Case Law Details
Smt. D. Zeenath Vs ITO (Madras High Court)
Conclusion: Assessee created mortgage after acquiring the property and clearing off of the mortgage debt prior to transfer of the property would not entitle her to claim deduction under section 48 as there was only a mere application by the owners themselves of the profits realized on the sale of land towards the discharge of loan obligations of same firm.
Held: Assessee along with two other co-owners had originally purchased a land. The property had been offered as collateral security in a loan obtained from Bank and assessee and the other two co-owners stood as guarantors, for the said loan. Mortgage was by deposit of title deeds. No registered mortgage deed was executed. Since the loan was not repaid, assessee and the other two co-owners consented for sale of the property by Bank to realize its dues.Revenue contended that mortgage deed was not registered thus bank did not have any independent authority to sell the property and also, assessee was liable to be taxed for capital gains for the consideration received, as payment to bank was only application of her income. Assessee contended that as she did not receive even a single pie from such sale consideration and seeked deduction of the entire sale consideration claiming that, since the entire sale consideration had been paid directly to the mortgagee/bank, it should be considered as expenditure incurred wholly and exclusively in connection with such transfer. It was held mortgage deed was never registered and Bank did not have a right to bring the property to sale. Assessee continued to have title over the property along with her co-owners. They brought the property to sale through Bank. There was no diversion of sale proceeds by virtue of overriding title, but on the contrary, there was only a mere application by the owners themselves of the profits realized on the sale of land towards the discharge of loan obligations of same firm. Therefore, assessee could not claim any part of such application as cost of acquisition for the purpose of computing capital gains as per the provisions of section 48.
FULL TEXT OF THE HIGH COURT ORDER / JUDGMENT
The assessee has filed the present appeal under Section 260A of the Act, challenging the order of the Income Tax Appellate Tribunal, Chennai, in I.T.A.No.659/Mds/2002 dated 16.12.2005, with respect to Assessment Year 1995-1996 dismissing the appeal of the assessee.
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