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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 ..... had acquired the property, the clearing of the mortgage by him prior to the transfer of the property would not entitle him 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. - Tax Case No.2604 of 2006 - - - Dated:- 21-12-2020 - Hon'ble Dr. Justice Vineet Kothari And Hon'ble Mr. Justice M.S. Ramesh For the Appellant : Mr.R.Parthasarathy For the Respondent : Mr.M.Swaminathan, Senior Standing Counsel assisted by Ms.V.Pushpa, Jr.Standing Counsel JUDGMENT DR.VINEET KOTHARI, J. Heard Mr.R.Parthasarathy, learned counsel appearing for the Appellants/Assessee and Mr.M.Swaminathan, learned Senior Standing Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision of the Hon'ble jurisdictional High Court in the case of CIT vs. N.Vajrapani Naidu, 241 HR 560 a mortgage had been created by the vendorassessee and the amount paid to the other creditors by the vendee was for the discharge of the debts which had been incurred by the assessee. The amount was paid as part of consideration to the sale. Hence the assessee's claim was held to be rightly rejected by the Income-tax Officer. Section 48 of the Income-tax Act clearly lays down the condition that to compute capital gain the expenditure must be incurred wholly and exclusively in connection with such transfer and cost of acquisition of the asset and the cost of improvement thereto. These are the expenses available for deduction while co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax Case is covered by the Judgement rendered by a Division Bench of this Court in Tmt.D.Zeenath v. Income-tax Officer, Ward-I(1) Nagapattinam, in which one of us (Dr.Justice Vineet Kothari) was a party, wherein the Court has held as under:- 29. In our opinion, the ratio in R.M.Arunachalam (supra), squarely applies to this case. As held by the Hon'ble Supreme Court, such payment would go to reduce the cost of acquisition only where the mortgage had not been created by the assessee, but was created by the person from whom the assessee had acquired the title and the mortgage was subsisting at the time title was acquired by the assessee. The position is, however, different where the mortgage is created by the owner after he has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 31/1 for a sum of ₹ 12,600. The Income-Tax Officer computed the capital gains in respect of the said properties at ₹ 68,400. The assessee questioned the computation of capital gains before the Appellate Assistant Commissioner and contended that the debts in respect of which mortgage had been executed were discharged by the buyer himself out of the sale proceeds, that the debts should be considered as increase in cost of acquisition of the properties and that in any event the debts may be treated as improvement to the property or as the cost of obtaining clear title to the property. The Appellate Assistant Commissioner rejected the said contention. He, however, upheld the contention of the assessee that there was an overridi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In Civil Appeals Nos.6098-6101 of 1983 [since reported as R. M. Arunachalam etc. v. CIT (1997) 141 CTR (SC) 348 filed against the judgment of the Full Bench of the Madras High Court in S. Valliammai Anr. v. CIT (supra) we have examined the correctness of the view of the Kerala High Court in Ambat Echukutty Menon v. CIT (supra) and have held that the said decision does not lay down the correct law in so far as it holds that where the previous owner had mortgaged the property during his life time the clearing off the mortgage debt by his successor can neither be treated as cost of acquisition nor as cost of improvement made by the assessee. It has been held that where a mortgage was created by the previous owner during his time and the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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