SHRI C.K.SUNDER, Nagpur v. I.T.O. WARD -3(1), Nagpur

ITA 473/NAG/2016 | 2007-2008
Pronouncement Date: 04-10-2016 | Result: Dismissed

Appeal Details

RSA Number 47323914 RSA 2016
Assessee PAN AETPS5932A
Bench Nagpur
Appeal Number ITA 473/NAG/2016
Duration Of Justice 1 month(s) 18 day(s)
Appellant SHRI C.K.SUNDER, Nagpur
Respondent I.T.O. WARD -3(1), Nagpur
Appeal Type Income Tax Appeal
Pronouncement Date 04-10-2016
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted SMC
Tribunal Order Date 04-10-2016
Assessment Year 2007-2008
Appeal Filed On 16-08-2016
Judgment Text
1 ITA NO. 473/NAG/2016. IN THE INCOME TAX APPELLATE TRIBUNAL NAGPUR BENCH NAGPUR BEFORE SHRI SHAMIM YAHYA ACCOUNTANT MEMBER. (S.M.C.) I.T.A. NO. 47 3 /NAG/2016 ASSESSMENT YEAR : 2007 - 08. M/S C.K. SUNDER THE INCOME - TAX OFFICER NAGPUR. VS. WARD - 3(1) NAGPUR. PAN AETPS5932A. APPELLANT. RESPONDENT. APPELLANT BY : SHRI MUKESH AGRA WAL. RESPONDENT BY : SMT. AGNES P. THOMAS. DATE OF HEARING : 03 - 10 - 2016 DATE OF PRONOUNCEMENT : 4 TH OCT. 2016 O R D E R. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(APPEALS) - II NAGPUR DATED 23 - 06 - 2016 AND PERTAINS TO ASSESSMENT YEAR 2007 - 08. THE GROUNDS OF APPEAL READ AS UNDER : 1. THE LEARNED CIT(A) - II ERRED IN CONFIRMING THE ADDITION OF RS.39 21 351/ - AS LONG TERM CAPITAL GAIN WHEN THE ENTIRE RECEIPTS WAS DIVERTED BY OVERRIDING TITLE IN FAVOUR OF SHIKSHAK SAHAKARI BA NK LTD. 2. THE LEARNED CIT(A) - II ERRED IN CONFIRMING AN ADDITION OF RS.39 21 351/ - TO THE ASSESSEES TOTAL INCOME ON THE BASIS OF VALUATION REPORT WHICH IS INCOMPLETE. 3. THE LEARNED CIT(A) - II ERRED IN HOLDING THAT THE FACTS OF THE ASSESSEES CASE IS COVERED BY THE JUDGEMENT OF HON. BOMBAY HIGH COURT IN THE CASE OF ROSHANBABU MOHAMMAD HUSSAIN WHEREAS THE 2 ITA NO. 473/NAG/2016. FACTS AND CIRCUMSTANCES SOF THE ASSESSEES CASE IS CLEARLY DISTINGUISHABLE. 2. BRIEF FACTS OF THE CASE ARE AS UNDER : THE RETURN OF INCOME DECLARING TOTAL INCO ME OF RS.1 71 590/ - WAS FILED ON 30 - 08 - 2007. THE ASSESSMENT IN THIS CASE WAS COMPLETED U/S 143(3) VIDE ORDER DATED 19 - 11 - 2009 ACCEPTING THE RETURNED INCOME. SUBSEQUENTLY IT WAS FOUND THAT THE APPELLANT HAD SOLD HIS IMMOVABLE PROPERTY SITUATED AT PLOT NO. 3 0 MAUZA KHAMLA DIST. NAGPUR VIDE SALE DEED DATED 30 - 10 - 2006 FOR A CONSIDERATION OF RS.51 00 000/ - AND THAT THE APPELLANT HAD NOT OFFERED THE CORRESPONDING INCOME OF CAPITAL GAIN. CONSEQUENTLY THE AO REOPENED THE ASSESSMENT ORDER BY ISSUE OF NOTICE U/S 1 48 OF THE I.T. ACT. 3. DURING THE COURSE OF RE - OPENED PROCEEDINGS