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TMI Blog2020 (12) TMI 993X X X X Extracts X X X X X X X X Extracts X X X X ..... following questions of law:- "i) Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in not appreciating that no part of the consideration for sale was received by the appellant and same was directly paid to the Bank by the purchaser in discharge of the mortgage amount and therefore no capital gains arises in the hands of the appellant? ii) Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in not holding that there was a diversion of the sale proceeds towards redeeming the interest of the mortgagor and therefore the amount so diverted was not liable to capital gains tax?" 3. The relevant portion of the order passed by the learned Tribuna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. towards the loan from the bank. It is hit by section 48 of the Act as it is not an allowable deduction under section 48. Therefore the claim of the assessee that there is no capital gain since the assessee has not received any consideration, is to be brushed aside. The decision of the Hon'ble Supreme Court in the case of RM.Arunachalam vs. CIT, 227 ITR 222 is directly on the point at issue. However, the learned counsel for the assessee attempted to impress us that according to the aforesaid decision of the Hon'ble Supreme Court at page 225 the payment for the purpose of acquiring the interest of the mortgagee in the property by the heir was held to be regarded as cost of acquisition under section 48 read with section 55(2) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to claim deduction under section 48 of the Act because in such a case he did not acquire any interest in the property subsequent to his acquiring the same. 30. This position had been reiterated by the Hon'ble Supreme Court in, V.S.M.R. Jagadishchandran (supra). The facts in that case were as follows. The facts and the judgment of the Hon'ble Supreme Court are extracted below: 'This appeal by the assessee is directed against the order dt. 25th July, 1984 passed by the Madras High Court in TC No. 145 of 1983 wherein the High Court on an application filed under s. 256(2) of the Act declined to direct the Tribunal to state a case and refer the following questions of law to the High Court : "1. Whether the Tribunal was right i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t liable to charge under the capital gains in respect of the sale of the properties and, therefore, he deleted the capitals gains of Rs. 68,400 as computed by the ITO. The Tribunal, following the decision of the Kerala High Court in Ambat Echukutty Menon v. CIT (1(1978) 111 ITR 880 (Ker), and the decision of the Madras High Court in CIT v. V.Indira (1979) 119 ITR 837 (Mad) held that clearing of the mortgage debt could neither be treated as "cost of acquisition" nor as an "cost of improvement" made by the assessee. The Tribunal, therefore, held that the deduction of the capital gains was not justified. Since the Tribunal declined to refer to the High Court the questions referred to above, the assessee filed an application under s.256(2) of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es interest in the property and, therefore, the amount paid to clear off the mortgage is the cost of acquisition of the mortgagees interest in the property which is deductible as cost of acquisition under s. 48 of the Act. In the present case, we find that the mortgage was created by the assessee himself. It is not a case where the property had been mortgaged by the previous owner and the assessee had acquired only the mortgagors interest in the property mortgaged and by clearing the same he had acquired the interest of the mortgagee in the said property. The questions raised by the assessee in the application submitted under s. 256(2) of the Act do not, therefore, raise any arguable question of law and the said application was rightly reje ..... X X X X Extracts X X X X X X X X Extracts X X X X
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