TaxTMI Login
Just a moment...
Press 'Enter' to add multiple search terms. Rules for Better Search
When case Id is present, search is done only for this
of 
of 
No Folders have been created
Are you sure you want to delete "My most important" ?
NOTE:
of of 
All Case Laws
of of All Case Laws
Note
Bookmark
Share
Don't have an account? Register Here
of <h1>Court rules mortgage debt payment not deductible in computing property transfer capital gains.</h1> <h3>Commissioner Of Income-Tax Versus N. Vajrapani Naidu</h3> Commissioner Of Income-Tax Versus N. Vajrapani Naidu - [2000] 241 ITR 560, 107 TAXMANN 277 Issues involved: Whether the amount paid for discharging debts due on mortgage of the property should be deducted in computing capital gains arising from the transfer of the property.Summary:The High Court of Madras considered a case where an individual sold immovable properties under 13 sale deeds, with a portion of the consideration paid by the buyer to the creditors of the vendor, including mortgagees. The assessee claimed this amount should be deductible for computing capital gains, but the claim was initially rejected by the Income-tax Officer and the Commissioner.Upon appeal, the Tribunal held that the amount paid to creditors, including mortgagees, was deductible as it was expenditure incurred wholly and exclusively in connection with the transfer u/s 48 of the Act. However, the High Court disagreed with this view, stating that the burden of the mortgage was created by the vendor for his own benefit, and thus, the amount paid for discharging the mortgage cannot be considered as expenditure in connection with the transfer.The Court emphasized that when a mortgaged property is sold, the consideration includes the sale of equity of redemption and the amount required for discharging the mortgage. The method of payment to the mortgagee, whether by the vendor or the vendee, does not affect the determination of consideration for the sale and capital gain.Referring to a Supreme Court case, the Court clarified that payment to discharge a mortgage would reduce the cost of acquisition only if the mortgage was not created by the assessee. In this case, as the mortgage was created by the vendor-assessee, the amount paid by the vendee for discharging the debts was part of the consideration for the sale.Ultimately, the Court ruled in favor of the Revenue, stating that the amount paid for discharging the mortgage debts should not be deducted in computing the capital gains arising from the property transfer.
TaxTMI 