IT WAS NOTED BY THE AO THAT THE PARTNERSHIP FIRM BY THE NAME OF M/S ANNAPURNA ENGINEERING CORPORATION (AEC) HAD AVAILED A TERM LOAN FROM SHIKSHAN SAHAKARI BANK LTD. (SSBL) NAGPUR AND THE S AID PROPERTY OF THE APPELLANT WAS MORTGAGED AS A SECURITY FOR THE SAID LOAN. IT WAS FURTHER NOTED BY THE AO THAT M/S ANNAPURNA ENGINEERING CORPORATION FAILED TO REPAY THE LOAN AMOUNT AND IN ORDER TO RECOVER THE LOAN SSBL SOLD THE PROPERTY MORTGAGED BY THE APPELLANT WHEREIN THE APPELLANT WAS THE VENDOR AND SS B L WAS THE CONSENTING PARTY. THE APPELLANT RECEIVED AN AMOUNT OF RS.51 00 000/ - AS SALE CONSIDERATION. THE AO REQUIRED THE APPELLANT TO EXPLAIN AS TO WHY THE SAID SALE CONSIDERATION SHOULD NOT BE BROUGHT TO TAX AS LONG TERM CAPITAL GAIN. 4. THE ASSESSEE RESPONDED AS UNDER : A. I STOOD AS THE GUARANTOR FOR THE LOAN AVAILED BY MLS ANNAPURNA ENGG . CO RPORATION FROM S HIKSHAK SAHAKARI BANK LTD NAGPUR & MORT GAGED MY PROPERTY TO THE SAID BA NK . B. HOWEVER ANNAPURNA ENGG . CORPORATION FAILED IN MAKING REPAYMENT OF TH E LOAN AMOUNT & THEREFORE SHIKSHAK SAHKARI BANK LTD (THE MORTGAGEE BANK) WHO HAD CREATE A CHARGE ON MY PROPER TY DECIDED TO DISPOSE OF MY PROPERTY BY WAY OF TRANSFERRING THE TITLE TO HE PURCHASER . C. I HAVE NO BUSINESS INTEREST IN MLS ANNAPURNA ENGINEERING CORPORATION WHO AD AVAILED LOAN FROM SHIKSHAK SAHAKARI BANK LTD (THE MORTGAGEE BANK) D. I HAVE NOT RECEIVED ANY AMOUNT OF RS. 51 LAKH FROM THE PURCHASERS E. I HAVE NOT RECEIVED A SINGLE RUPEE FROM THE PURCHASE 3 ITA NO. 473/NAG/2016. F. THE ENTIRE AMOUNT WAS PAID BY THE PURCHASER DIRECTLY TO SHIKSHAK SAHAKA I BANK LTD. FOR BUYING T H E PROPERTY G. I HAVE FILED MY INCOME TA X RETURN FOR THE ASSESSMENT YEAR 2007 - 08 VIDE A C KNOWLEDGEMENT NUMBER 031/019926 DT. 30 / 08 / 200 7 . NO OTHER INCOME TAX RETURN FOR ASSESSME N T YEAR 2007 - 08 WAS FILED H. I HAVE NO OTHER INCOME OTHER THAN MY PENSION FOR F . Y . 2006 - 07. IN FACT HAVE NO OTHER INCOME FROM ANY OTHER SOURCE OTHER THAN MY PENSION AFTER MY RETIREMENT & TI I DATE . I. I HAVE NO OT H ER PROPERTY J. I HAVE ALREADY SUBMITTED CASE LAW: ADDITIONAL COMMISSIONER OF INCOME TAX V I S GLAD INVESTMENT (P) LTD. 9 TH JUNE 2 006 EQUIVALENT CITATION : 2006 1021TD 227 DELHI (2006) 105 ITJ 218 DE/HI 5. HOWEVER THE AO WAS NOT CONVINCED. HE HELD THAT THE ASSESSEE WAS A GUARANTOR OF THE FIRM M/S ANNAPURNA ENGINEERING CORPORATION WHICH HAS AVAILED A TERM LOAN OF RS.1.69 CRORES FROM SHIKSHAK SAHAKARI BANK LTD. THE PARTNERS OF THE SAID FIRM WERE FAMILY MEMBERS OF THE ASSESSEE BEING THREE SONS AND WIFE OF THE