the determination of the fair market value - Tribunal sustaining the average value adopted on the consideration of the SRO s guideline value and the Chartered Engineer s valuation report to quantify the cost of acquisition being the fair market value as on 01.04.1981 - HELD THAT - Land of 3 acres in question, which was in the form of collateral security with SBI, has been settled by Mrs.Susila Ammal in favour of the Assessee and to clear off that debt, the sale of the land in question alongwith other parts of the land had to be undertaken in the settlement of dues to the SBI under the OTS Settlement. While there is no doubt that the said contribution of the Assessee to the extent of the land settled in his favour would be part of cost of acquisition or cost of improvement of the asset acquired by him as per Section 48 and Section 55 computation of the same deserves to be gone by the Tribunal, being a fact finding body, to find out whether the said sum vide the Table quoted above is correct amount or not and whether the advance of ₹ 4 Crores received from the Purchaser M/s.Martin Group on 19.8.2009 vide Demand Draft payable to ASREC (India) Limited is correct fact or not. High Court cannot be expected to do such a computing exercise under Section 260-A of the Act. Therefore, a remand of the case to the Tribunal is necessary, since these aspects of facts do not seem to have been properly placed before the Tribunal, as they are sought to be argued before us now with the documents placed on record of the High Court under the directions of the court. We are of the opinion that a miscarriage of justice may happen, if all these facts are ignored even at this stage. Assessee ought to have argued his case before the learned Tribunal on the relevant facts and evidence as otherwise, the finding of facts rendered by the learned Tribunal will be binding on the High Court while disposing the Appeals under Section 260-A - But, even on prima facie perusal of these facts before us, we are not inclined to ignore these facts which unfortunately, the Tribunal also could not take into account for either they were not placed before the learned Tribunal properly or even if they were placed before it, the learned Tribunal did not choose to go into all those details in a more detailed manner. To avoid any miscarriage of justice and to allow a fresh recomputation of cost of acquisition or cost of improvement properly under Section 48/49 and Section 55 of the Act in the facts and circumstances of the case, we dispose of the present Appeal by setting aside the order of the Income Tax Appellate Tribunal to that extent. Regarding computation of Capital Gain in the hands of the Assessee and to compute the cost of acquisition properly in the light of the decision of R.M.Arunachalam, etc. v. CIT 1997 (7) TMI 5 - SUPREME COURT we remit the matter back to the learned Income Tax Appellate Tribunal to decide the Appeal of the Assessee on that ground once again. Questions with regard to Capital Gain Tax liability and computation of cost of acquisition are answered in the aforesaid manner and the computation part is remitted back to the learned Tribunal
Issues Involved:
1. Sustaining the average value adopted for determining the fair market value (FMV) as on 01.04.1981. 2. Disallowance of payments made to clear the loan liability as part of the cost of acquisition in the recomputation of long-term capital gains. 3. Disallowance of payments made to clear the loan liability as part of the expenses incurred in connection with the transfer as prescribed in section 48 of the Act. 4. Overlooking the loss suffered due to the guarantee/mortgage of the property in relation to the loan transaction with the bank. Issue-wise Detailed Analysis: 1. Sustaining the Average Value Adopted for Determining FMV: The Tribunal upheld the order of the Commissioner of Income Tax (Appeals) (CIT(A)) by considering the average of the registered valuer and Sub-Registrar valuation for determining the FMV of the property as on 01.04.1981. This decision was based on the Tribunal's earlier view in the case of M/s. Kutty Flush Doors. The Tribunal found no infirmity in the CIT(A)'s order and confirmed it. The Assessee's alternate ground for adopting the average value was also noted, referencing the judgment in CIT v. J. Chelladurai and the decision in DCIT vs. M/s. Kutty Flush Doors & Furniture Company Private Limited. The High Court did not permit this question of law to be raised again under Section 260A of the Act, thus answering it against the Assessee and in favor of the Revenue. 2. Disallowance of Payments Made to Clear Loan Liability as Part of Cost of Acquisition: The Tribunal disallowed the Assessee's claim that the payments made to clear the loan liability should be considered part of the cost of acquisition. The Tribunal noted that the loan was taken for business purposes by a firm where the Assessee's grandmother had offered her asset as collateral security. The loan was settled by the company that subsumed the firm, not by the Assessee or his grandmother. The Tribunal emphasized that the sales consideration was not utilized to clear the loan liability and that the primary responsibility for the loan was on the company, not the Assessee's grandmother. The Tribunal confirmed the CIT(A)'s order, stating that the mortgage debt could not be considered a cost of acquisition for computing capital gains. 3. Disallowance of Payments Made to Clear Loan Liability as Part of Expenses Incurred in Connection with Transfer: The Tribunal rejected the Assessee's alternative claim that the payments made to clear the loan liability should be considered expenses incurred in connection with the transfer under Section 48 of the Act. The Tribunal reiterated that the property was given as collateral security for a loan availed by another entity, and neither the Assessee nor his grandmother was the borrower. The Tribunal found that the mortgage debt could not be considered a cost of acquisition or improvement, and thus, the interest paid by another entity for its own loan could not be transferred as the liability of the Assessee's grandmother. 4. Overlooking the Loss Suffered Due to Guarantee/Mortgage of Property: The High Court examined whether the Assessee's contribution to clearing the mortgage charge should be considered part of the cost of acquisition or improvement under Section 48/49 of the Act. The Court referred to the Supreme Court judgment in R.M. Arunachalam v. CIT, which held that discharging a mortgage debt by an heir who inherits a property with a mortgage charge should be regarded as part of the cost of acquisition. The High Court noted that the Tribunal did not properly consider the facts and evidence related to the Assessee's claim and found the Tribunal's order to be perverse. Consequently, the High Court remanded the case back to the Tribunal to re-examine the facts and recompute the cost of acquisition or improvement properly. Conclusion: The High Court disposed of the appeal by setting aside the Tribunal's order regarding the computation of long-term capital gains and remanded the matter back to the Tribunal for a fresh recomputation of the cost of acquisition or improvement under Section 48/49 and Section 55 of the Act. The High Court emphasized the need to avoid any miscarriage of justice and directed the Tribunal to decide the Assessee's appeal on the relevant facts and evidence. No order as to costs was made.
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