M/S V D Thakkar Family Trust, Ahmedabad V. The Jtcit Sr-11, Ahmedabad

ITA 1670/AHD/2001

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 0323 (ITAT-AHMEDABAD)
• Duration Of Justice: 8 year(s) 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-10-2009
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 19-08-2009
• Assessment Year: 1996-1997
• Appeal Filed On: 25-07-2001
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: NEETA SHAH
• Assessee Lawyers: J P SHAH
• Keywords: Depreciation; Cost of acquisition; Fair market value; Valuation report; Capital Gains
• Section: 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD B BENCH (BEFORE S/SHRI R.V.EASWAR, VICE-PRESIDENT AND P.K. BANSAL, ACCOUNTANT MEMBER) ITA NO.1670/AHD/2001 [ASSTT.YEAR : 1996-1997] V.D. THAKKAR FAMILY TRUST PLOT NO.307, LANE NO.16 SATYAGRAH CHAVANI SATELLITE ROAD, AHMEDABAD. VS. JCIT, SR-11 AHMEDABAD. ASSESSEE BY : SHRI J.P. SHAH REVENUE BY : SMT.NEETA SHAH O R D E R PER R.V.EASWAR, VICE-PRESIDENT : THIS APPEAL BY THE ASSESSEE RISES A VERY SHORT QUESTION IN RELATION TO THE COMPUTATIO N OF CAPITAL GAINS. THE FACTS GIVING RISE TO THE APPEAL ARE AS FOLLOWS. ONE V.D. THAKKER EXECUTED A WILL ON 17-2-1976 UNDER WHICH HE BEQUEATHED ALL HIS MOVABLE AND IMMOVABLE PROPERTIES UPON TRUST FOR THE BENEFIT OF HIS SON, P RANAV THAKKER WHO WAS THE SOLE BENEFICIARY. THE TRUST WAS CALLED V.D.THAKKER FAMILY TRUST AND IS THE ASSESSEE HEREIN. THE DAUGHTER OF V.D.THAKKER, BY N AME MRS.DARSHANA JEET AND SON-IN-LAW BRAHM JEET WERE MADE THE TRUSTEES OF THE TRUST UNDER THE WILL. DURING HIS LIFE TIME, V.D.THAKKER HAD PURCHASED A F LAT BEARING NUMBER 14/B/2 IN WOODLANDS APARTMENTS, PEDDAR ROAD, BOMBAY ON 24 -4-1969 FOR A SUM OF RS.1,15,000/-. THE SAID FLAT WAS RENTED OUT TO EXI M BANK FOR A PERIOD OF TEN YEARS UNDER A LEAVE AND LICENCE AGREEMENT DATED 11- 5-1983. WHILE LETTING OUT THE FLAT, V.D.THAKKER HAD TAKEN A DEPOSIT OF RS.10 LAKHS FROM EXIM BANK. ON 26-11-1983, V.D.THAKKER BREATHED HIS LAST. IT APPE ARS THAT DUE TO THE POLICY OF THE GOVERNMENT OF INDIA THE EXIM BANK CEASED TO EXI ST AND THEREFORE IT WANTED TO SURRENDER THE POSSESSION OF THE FLAT TO THE TRUS TEES. IT WANTED THE ASSESSEE TRUST TO REFUND THE DEPOSIT OF RS.10 LAKHS WHICH IT HAD MADE AT THE TIME OF THE EXECUTION OF LEAVE AND LICENCE AGREEMENT. IT APPEA RS THAT THE TRUST HAD NO MONEY TO PAY BACK THE DEPOSIT. THE MATTER SEEMS TO HAVE REACHED THE HIGH PAGE - 2 IT(SS)A NO.42/AHD/2006 -2- COURT IN CIVIL APPLICATION NO.1624 OF 1992. BY ORD ER DATED 15-7-1992 THE HONBLE HIGH COURT DIRECTED THAT THE AMOUNT OF RS.1 0 LAKHS SHALL BE PROVIDED BY MRS.DARSHANA JEET, WHO WAS ONE OF THE TRUSTEES A ND FOR SUCH AMOUNT NO CLAIM SHALL BE MADE BY HER FROM THE TRUST DURING TH E PENDENCY OF THE SUIT. THE ASSESSEE TRUST THUS BORROWED MONEY FROM MRS.DARSHAN A JEET AND PAID OF EXIM BANK AND OBTAINED VACANT POSSESSION OF THE FLAT. D URING THE YEAR ENDED 31-3- 1996 RELEVANT TO THE ASSESSMENT YEAR 1996-97, THE A SSESSEE TRUST REPAID THE LOAN OF RS.10 LAKHS WHICH IT TOOK FROM DARSHANA JEET ALO NG WITH INTEREST OF RS.5.66 LAKHS. THE FLAT WAS SOLD BY THE ASSESSEE TRUST ON 27-7-1995, WHICH FALLS WITHIN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR U NDER APPEAL FOR A SUM OF RS.2.60 CRORES. 