ASSESSEE. THUS THE AO HELD THAT IT WAS TO PROVIDE BENEFIT AND PRO TECTION OF FAMILY MEMBERS FROM LEGAL WRANGLE T HAT THE ASSESSEE HAD AGREED TO SELL HIS PROPERTY . THE AO FURTHER PLACED RELIANCE UPON JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF CIT VS. ROSHANBABU MOHAMMAD HUSSAIN 144 TAXMAN 720. ACCORDINGLY THE AO HELD THAT THE ASSESSEE HAS HIMSELF VOLUNTARILY MORTGAGED HIS PROPERTY AND HENCE IS LIABLE FOR CAPITAL GAINS TAX. 6. UPON ASSESSEES APPEAL LEARNED CIT(APPEALS) AFFIRMED THE AOS ACTION. HE HELD AS UNDER : 4.5 IN THIS REGARD IT IS TO BE STATED THAT THE CASE OF THE APPELLANT IS MORE PROPERLY COVERED BY THE DECISION OF THE JURISDICTIONAL BOMBAY H I GH COURT IN THE CASE OF CIT V S . ROSHANBABU MOHAMMED HUSSAIN (SUPRA) WHICH ALSO INVOLVED DISPOSAL OF THE PROPERT Y BY THE APPELLANT WHO WAS THE GUARANTOR IN RESPECT OF THE FIRM WHEREIN A FAMILY MEMBER WAS A DIRECTOR . IN THE SAID CASE THE APPELLANT WAS THE SHAREHOLDER OF M LTD IN WHICH HER HUSBAND WA S A DIRECTOR . 'M' LTD . RAISED A LOAN FROM THE BANK AND FOR TH E R E P A YM E NT O F WHI C H TH E ASSESSEE STOOD AS ONE OF THE GUARANTORS AND TH E A S SES SEE OFF E RED H ER PLOT OF LAND AS SECURITY FOR REPAYMENT OF LOAN . AS 'M ' LTD . FAILED TO PAY TH E LO A N T H E BA NK FIL E D - A SUIT AGAINST THE COMPANY . SUBS E QU E NTLY CON S ENT T E RMS WER E AR RI VED AT IN TH E SA ID SU I T AS ' PER WHICH THE BANK WAS TO HAV E A NEGATIVE LIEN OVER TH E A SSE SS E E ' S P L OT O F L A ND WHICH WAS .GIVEN AS COLLAT E RAL S ECURITY FOR THE LOAN . THE SAID LI E N W AS TO R E M A IN OPERATIV E TILL TH E BANK'S DUES W E RE FULLY PAID . THEREAFTER THE ASS E S SEE A FT E R O BTAINING PERMISSION FROM THE BANK SOLD A PART OF THE LAND FOR A CONSIDERATION AN D DEPOSIT E D THE S AME WITH THE BANK TOWARDS DISCHARGE OF THE DEBT . THE AS S ESS E E CLAIM ED TH A T LONG - TERM CAPITAL GAIN ARISING ON SALE OF HER LAND WAS EXEMP T FROM CAPITAL GAINS TA X . HOW E VER TH E A S SESSING OFFICER COMPLETED THE ASSESSMENT UNDER SECTION 143(3) AN D TA XE D TH E SA ID AMOUNT . ON APPEAL: ' . 16. THE C ONTENTION THAT THE ASSESS E E HAS NOT RECEIVED A PIE FROM THE TRAN SFER 4 ITA NO. 473/NAG/2016. A ND THE ENTIRE SALE PROCEEDS REALISED ON TRANSFER OF THE MORTGAGED ASSET HA S BEEN APPROPRIATED TOWARDS DISCHARGE OF MORTGAGE IS ALSO WITHOUT ANY MER I T . AS H E LD BY. THE APEX COURT WHEN THE PROPER T Y BELONGING TO THE ASSESSEE IS SOL D IN DI S CHARGE OF THE MORTGAGE CREATED BY THE A S SESSEE HIM S ELF THEN IRRESPE C TIV E OF T H E A MOUNT ACTUALLY RECEIVED BY THE A SS ES SEE TH E C APITAL GAIN HA S TO BE C OMPUTED ON THE FULL PRICE REALISED (LESS ADMISSIBLE DEDUCTION) ON TRANSFER OF TH E A SS ET . TO ILLUSTRATE SUPPOSE THE ASSESSEE MORTGAGE S I TS CA PITAL ASSET AND O B T A I N S L OA N OF RS . 