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TMI Blog2016 (7) TMI 398X X X X Extracts X X X X X X X X Extracts X X X X ..... a lenient view subsequently, by its order dated 09.10.2015, would not justify setting aside the earlier order of the Tribunal dated 14.01.2015 upholding the assessment order. Viewed from any angle, we see no error in the order of the Tribunal, much less a substantial question of law, necessitating interference in these appeals. - I.T.T.A.Nos.433, 448 & 466 of 2015 - - - Dated:- 7-12-2015 - SRI JUSTICE RAMESH RANGANATHAN AND THE HON BLE SRI JUSTICE S.RAVI KUMAR FOR THE PETITIONER : SIVA KARTIKEYA COMMON ORDER : (per Hon ble Sri Justice Ramesh Ranganathan) Heard Sri A.V.Krishna Kaundinya, learned Senior Counsel appearing on behalf of the appellants, and Sri B.Narasimha Sarma, learned Special Standing Counsel for the Income Tax Department and, after hearing both the learned counsel, these appeals are being disposed of at the stage of admission. These three appeals are preferred by the assesses under Section 260-A of the Income Tax Act, 1961 (for short the Act ) against the order of the Income Tax Appellate Tribunal, Hyderabad in I.T.A.Nos.1386, 1387 and 1388 of 2014 dated 14.01.2015. The assessees, in these three appeals, are two brothers and their mother. They ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sees had stated that they had made short term deposits with the State Bank of Hyderabad from out of the sale proceeds, thereafter, they had made payment to the bank towards the dues of the company, and since the sale proceeds were utilised for clearing the debts of the company, no capital gains arose. The Assessing Officer subjected the transaction to tax as capital gains holding that, as per the statutory provisions, loan repayment is not one of the modes which would entitle the assessees to claim deduction from chargeability to tax on capital gains. In the appeals, filed before the Commissioner (Appeals), the assessees contended that both M/s.Hansa Overseas Enterprises (a partnership firm) and M/s.Hoe Leather Garments Private Limited had availed loans from the State Bank of India as security for which, their residential house, held jointly in the names of the assessees (both the brothers and their mother), were mortgaged; due to recession in the market from 2002 onwards, the loan had become a Non Performing Asset; proceedings for recovery were initiated both against the partnership firm and the company; subsequently the proposal, for a One Time Settlement (OTS), was accepted b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n was not paid directly to the mortgagee bank; the property was directly sold by the assessee, regardless of the OTS and the mortgage in force; and, hence, the assessees claim, that the sale consideration received by them should be allowed as deduction under Section 48(1) of the Act, could not be accepted. The Commissioner further observed that the amount, claimed to have been repaid as a loan, was not the liability of the assessees but the liability of the company and the firm in which two of them were directors/partners; the amount used for repayment of the loan was credited, in the books of accounts of the company, as a loan from the directors who were shown as creditors to the company; the amount paid to the bank, through the books of accounts of these concerns credited in the name of the directors, could not be treated as expenses incurred by the assessees in connection with the transfer of property; the assessees were independent entities different from the concerns which had availed the loans; the properties were also sold independently by their owners, irrespective of the fact that there was a mortgage or an OTS; as the sale consideration had no connection with repayment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... could not be chargeable to capital gains, could not be accepted. The Tribunal further held that, even if the property was mortgaged as security towards the debt availed by the company/firm, the same could not be charged to capital gains; the Supreme Court, in R.M.Arunachalam vs. Commissioner of Income Tax and VSNR Jagdish Chandran vs. Commissioner of Income Tax , had held that the amount paid, out of the sale proceeds, to clear the mortgage debt could not be treated as the cost of acquisition or the cost of improvement, so as to reduce the same from the sale consideration, while computing capital gains under Section 48 of the Act; and there was no infirmity in the order passed by the Commissioner of Income Tax (Appeals). Before us, Sri A.V.Krishna Kaundinya, learned Senior Counsel appearing on behalf of the appellants, would contend that the sale transaction could not be subjected to tax twice; the amounts received as sale consideration, which was kept in the form of short term fixed deposits, were in turn advanced as unsecured loans to the company/firm; the unsecured loans, given by the assessees, were used for repayment of the debt due to the bank under the OTS; the amo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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