2. IN COMPUTING THE CAPITAL GAINS ON THE SALE OF TH E FLAT, THE ASSESSEE INTER ALIA CLAIMED DEDUCTION OF THE AMOUNT OF RS.10 LAKHS AS WELL AS THE INTEREST OF RS.5.66 LAKHS THEREON, AGGREGATING TO RS.15.66 LAKH S UNDER SECTION 48(I) OF THE INCOME TAX ACT. THE AO REJECTED THE CLAIM HOLDING THAT IT WAS NOT AN ALLOWABLE DEDUCTION UNDER SECTION 48 NOR WAS THE AM OUNT PAID BY THE ASSESSEE TO LIQUIDATE A CHARGE CREATED ON THE PROPERTY SO AS TO OBTAIN A PERFECT TITLE TO THE PROPERTY. THE CIT(A) HAVING CONFIRMED THE DISALLOW ANCE THE ASSESSEE IS IN FURTHER APPEAL BEFORE THE TRIBUNAL. 3. SECTION 48(I) PROVIDES FOR DEDUCTION OF THE EXPE NDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH THE TRANSFER OF THE ASSET WHICH GAVE RISE TO CAPITAL GAINS. CLAUSE (II) PROVIDES FOR DEDUCTION OF THE COST OF ACQUISITION OF THE ASSET AND THE COST OF ANY IMPROVEMENT THERETO I N COMPUTING THE CAPITAL GAINS. THE FIRST SUBMISSION OF MR.J.P. SHAH, THE L EARNED COUNSEL FOR THE ASSESSEE WAS THAT THE CAPITAL GAINS HAVE TO BE COMP UTED ON COMMERCIAL PRINCIPLES AS LAID DOWN BY THE SUPREME COURT IN THE CASE OF MISS DHUN DADABHOY KAPADIA VS. CIT, (1967) 63 ITR 651 AND IN DOING SO ALL NECESSARY EXPENDITURE HAVE TO BE DEDUCTED. WE ARE UNABLE TO ACCEPT THE ARGUMENT THAT PAGE - 3 IT(SS)A NO.42/AHD/2006 -3- THE RETURN OF THE BORROWING OF RS.10 LAKHS ALONG WI TH INTEREST OF RS.5.66 LAKHS BY THE ASSESSEE TO DARSHANA JEET, TRUSTEE, REPRESEN TED EXPENDITURE. A RETURN OF LOAN CANNOT CERTAINLY BE DESCRIBED AS AN EXPENDITUR E INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH THE TRANSFER. IN TH E CITED CASE, THE CONCOMITANT OF THE ACQUISITION OF THE RIGHTS SHARES BY THE ASSE SSEE WAS THE DEPRECIATION IN THE VALUE OF THE OLD SHARES AND IT WAS HELD THAT TH E DEPRECIATION WAS IN A COMMERCIAL SENSE BE DEEMED TO BE THE VALUE OF THE R IGHT WHICH SHE SUBSEQUENTLY TRANSFERRED. IT WAS HELD THAT THE DEP RECIATION OF THE ORIGINAL SHARES WAS A LOSS INCURRED BY THE ASSESSEE IN ORDER TO ACQUIRE THE RIGHTS SHARES AND THEREFORE THE NET CAPITAL GAIN WOULD BE REPRESE NTED ONLY AFTER DEDUCTING THE DEPRECIATION IN THE VALUE OF THE ORIGINAL SHARES AG AINST THE SALE PRICE OF THE RIGHTS SHARES. IT SHOULD BE BORNE IN MIND THAT DE PRECIATION WAS ALLOWABLE IN COMPUTING THE PROFITS OF THE BUSINESS AND THE SAME PRINCIPLE WAS EXTENDED BY THE SUPREME COURT TO THE COMPUTATION OF THE CAPITAL GAINS. HOWEVER, IN THE CASE BEFORE US WE ARE NOT CONCERNED WITH AN EXPENDI TURE WHICH IS ALLOWABLE IN THE COMPUTATION OF THE BUSINESS PROFITS, FOR, EVEN WHILE COMPUTING BUSINESS PROFITS A RETURN OF A LOAN DOES NOT COME IN FOR CON SIDERATION AS A DEDUCTION. WE ARE THEREFORE, WITH RESPECT, UNABLE TO GIVE EFFECT TO THE FIRST CONTENTION OF MR.SHAH BASED ON THE JUDGMENT CITED ABOVE. 