1 LAKH FROM A BANK . THEREAFTER IF THE ASSESSEE TRANSFERS THE S A I D CAPITAL ASSET WITH THE CONSENT OF THE BANK FOR RS . 1 LAKH AND PAYS THE EN TI R E A MOUNT OF R S . 1 LAKH TO THE BANK TO DISCHARGE THE MORTGAGE CREATED BY TH E A S SESSEE THEN IT IS NOT OPEN TO THE ASSESSEE TO CONTEND THAT THE CAPITAL GAINS TA X I S NOT LEVIABLE ON TRANSFER OF THE PROPERTY BECAUSE THE ASSESSEE HAS NOT RECEI V ED A PI E ON TRANSFER OF THAT CAPITAL AS S ET . . 17. A S REGARDS THE DECISIONS OF THIS COU RT IN THE C AS E OF SHAKUNTALA KANT I LAL (SUPRA) FOLLOWED IN THE CASE OF ABRAR ALVI (SUPRA) AND THE DECISIONS OF THE KERALA HIGH COURT IN THE CASE OF SMT . THRE S SIAMMA ABRAHAM (SUPRA) WHICH ARE STRON G L Y R E LI E D UPON BY THE COUNSEL FOR THE ASSESSEE WE ARE OF THE OPINION THAT THE SA ID DECISIONS ARE NO LONGER GOOD LAW IN THE LIGHT OF THE S UBSEQUENT DECISIONS OF TH E APE X COURT REFERRED TO HEREINABOVE . . 18 . FOR ALL THE AFORESAID REASONS WE ANSWER QUESTION SET OUT AT PARA 2 IN TH E NEGATIVE I.E. IN TEV OUR OF THE REVENUE AND AGAINST THE E SS ES SE : ' 4.6. THE FACTS AS STATED IN THE ABOVE CASE OF CL T VS ROSHANBABU MOHAMMED HUSSAIN ARE ALMOST IDENTICAL TO THE CASE UNDER CONSIDERATION AND SAME IS THE JUDGEMENT OF JURISDICTIONAL HIGH COURT. THIS IS I N CONTRAST TO THE DELHI HIGH COURT TO IN THE CASE OF ADDL . CIT VS GLAD INVESTMENT PVT LTD. WHEREIN THE APPELLANT WAS A FINANCE COMPANY AND H AD PLEDGED I TS SHARES AS COLLATERAL SECURITY FOR LOANS TAKEN BY TH I RD PARTY . AS STATED ABOVE IN THE CASE OF CIT VS ROSHANBABU MOHAMMED HUSSAIN THE APPELLANT WAS A S H ARE HOLDER O F THE COMPANY IN WHICH HER HUSBAND WAS A DIRECTOR . ALSO THERE IS NO BASIS TO COME A CONCLUSION THAT THE DEPARTMENT HAS ACCEPTED THE DECISION OF THE DELH I H I GH COURT AND HAS NOT CONTESTED THIS MATTER FURTHER . 4 . 7 THE FINDINGS GIVEN IN THE CASE OF CIT VS ROSHANBABU MOHAMMED HUSSA I N (SUPRA) ARE UNAMBIGOUS AND ARE DIRECTLY RELEVANT FOR THE CASE UNDER CONSIDERAT I ON . THE PROVISIONS OF SECTION 45 BRING TO CHARGE OF TAX 'ANY PROFITS OR GAINS ARISING FROM THE TRANSFER OF A CAPITAL ASSET'. THE LEVY IS ONLY IF PROFITS OR GAINS ARISE TO THE ASSESSEE NOT OTHERWISE. THE CONTENTION THAT THE ASSESSEE HAS NOT RECEIVED A PIE FROM THE TRANSFER AND THE ENT IRE S ALE PROCEEDS REALISED ON TRANSFER OF THE MORTGAGED ASSET HAS BE E N APPROPRIATED TOWARDS