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TMI Blog1991 (1) TMI 195X X X X Extracts X X X X X X X X Extracts X X X X ..... nce the sale proceeds of the shares sold by auction had been appropriated towards repayment of the loan, there was a diversion of income by overriding title under a legal obligation which was enforceable in a Court of Law and accordingly no capital gains was chargeable on sale of the said shares. 3. The arguments of the learned authorised representative of the assessee and the learned Departmental Representatives were heard. 4. Ground No.1.2. No arguments were advanced before us in relation to this ground. However, from a reading of the impugned order of the learned C.I.T.(A) we find that it was contended before him that since there could be no improvement in respect of the shares they could not constitute capital asset at all and hence section 45 could not come into play. Support on this point was sought from the decision of the Bombay High Court in the case of Evans Fraser & Co. Ltd. v. CIT [1982] 137 ITR 493. The learned C.I.T.(A), however, took the view that the said decision of the Bombay High Court was distinguishable inasmuch as it dealt with the case of goodwill, which was an intangible asset, whereas the present case pertains to shares, which constitute a tangible asset. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessing officer does not in any way render any assistance to the present assessee's case before us. A view of a matter, involving a mixed question of law and facts, taken by an assessing officer in the assessment proceedings pertaining to one assessee cannot ipso facto be made applicable to the assessment proceedings pertaining to another assessee. This would be so even though the factual situation in both the cases may be the identical. This would be more particularly so where such order of the assessing officer is sought to be made the basis of a favourable finding on a mixed question of law and facts from an appellate authority. There may not be quarrel with the principle that, a finding purely of facts on a given set of facts in assessment proceedings may be allowed to govern the decision on identical facts in another connected assessment proceedings. But then, this principle holds good in so far as the finding purely of facts is concerned. The position would be materially different where a question under consideration is a mixed question of law and facts. The present issue before us involves a mixed question of law and facts and, therefore, any decision of the assessing o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no question of carry forward of any capital loss because after satisfying the mortgage debt the sale consideration became Nil and there cannot be any negative figure. " The relevant part of the decision of the Hyderabad Bench as reported in (1986) Case Digest/ITAT page 99, reads as under : " Capital gains can be computed only with reference to the pro tanto consideration received by an assessee towards his interest in the property sold. Suppose, a person's interest is not full-fledged and he is holding a limited interest, then, for the purposes of computing capital gains tax the whole price realised by the sale of the whole interest in the property cannot be taken for the simple reason that no man can convey a better title than what he himself has. In the present case, the assessee created a mortgage or a charge in the said property in favour of the Government. Therefore, by the date of auction conducted by the State Government two persons were having interest in the same property. The assessee, no doubt, held the property subject to the mortgage deed or a charged debt due to the Government, but the debt due to the Government was a secured debt. In the auction the property was s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een subsequently created on account of operation of any provision of law. In such a case, if there is diversion or appropriation of income on account of such charge/encumbrance, then such diversion or appropriation can validly be treated as diversion by overriding title. But where diversion or appropriation of the sale proceeds of a property is on account of charge or encumbrance created by its owner in lieu of a voluntary transfer made by him for a consideration, then such diversion or appropriation of the sale proceeds or any part thereof cannot validly be treated as a diversion by overriding title. In the case in hand, it is an admitted position that the present assessee had deposited his shares with the creditor as a security against a loan taken by the firm in which the assessee was one of the partners. Therefore, the amount of that loan and the interest thereon constituted part of the consideration paid to, and received by, the owner on the sale of his shares. It appears that this fact of advance of loan amount and the adjustment of that amount and the interest thereon by the creditor by making appropriation of the sale proceeds or part thereof has been lost sight of, and not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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