4. IT WAS THEN CONTENDED BY MR.SHAH THAT BY RETURNI NG THE LOAN TO TRUSTEE, THE ASSESSEE TRUST WAS RID OF THE CHARGE WHICH THE TRUSTEE HAD OVER THE PROPERTY AND THUS SECTION 48(II) WOULD APPLY. HE CITED THE FOLLOWING PASSAGE FROM MULLAS COMMENTARY ON THE TRANSFER OF PROPERTY ACT (10TH EDN.) AT PAGE 944 UNDER THE HEAD TRUSTEES CHARGE; (17) TRUSTEES CHARGE A TRUSTEE IS ENTITLED TO A CHARGE ON THE INCOME AS WELL AS THE CORPUS OF THE TRUST ESTATE FOR ALL MONEYS PROPERLY EXPENDED I N PERFORMING THE OBLIGATIONS OF THE TRUST. THIS CHARGE HAS PRIORITY OVER THE RETURNS OF THE BENEFICIARIES. HOWEVER, AS LONG AS HE IS A TRUSTEE , HIS REMEDY FOR PAGE - 4 IT(SS)A NO.42/AHD/2006 -4- ENFORCING HIS CHARGE IS LIMITED BY S. 32 OF THE IND IAN TRUSTS ACT 1882. HE MAY THEREFORE, ONLY REIMBURSE HIMSELF FOR SUCH E XPENSES AND INTERESTS OUT OF THE INCOME AND PROFITS OF THE TRUS T ESTATE, AND PROHIBIT ANY DISPOSITION OF THE TRUST PROPERTY WITHOUT PREVI OUS PAYMENT OF HIS EXPENSES. WHILE HE IS A TRUSTEE HE CANNOT DESTROY THE TRUST BY BRINGING IT TO SALE. BUT AFTER HE HAS CEASED TO BE A TRUSTEE, OR AFTER HE HAS LOST POSSESSION OF THE TRUST PROPERTY, HE MAY ENFORCE HI S CHARGE BY SALE. HE ALSO DREW OUR ATTENTION TO CLAUSE (5) OF THE LEA VE AND LICENCE AGREEMENT EXECUTED ON 11-5-1983 WHICH DESCRIBED THE SECURITY DEPOSIT OF RS.10 LAKHS MADE BY EXIM BANK WITH V.D.THAKKER AS SECURITY FOR THE FIXTURES AND FITTINGS AND FOR THE DUE AND FAITHFUL PERFORMANCE OF THE TER MS AND CONDITIONS OF THE AGREEMENT. CLAUSE (20), TO WHICH ALSO OUR ATTENTIO N WAS DRAWN BY MR.SHAH PROVIDED FOR THE CONSEQUENCES OF NOT RETURNING THE DEPOSIT TO EXIM BANK ON THE TERMINATION OF THE LEAVE AND LICENCE AGREEMENT. I T IS POINTED OUT FROM THE CLAUSE THAT IN SUCH AN EVENTUALITY EXIM BANK HAD TH E RIGHT OR OPTION TO CONTINUE TO OCCUPY THE FLAT FOR SUCH PERIOD AS IT MAY DEEM F IT AND PROPER AND THAT IT WAS OPEN TO THE EXIM BANK, ON FURTHER PAYMENT OF RS.4 L AKHS, TO CALL UPON V.D.THAKKER TO TRANSFER THE FLAT IN ITS NAME FOR AB SOLUTE USE AND OCCUPATION AND ON BEING CALLED UPON TO DO SO, IT WAS THE DUTY OF T HE V.D.THAKKER TO TRANSFER THE SHARES IN THE NAME OF THE BANK. FROM THIS IT I S POINTED OUT THAT THE FAILURE TO RETURN THE DEPOSIT WOULD ENTAIL THE LOSS OF THE PRO PERTY ITSELF AND BY PAYING BACK THE DEPOSIT OUT OF BORROWED FUNDS THE ASSESSEE TRUST WAS PERFECTING ITS TITLE TO THE PROPERTY AND SAVING IT FROM EXPROPRIATION AN D THEREFORE THE RETURN OF THE BORROWING, WITH INTEREST, TO THE TRUSTEE, WHO HAD P ROVIDED THE FUNDS TO ENABLE THE ASSESSEE TO REFUND THE DEPOSIT TO EXIM BANK UND ER ORDERS OF THE COURT, CONSTITUTED AN ALLOWABLE DEDUCTION UNDER SECTION 48 (II). 