DISCHARGE OF MORTGAGE IS WITHOUT ANY MER I T . IT IS ON L Y LOGICAL THAT W H E N TH E PROPERTY BELONG IN G TO THE APPELLANT IS SOLD IN DISCHARGE OF A MORTGAGE CREATED B Y T H E A PP E LL A NT HIM S ELF THEN IRRESPECTIVE OF THE AMOUNT ACTUALLY RECEIVED BY THE HIM THE C APITAL G A IN HAS TO BE COMPUTED ON THE FULL PRICE REALISED (LESS ADMISSIBLE DEDUCTION) ON TRANSFER OF THE AS S ET . THIS VIEW IS CATEGORICALLY ENDORSED BY CIT VS ROSHANBA BU M O H A MMED HUSSAIN ( S UPRA). 4 . 8 IN THE CA S E UNDER CONSIDERAT I ON SINCE IT I S E VIDENT THAT THE APPELLANT HAD MORTGAGED HIS PROPERTY TO FURTHER THE INTEREST OF HIS FAMILY MEMBERS AND HAD SUBSEQUENTLY AGR E ED TO THE SALE THEREOF I SEE NO REASONS TO INTERFERE WITH THE FIND I NGS OF TH E LD. AO OF BRIN G ING TO TAX THE CAP I TAL GAIN ON THE SALE CONSIDERATION RECEIVED BY THE APPELLANT I N LIEU OF SALE OF THE SAID PROPERTY. TAKING I NTO CONSIDERATION THE ABOVE FACTS THE ADDITION S MADE BY THE LD . AO AMOUNTING TO RS. 39 21 351/ - I S HEREBY CONFIRMED . THES E GROUNDS ARE T HE REFORE DISMISSED. 5 ITA NO. 473/NAG/2016. 7. AGAINST THE ABOVE ORDER THE ASSESSEE IS IN APPEAL BEFORE THE ITAT. 8. LEARNED COUNSEL OF THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW. HE SUBMITTED THAT THE ASSESSEE HAS NOT RECEIVED A SINGLE RUPEE FROM THE SALE. THE ENTIRE AMOUNT WAS PAID BY THE PURCHASER DIRECTLY TO THE BANK. LEARNED COUNSEL ALSO PLACED RELIANCE UPON THE DECISION OF ITAT DELHI BENCH IN THE CASE OF ADDL. CIT VS. GLAD INVES TMENT PVT. LTD. 105 TTJ 210. HE FURTHER SUBMITTED THAT THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT RELIED UPON BY THE REVENUE IN THE CASE OF ROSHANBABU MOHAMMED HUSSAIN (SUPRA) WAS NOT APPLICABLE TO THE FACTS OF THE CASE. 9. PER C ONTRA LEARNED D.R. RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW AND THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT (SUPRA). 10. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS AND PERUSED THE RECORDS. I FIND THAT THE ASSESSEE HAD MORTGAGED HIS PROPERTY AS A GUARANTOR FOR LOAN TO A FIRM IN WHICH HIS SONS AND WIFE WERE PARTNERS. DUE TO DEFAULT IN PAYMENT OF LOAN THE ASSESSEE SOLD THE PROPERTY AND THE ENTIRE SALE CONSIDERATION WAS RECEIVED B Y THE BANK. NOW IN THESE CIRCUMSTANCES IN MY CONSIDERED OPINION THE ASSESSEES AC TION OF SALE OF THE PROPERTY AND RECEIPT BY THE BANK OF THE ENTIRE SALE CONSIDERATION IS ONLY AN APPLICATION OF INCOME BY THE ASSESSEE. BY NO STRETCH OF IMAGINATION IT CAN BE CONSIDERED TO BE DIVERSION BY OVERRIDING TITLE. IT WAS ONLY UPON THE SIGNING OF T HE SALE