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TMI Blog2020 (10) TMI 93X X X X Extracts X X X X X X X X Extracts X X X X ..... 's guideline value for the understanding/for the determination of the fair market value? (ii) Whether the Appellate Tribunal is correct in law in sustaining the disallowance of the payments made to clear the loan liability as part of the cost of acquisition in the recomputation of long term capital gains while overlooking the pre-existing charge of the bank liability on the capital asset/property under consideration when it got vested by virtue of settlement deed dated 14.7.2004? (iii) Whether the Appellate Tribunal is correct in law in sustaining the disallowance of the 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 in the recomputation of long term capital gains which was claimed as alternative stand by the Appellant? (iv) Whether the Appellate Tribunal is correct in sustaining the recomputation of long term capital gains while overlooking the loss suffered consequent to the guarantee/mortgage of the property/capital asset in relation to the loan transaction with the bank entered into by the company which legally mandated for set off as well as not disputed the loss suffered i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of M/s.Sivanandha Mills Ltd., in ITA Nos.1216 & 2016/Mds/2013 to the proposition that the payment of loan liability to the State 'Bank of India, settled through the Debt Recovery Tribunal is having a direct nexus with transfer of capital assets and it is to be deducted from the sale consideration of capital assets and accordingly capital gains to be computed. In our opinion, the decision cannot be applied to the facts of the present case. In this case, the property was given as a collateral security for the loan availed by other than the assessee, which is a M/s.S.Albert & (Co., as pointed out by the AO in his assessment order and neither the assessee nor the assessee's grandmother who settled the property in favour of the assessee, is borrower nor a party to the suit, the mortgage debt cannot be considered as a cost of acquisition of property so as to give deduction while computing the capital gains from the transfer of the property. If the consideration of sale of property apportioned towards the outstanding debt in bank, the assessee is having very well right to claim from the borrower of the bank whose debt was settled. In view of this we do not find any an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ief which has led to filing of the present Appeal as discussed by the learned Tribunal are thus:- The Assessee received 3 acres of land under a Settlement Deed dated 14.7.2004 out of the total land of 11.53 acres belonging to various family members out of which the Assessee's Grandmother Mrs.Susila Ammal settled 3 acres of land in favour of the Assessee Mr.N.Rajarajan. The said land entirely seems to have been mortgaged by the various joint owners of the property with State Bank of India and upon defaults in repayment, in the proceedings before the DRT by the Company M/s.Albert and Co. Ltd., which took over the Partnership Firm of M/s.Albert & Company, in which the said Settler Mrs.Susila Ammal was a Partner, settled the land, in an One Time Settlement (OTS) in O.A.No.2387 of 2001 before the DRT to square up the said settlement of 9.60 Crores in favour of M/s.ASREC India Limited, the Assignee of the debt by the State Bank of India, the land in question was required to be sold and payment made to the said ASREC India Limited on the following dates:- DATE PARTICULARS AMOUNT PAID TO April 2007 SARFAESI 50,00,000 DRT 12.08.2009 RTGS BY ANDHRA BANK, ANNA NAGAR 1,00,00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as under:- Proportionate to selling price of 3 Acres : 2,18,52,839 --------------- x 9,60,00,000 = Rs. 1,06,76,905/- 19,64,86,941 8. Thus, the Assesee claimed that a sum of Rs. 1,06,76,905/- was part of his contribution of the Settlement amount of Rs. 9,60,00,000/- being the amount agreed in OTS to clear up the dues SBI, through its Asset Reconstruction Company, ASREC (India) Ltd. and therefore, the said amount forms part of 'cost of acquisition or cost of improvement' under Section 48 read with Section 49 of the Income Tax Act and the same is liable to be deducted from the sale value of land to compute capital gains tax liability. However, the same was disallowed by the Authorities below for the reasons narrated in the order of the learned Tribunal. 9. During the course of hearing of the present appeal, we directed the Assessee to produce the said Documents for our perusal so that prima facie, we can have a look at the facts of the case, as they emerged for the Settlement of the property in favour of the Assessee and Sale thereof to clear the cloud over the title of the Assessee and to ascertain whether the same could form part of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of acquisition or cost of improvement under S.48 of the Act. The questions referred to by the Tribunal to the High Court have to be considered in the light of the said submissions. The submission regarding diversion involves the question whether apart from the deductions permissible under the express provision contained in S.48 of the Act, deduction on account of diversion is permissible in the matter of computation of capital gains under the Act. This is an entirely independent issue which has not been considered by the Tribunal or the High Court. It cannot be permitted to be raised for the first time at this stage. We, therefore, do not propose to go into this question. 14. While we are affirming the impugned judgment of the High Court, we are unable to endorse the view of the Kerala High Court in Ambat Echukutty Menon vs. CIT (supra) to which reference has been made by the High Court in the impugned judgment. In that case, the assessee, as one of the heirs, had inherited property from the previous owner who had mortgaged the same during his life-time and after his death the heirs, including the assessee, had discharged the mortgage created by the deceased. The said propert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of such payment made for the purpose of clearing off the mortgage the interest of the mortgagee in the property has been acquired by the heir. The said payment has, therefore, to be regarded as cost of acquisition under S.48 r/w S.55(2) of the Act. The position is, however, different where the mortgage is created by the owner after he has acquired the property. The clearing off the mortgage debt by him prior to transfer of the property would not entitle him to claim deduction under S.48 of the Act because in such a case he did not acquire any interest in the property subsequent to his acquiring the same. In CIT vs. Daksha Ramanlal (supra) the Gujarat High Court has rightly held that the payment made by a person for the purpose of clearing off the mortgage created by the previous owner is to be treated as cost of acquisition of the interest of the mortgagee in the property and is deductible under S.48 of the Act." 13. While overruling the Judgment of the Kerala High Court in the case of Ambat Echukutty Menon v. CIT, the Hon'ble Supreme Court has clearly held that in the later part of the afore quoted part that that by discharging the mortgage debt, his heir, who has inherite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the property acquired it, as increased by the cost of any improvement of the assets incurred or borne by the previous owner or the assessee, as the case may be. Explanation. - In this sub-section the expression "previous owner of the property" in relation to any capital asset owned by an assessee means the last previous owner of the capital asset who acquired it by a mode of acquisition other than that referred to in cl. (i) or cl. (ii) or cl. (iii) of this sub-section". The expressions "cost of improvement" and "cost of acquisition" for the purpose of ss. 48, 49 and 50 have been defined in S.55 of the Act. In cl. (b) of sub-s. (1) of S.55 "cost of improvement" was thus defined : "(b) "cost of improvement", in relation to a capital asset, - (i) where the capital asset became the property of the previous owner or the assessee before the 1st day of January, 1954, and the fair market value of the asset on that date is taken as the cost of acquisition at the option of the assessee, means all expenditure of a capital nature incurred in making any additions or alterations to the capital asset on or after the said date by the previous owner or the assessee, and (ii) in any oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whether the said sum of Rs. 1,06,76,905/- vide the Table quoted above is correct amount or not and whether the advance of Rs. 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. 18. Obviously, the 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. Therefore, we are of the opinion that a miscarriage of justice may happen, if all these facts are ignored even at this stage. 19. It is needless to say that the 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 of the Act. But, even on prima facie perusal of these facts before us, we are not inclined to ignore these facts wh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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