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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 ..... ibunal, 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 co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 in the capital field? 2. The relevant findings of the learned Tribunal are quoted below for ready reference:- 6.1 On appeal, the Ld.CIT(A) upheld the order of Id. Assessing officer with the following reasons. (1) The loan was not taken by Smt.S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th 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 any infirmity in the order of the Ld. CIT(A). The same is confirmed. 3. On the issue of average of valuation governed by Registered Valuer and Sub-Registrar Valuation for determining the Fair Market Value (FMV) of the property as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.53 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 1,00,00,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 50.00 5196095.00 876000.00 A.CHAKRAVARTHY 5.00 Acres 530 27532152.00 13451716.00 3000000.00 A.CHAKRAVARTHY 2.76 Acres 529 24643542.00 12040395.00 1656000.00 A.MURALIDHARAN 6.52 Acres 569 19661013.00 9606020.00 3912000.00 A.MURALIDHARAN 2.00 Acres 534B/339 15458862.00 7552923.00 1200000.00 A.MADHUKUMARAN 8.53 Acres 534B2 62134920.00 30358008.00 5118000.00 A.MADHUKUMARAN 2.00 Acres 534B 14568563.00 7117938.00 1200000.00 RAJA RAJAN 3.00 Acres 567B2 21852839.00 10676905.00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the mortgage charge was not being considered as the cost of acquisition or improvement and without going into such relevant factual things, the Tribunal, which it was duty bound to do so as a final fact finding body, but it has disallowed the claim of the Assessee even though a ground in that regard was raised before it. In our opinion, the order of the learned Tribunal is therefore rendered perverse and the learned Tribunal is required to re-examine the facts on the basis of the legal position. 11. As far as the legal position in this regard is concerned, the issue seems to have been settled by the Hon'be Supreme Court in the judgment in the case of R.M.Arunachalam, etc. v. CIT (227 ITR 222). 12. We may add here that the said case arose before the Hon'ble Supreme Court to consider the question whether the estate duty paid by the legal heirs who inherit the property in respect of the inherited portion, would form part of cost of acquisition or not. The Hon'ble Supreme Court held that it would not form part of cost of acquisition. But, while discussing the legal position in this regard and referring to the decisions of various other High Courts cited befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of the cost of any improvement, the expenditure should have been incurred in making any additions or alterations to the capital asset that was originally acquired by the previous owner and if the previous owner had mortgaged the property and the assessee and his co-owners cleared off the mortgage so created, it could not be said that they incurred any expenditure by way of effecting any improvement to the capital asset that was originally purchased by the previous owner . This decision has been followed in subsequent decisions of the High Court in Salay Mohamad Ibrahim Sait vs. ITO Anr. (1994) 210 ITR 700 (Ker) and K. V. Idiculla vs. CIT (1995) 214 ITR 386 (Ker). A contrary view has been taken by the Gujarat High Court in CIT vs. Daksha Ramanlal (1992) 197 ITR 123 (Guj). In taking the view that in a case where the property has been mortgaged by the previous owner during his life-time and the assessee, after inheriting the same, has discharged the mortgage debt, the amount paid by him for the purpose of clearing off the mortgage is not deductible for the purpose of computation of capital gains, the Kerala High Court has failed to note that in a mortgage there is transfe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n whose favour the property has been settled like the Assessee before us, the amount paid by the Assessee to clear that encumbrance has to be treated as part of cost of acquisition or cost of improvement under Section 48/49 of the Act. 15. The said provisions are also quoted below for ready reference:- Sec. 48. Mode of computation and deductions . - The income chargeable under the head Capital gains shall be computed by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset the following amounts, namely : (a) expenditure incurred wholly and exclusively in connection with such transfer; (b) the cost of acquisition of the capital asset and the cost of any improvement thereto. Sec. 49 makes provision regarding the cost of acquisition with reference to certain modes of acquisition of the assets. Sub-s. (1) of S.49 provided as under : Sec. 49. Cost with reference to certain modes of acquisition :- (1) Where the capital asset became the property of the assessee : (i) on any distribution of assets on the total or partial partition of an HUF; (ii) under a gift or wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'cost of acquisition' was defined in the following terms : (2) For the purposes of ss.48 and 49, 'cost of acquisition', in relation to a capital asset, - (i) where the capital asset became the property of the assessee before the 1st day of January, 1954, means the cost of acquisition of the asset to the assessee or the fair market value of the asset on the 1st day of January, 1954, at the option of the assessee; (ii) where the capital asset became the property of the assessee by any of the modes specified in sub-s.(1) of S.49, and the capital asset became the property of the previous owner before the 1st day of January, 1954, means the cost of the capital asset to the previous owner or the fair market value of the asset on the 1st day of January, 1954 at the option of the assessee. 16. In view of the above, we do not consider it necessary to go into other judgments cited before us as the position of law seems to be clear and the facts narrated above also prima facie indicate that the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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