DEED BY THE ASSESSEE THAT THE SALE WAS FORMALIZED. HENCE IT WAS THE ASSESSEE WHO HAS SOLD THE PROPERTY THE PROCEEDS WHERE OF WERE DIRECTLY RECEIVED BY THE BANK AS PAYMENT OF THE LOAN TAKEN BY THE FIRM FOR WHOM THE ASSESSEE HAD STOOD GUARANTOR AND W HOSE PARTNERS WERE OF SONS AND WIFE OF THE ASSESSEE. HE ENCUMBRANCE OR MORTGAGE OR CHARGE ON THE PROPERTY WAS CREATED BY THE ASSESSEE HIMSELF. IT IS NOT THE CASE THAT THE SAID PROPERTY WHEN ACQUIRED BY THE ASSESSEE CONTAINED ENCUMBRANCES OR CHARGES OR MOR TGAGE OF THE PROPERTY. ON A PROPERTY WHICH WAS FREE FROM ALL ENCUMBRANCES 6 ITA NO. 473/NAG/2016. THE ASSESSEE HIMSELF CREATED ENCUMBRANCE BY MORTGAGING THE SAME AS A GUARANTOR FOR LOANS TO BE RECEIVED BY A FIRM IN WHICH HIS RELATIVES WERE PARTNERS. NOW WHEN THERE WAS DEFAULT IN PAYMENT OF THE LOAN AND THE BANK INVOKED ASSESSEES GUARANTEE AND HENCE TO DISCHARGE SUCH ENCUMBRANCE THE ASSESSEE SIGNED THE SALE DEED AND THE ENTIRE SALE PROCEEDS WAS APPLIED FOR DISCHARGING OF THE DEBT OF THE SAID FIRM. IN THESE CIRCUMSTANCES THE ASS ESSEE IS CLEARLY LIABLE TO CAPITAL GAINS ON THE ENTIRE SALE PROCEEDS SUBJECT TO PERMISSIBLE DEDUCTIONS. THE AFORESAID VIEW IS PERFECTLY IN ACCORDANCE WITH THE EXPOSITION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. ROSHANBABU MOHAMMED HUSSAIN 275 ITR 231. I MAY GAINFULLY REFER TO THE EXPOSITION OF TH HONBLE JURISDICTIONAL HIGH COURT IN THIS CASE AS CONTAINED IN PARA 14 TO 19 AS UNDER : 14. FROM THE AFORESAID DECISIONS OF THE APEX COURT IT IS CLEAR THAT THERE I S A DIST I NCTION BETWEEN THE OBLIG AT ION TO DISCHARGE THE MORTGAGE DEBT CREATED BY THE PREVIOUS OWNER AND T H E OB LI GA TI O N T O D IS CHARGE THE MORTGAGE DEBT CREATED BY THE ASSESSEE HIMSE L F. WHERE T H E PROPER TY A CQUI R E D B Y THE AS SESSEE I S SUBJECT TO THE MORTGAGE CREATED BY THE PREV I OUS OWNER THE ASSESSEE ACQ UI RES ABSO L U T E I NTEREST I N THAT PROPERTY ONLY AFTER THE INTEREST CREATED I N THE PROPERTY IN F AVOU R O F T H E MORTGAGEE I S TRA NS F ER R ED TO THE ASSESSEE THAT IS A F TER THE D I SCHARGE OF MORTGAGE DEBT . IN SUC H A C ASE T HE EX P EN D IT URE I NCURRED BY THE ASSESSEE TO DISCHARGE THE MORTGAGE DEBT CREATED BY TH E P R E VI OUS OWNE R TO AC QU I RE ABSOLUTE I NTERES T I N THE PROPERTY I S TREATED AS ' COST OF ACQUISITION' A N D I S DEDUCTIB LE FROM T H E FUL L VA LUE OF CONS I DERAT I ON RECE I VED BY THE ASSESSEE ON TRANSFER OF THAT PROPERTY . H OW EV ER W H ERE THE ASSE SSEE ACQUIRES A PROPERTY WHICH I S UNENCUMBER E D THEN THE ASSESSEE GETS ABSO L UT E I NTEREST IN TH A T PR OPER