CIT Vs Attili N. Rao (Supreme Court of India)
The Supreme Court allowed the Revenue’s civil appeal against the judgment of the High Court, which had answered the Revenue’s questions against it concerning computation of capital gains on the sale of mortgaged immovable property. The matter related to assessment year 1982-83. The assessee, who carried on abkari business, had mortgaged his immovable property at Waltair to the Excise Department of the State of Andhra Pradesh during financial year 1970-71 as security for amounts of “kits” due to the State. During the relevant assessment year, the State sold the property by public auction, without intervention of the court, to realise its dues. The property fetched Rs. 5,62,980 at the auction. The State deducted Rs. 1,29,020 towards “kits” and interest and paid the balance to the assessee.
The Revenue contended that the assessee was liable to capital gains tax on capital gains of Rs. 3,70,970, having regard to the cost of acquisition of the immovable property. The assessee contended that the amount of Rs. 1,29,020 payable to the State towards “kits” was required to be deducted from the auction amount before computing the capital gain, resulting in capital gain of Rs. 85,130. The Income-tax Officer and the appellate authority rejected the assessee’s position, following which the assessee appealed to the Income-tax Appellate Tribunal.
