TaxTMI 
TaxTMI 
2022 (3) TMI 1309
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.... upholding the order passed by the Ld. ITO, which is bad in law and against justice and liable to be quashed. 2 (a) On the facts and circumstances of the case and in law, the learned CIT (A) has erred in upholding the order passed by the Ld. ACIT, who has erred in disallowing the deduction of Rs. 12,696,360 being claimed as expenses while determined the capital gain. (b) The learned CIT (A) has failed to appreciate the fact that the said amount was paid directly to the bankers towards principal amount of loans from compensation amount awarded as per Rajasthan High Court Order as such bank had pre existing overriding title on company's fixed assets. (c) The learned CIT (A) has failed to appreciate the judicial pronouncement of Hon'ble Calcutta High Court in the case of Gopee Nath Paul & Sons vs. Deputy CIT [2005] 278 ITR 240 where it was held that on the sale of firm's business as a going concern the amount paid to banks to have the charge lifted was treated the expenses in relation to transfer. 3. The appellant craves leave to right of alter, amend and add the grounds of appeal on or before the hearing of appeal" 4. Brief facts related to the ....
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....payment of kist and the Government sold the property for Rs. 5.63 lakhs, deducted its due of Rs. 1.29 lakhs and the balance of rs.4.34 lakhs was given to the assessee. The assessee contended that the amount realized by the Government adjusted towards its kist was diverted by overriding title. It was held by the Apex Court that what was sold by the State at the auction was the immovable property that belonged to the assessee. The price that was realized therefor belonged to the assessee. From out of that price, the State deducted its dues towards 'kist' and interest due from the assessee and paid over the balance to him. The capital gain that the assessee made was on the immovable property that belonged to him. Therefore, it is on the full price realized (less admitted deductions) that the capital gain, and the tax thereon has to be computed and not the full price reduced by the mortgage amount. In CIT vs. Sharad Sharma (2008) 305 ITR 24 (All) inheritance/acquisition along with the mortgage, perfecting his title by getting mortgage discharged, the assessee would be entitled to get the deduction of the mortgage debt but where the charge is created by the assessee himself, it cann....
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....ified in that section are not satisfied. In the circumstances the computation of long term capital gains by the A.O. is sustained." 6. Aggrieved assessee is in appeal before us and Ld.AR of the assessee filed written submissions, the same is reproduced below:- "1. Due to continuous losses, the net worth of the assessee company wiped out and it became a sick industrial company within the meaning of Sec. 3(1)(0) of Sick Industrial Companies (Special Provisions) Act, 1985. 2. It was declared a sick company by the Board of Industrial and Financial Reconstructions (BIFR), New Delhi vide its order dated 21.11.1988. 3. BIFR sanctioned a scheme of rehabilitation vide order dated 19.12.1990 which was modified by order dated 18.02.1993. 4. As the scheme of rehabilitation could not be implemented as envisaged due to factor beyond assessee's control, the BIFR passed an order dt.20.03.1996 for winding up of the company. 5. On assessee's appeal before Appellate Authority for Industrial and Financial Reconstruction (AAIFR), the order of BIFR was stayed and a new rehabilitation scheme was sanctioned by it vide order dt.11.09.1997. 6.....
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.....10.07.2006 directing the compensation amount to be deposited with Canara Bank for distribution amongst secured creditors as per its directions. 15. The honourable High Court, in terms of scheme of arrangement and compromise passed an order dt.18.01.2007 that out of amount lying with Canara Bank, Rs. 2,12,71,119/- should be distributed to the secured creditors towards 50% of the principle amount and 50% of the simple interest accrued till 30.01.2007. As per the directions of the honourable High Court, Canara Bank remitted the respective amount to six secured creditors and transferred the respective amount to their loan account. 16. The total amount due to the secured creditors under OTS as per the Scheme of Arrangement and Compromise (sanctioned by the Honourable Rajasthan High Court vide order dated 19.04.2004) was Rs. 3,29,00,000/-. The company paid 15% of OTS amount as upfront deposit which worked out to Rs. 50,98,948/-. The balance amount of Rs. 2,78,01,052/- was payable to the secured creditors. 17. The assessee received compensation amount of Rs. 163.39 lacs from the competent authority vide order and award dt.11.08.2006 out of which, after deductio....
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....rve from the record that no doubt the land belongs to the company was transferred and assessee has received sale proceeds out of the above said sale proceeds and assessee has transferred Rs..1,26,96,360/- being principal loan amount towards repayment to financial institutions from the compensation received from the NHAI based on the direction of Hon'ble High Court of Rajasthan. On a careful consideration of the Hon'ble Rajasthan High Court order, we observe that: - "5.1. ..... 5.2 That there is a pre existing overriding title and interest in the property of the company in favour of its seven Secured Creditors comprising of Financial Institutions and Banks on pari passu basis, by virtue of Joint Equitable Mortgage created on 1st June, 1994 on the company's immoveable properties described in the First Schedule to the Memorandum of entry together with buildings and structures thereon and all plant and machinery attached to the earth or permanently fastened to anything attached to the earth and also by virtue of relevant provisions of Banking Regulation Act, State Financial Corporations Act, 1951 and other relevant laws safeguarding the interest of the sai....