TY O N AC QU I S I T I ON . WHE N THE ASSESSEE TRANSFERS THAT PROPERTY T HE ASSESS EE IS LIABL E F O R C APIT A L G A I NS TAX O N THE FULL VALUE (LESS ADM I TTED DEDUCT I ONS ) R EAL I SED EVEN I F A N ENC UMBR AN CE I S CRE A TE D BY TH E ASSESSEE HIMSELF ON THAT PROPERTY AND THE ASSESSEE I S UNDER AN OB LI GAT I O N T O REMO V E TH A T ENCUMB R ANCE FOR EFFECT I VELY T R ANSFERR I NG THE PROPERTY. IN OTHER WORDS THE EXPE NDI TU R E IN CU RRED BY THE ASSESSEE TO REMOVE THE ENCUMBRANCE CREATED BY THE ASSESSEE HIMSELF ON THE PROPERTY WHICH WAS ACQUIRED BY THE ASSESSEE WITHOUT ANY ENCUMBRANCE IS NOT ALLOWABLE DEDUCTION UNDER S. 48 OF THE IT ACT. . 15. FURTHER IT IS TRUE THAT IN NONE OF THE AFORESAID CASES THE APEX COURT HAS SPECIFICALLY HELD THAT REPAYMENT OF THE MORTGAE DEBT CREATED BY THE ASSESSEE HIMSELF IS NOT AN EXPENDITURE INCURRED FOR EFFECTIVELY TRANSFERRING THE PROPERTY. HOWEVER IT IS IMPLICITLY HELD BY THE APEX COURT THAT THE EXPENDITURE INCURRED TO REMOVE THE ENCUMBRANCE CREATED BY THE ASSESSEE HIMSELF ON A PROPERTY ON WHICH THE ASSESSEE HAD ABSOLUTE INTEREST IS NOT AN EXPENDITURE INCURRED FOR EFFECTIVELY TRANSFERRING THE PROPERTY AS CONTEMPLATED UNDER S. 48 OF THE IT ACT. IT IS NOT IN DISPUTE THAT IN BOTH THE APPEALS WHICH ARE BEFORE US THE PROPERTY ON WHICH THE ENCUMBRANCE WAS CREATED BY THE ASSESSEE WAS ACQUIRED BY THE ASSESSEE FREE FROM ENCUMBRANCES. THEREFORE IN THE LIGHT OF THE DECISIONS OF THE APEX COURT REFERRED TO HEREINABOVE IT MUST BE HELD THAT THE ASSESSEE IS NOT ENTITLED TO THE DEDUCTION OF THE EXPENDITURE INCURRED TO ABOVE THE ENCUMBRANCE CREATED BY THE ASSESSEE HIMSELF. 7 ITA NO. 473/NAG/2016. 16. THE CO N T E N TI ON THAT THE ASSESSEE HAS NOT R ECEIVED A P I E FROM THE TRANSFER A N D THE EN T I R E S AL E PROCE EDS REA LI SED ON TRANSFER OF THE MORTGAGED ASSET HAS BEEN APPROP R IATED T OWA R D S DI S CHARGE O F M O R TGAG E I S ALSO W I THOUT ANY MER I T . AS HELD B Y T HE APEX COURT WH E N THE P R OP ER TY BELONGING TO THE A SSESSEE I S SOLD I N D I SCHARGE OF THE MORTGAGE CREATED BY THE ASSESS E E HIM SEL F T HEN IRR ESPE CTI V E OF TH E AMOUNT ACTUALLY RECEIVED BY THE ASSESSEE THE CAP I TAL GA I N H AS TO B E COMP UT ED O N TH E FULL PR I CE R EA LI SED (LESS ADM I SSIB L E DEDUCT I ON) ON TRANSFER OF THE ASSET. TO IL LUS TR A T E SU PPOSE THE ASSESSE E MORTGAGES I TS CAPITAL ASSET AND OBTA I NS LOAN OF RS. 1 L A K H FROM A BAN K. T H EREA F TE R IF THE AS S E SS EE TRANSFERS THE SA I D CAPITAL ASSET WITH THE CONSENT OF T H E B ANK F O R RS. 1 LA KH A ND PA YS THE ENTIRE AMOUNT OF RS. 1 LAKH TO THE BANK TO DISCHARGE THE MORTGAGE CREA T ED BY THE ASSESSEE TH E N IT IS NOT OPEN TO TH E ASSESSEE TO CONTEND THAT THE CAPITAL GAINS TAX I S N OT LEV I ABLE ON TRA N SFE R OF THE P R OPE R T Y B EC AU S E THE ASSESSEE HAS NOT RECE I VED A PIE ON TRANSFER OF THAT CAP I TAL ASSET . 17. AS REGARDS THE DEC I SIONS OF THIS COURT I N THE CASE OF SHAKUNTALA KANT I LAL (SUPRA) FOLLOWED IN THE CASE OF ABRAR ALVI (SUPRA) AND THE DEC I SIONS OF THE KERA L A H I GH COURT I N THE CASE OF SMT . THRESS I AM M A ABRAHAM (SUPRA) WH I CH ARE STRONGLY RE L IED UPON BY THE COUNSEL FOR THE ASSESSEE WE ARE O F THE OP I N I ON TH A T THE SA I D DEC I S I ONS ARE NO LONGER GOOD LAW I N THE LIGHT O F T H E SUBSEQ U ENT DECIS I ONS O F T HE APE X COURT REFE R R ED T O H ERE I NABO V E . 18. FOR ALL THE AFORESA I D REASONS WE ANSWER QUEST I ON SET OUT AT PA R A 2 I N THE NEGAT I VE I . E. I N F AVOUR O F T HE REVENUE AND AGA I NST THE ASSESSEE. 19. ACCORDINGLY THE APPEAL NO. 755 OF 2000 FILED BY THE REVENUE I S A L LOWED AND THE APPEAL NO. 603 OF 2000 FILED BY THE ASSESSEE IS DISMISSED. HOWEVER THER E WILL BE NO ORDER AS TO COSTS. 11 . IN MY CONSIDERED OPINION AS HELD BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE ABOVE CASE THE ASSESSEE WAS FULLY RESPONSIBLE FOR CAPITAL GAINS ON THE PORTION OF SALE PROCEED WHICH WERE PAID DIRECTLY TO THE BANK AND NOT TO THE ASSESSEE. HENCE THE RATIO FROM THIS DECISION IS CLEARLY APPLICABLE ON THE FACTS OF THIS CASE. HENCE THE DISTINCTION SOUGHT BY THE LEARNED COUNSEL OF THE ASSESSEE IS NOT CORRECT. FURTHER MORE THE ITAT DELHI BENCH DEC ISION REFERRED BY THE LEARNED COUNSEL OF THE ASSESSEE NEED NOT BE CONSIDERED IN VIEW OF THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT MENTIONED HEREIN ABOVE IN VIEW OF THE DOCTRIN OF JUDICIAL PRECEDENTS. ACCORDINGLY IN THE BACKGROUND OF AFORESAID DISC USSION AND PRECEDENT I DO NOT FIND ANY INFIRMITY IN THE ORDER OF LEARNED CIT(APPEALS). ACCORDINGLY I UPHOLD THE SAME. 8 ITA NO. 473/NAG/2016. 12. IN THE RESULT THIS APPEAL FILED BY THE ASSESSEE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 4 TH DAY OF OCT. 2016. SD/ - ( SHAMIM YAHYA) ACCOUNTANT MEMBER. NAGPUR DATED: 4 TH OCT. 2016. COPY FORWARDED TO : 1. M/S C.K. SUNDER G - 01 MANGALMURTHY APARTMENT OPP. MOKHARE COLLEGE LAKESHWAR NAGAR JAITALA NAGPUR - 440 036. 2. I.T.O. WARD - 3(1) NAGPUR. 3. C.I.T. - NAGPUR. 4. CIT(APPEALS) - II NAGPUR. 5. D.R. ITAT NAGPUR. 6. GUARD FILE TRUE COPY BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL NAGPUR BENCH NA GPUR. WAKODE.