5. WITH RESPECT, WE ARE UNABLE TO GIVE EFFECT TO TH E AFORESAID ARGUMENT PUT FORWARD BY MR.SHAH, THE LEARNED COUNSEL FOR THE ASS ESSEE. IT IS NECESSARY TO REFER TO THE JUDGMENT OF THE SUPREME COURT IN RM. A RUNACHALAM VS. CIT, (1997) 227 ITR 222. IN THIS CASE THE QUESTION BEFO RE THE SUPREME COURT WAS WHETHER ESTATE DUTY PAID BY THE ACCOUNTABLE PERSON CAN BE CONSIDERED AS COST OF PAGE - 5 IT(SS)A NO.42/AHD/2006 -5- ACQUISITION OR COST OF IMPROVEMENT WITHIN THE MEANI NG OF SECTION 48(II) OF THE PROPERTY WHICH HE RECEIVED FROM THE DECEASED. IT WAS OBSERVED BY THE SUPREME COURT, WHILE ANSWERING THE QUESTION IN THE NEGATIVE THAT THE LIABILITY OF THE ACCOUNTABLE PERSON TO PAY ESTATE DUTY WAS PE RSONAL AND LIMITED TO THE ASSETS OF THE DECEASED WHICH HE RECEIVED. UNDER SE CTION 74(1) OF THE ESTATE DUTY ACT, A CHARGE IS CREATED FOR PAYMENT OF ESTATE DUTY ON THE IMMOVABLE PROPERTY PASSING ON THE DEATH. HOWEVER, IT WAS OB SERVED THAT THE CREATION OF THE CHARGE ONLY MEANS THAT IN THE MATTER OF RECOVER Y OF ESTATE DUTY FROM THE PROPERTY WHICH IS THE SUBJECT MATTER OF THE CHARGE, THE AMOUNT RECOVERABLE BY THE GOVERNMENT BY WAY OF ESTATE DUTY WOULD HAVE PRE CEDENCE OVER OTHER CLAIMS AGAINST THE ACCOUNTABLE PERSON, INCLUDING THE CLAIM OF A MORTGAGEE. WITH REFERENCE TO SECTION 48(II), IT WAS ALSO HELD THAT AS A RESULT OF THE CHARGE CREATED BY SECTION 74(1) OF THE ESTATE DUTY ACT IT CANNOT B E SAID THAT THE TITLE OF THE ASSESSEE (ACCOUNTABLE PERSON) TO THE IMMOVABLE PROP ERTIES RECEIVED BY HIM FROM THE DECEASED WAS INCOMPLETE OR IMPERFECT IN AN Y MANNER. SINCE THE TITLE WAS NEITHER INCOMPLETE NOR IMPERFECT IT COULD NOT B E SAID THAT AS A RESULT OF PAYMENT OF ESTATE DUTY THERE WAS AN IMPROVEMENT IN THE TITLE OF THE ASSESSEE. IN THIS CASE, THE SUPREME COURT DISTINGUISHED THE CASE OF MORTGAGE CREATED BY THE ASSESSEE AFTER HE HAS ACQUIRED THE PROPERTY AND THE CASE OF A MORTGAGE CREATED BY THE PERSON FROM WHOM THE ASSESSEE ACQUIRED THE P ROPERTY SUBJECT TO THE MORTGAGE AND CLEARED THE SAME. THESE OBSERVATIONS WERE MADE AT PAGE 239 OF THE REPORT WHILE NOTICING THE CONTRARY VIEWS EXPRES SED BY THE KERALA HIGH COURT IN AMBAT ECHUKUTTY MENON VS. CIT, (1978) 111 ITR 880 ON THE ONE HAND, AND THE GUJARAT HIGH COURT IN CIT VS. DAKSHA RAMANLAL, (1992) 197 ITR 123. WE REPRODUCE THE OBSERVATIONS BELOW: .. IN TAKING THE VIEW THAT IN A CASE WHERE THE P ROPERTY HAS BEEN MORTGAGED BY THE PREVIOUS OWNER DURING HIS LIFE TIM E AND THE ASSESSEE, AFTER INHERITING THE SAME, HAS DISCHARGED THE MORTG AGE DEBT, THE AMOUNT PAID BY HIM FOR THE PURPOSE OF CLEARING OFF THE MOR TGAGE IS NOT DEDUCTIBLE FOR THE PURPOSE OF COMPUTATION OF CAPITA L GAINS, THE KERALA HIGH COURT HAS FAILED TO NOTE THAT IN A MORTGAGE TH ERE IS TRANSFER OF AN PAGE - 6 IT(SS)A NO.42/AHD/2006 -6- INTEREST IN THE PROPERTY BY THE MORTGAGOR IN FAVOUR OF THE MORTGAGEE AND WHERE THE PREVIOUS OWNER HAS MORTGAGED THE PROPERTY DURING HIS LIFETIME, WHICH IS SUBSISTING AT THE TIME OF HIS DE ATH, THEN AFTER HIS DEATH HIS HEIR ONLY INHERITS THE MORTGAGORS INTEREST IN THE PROPERTY. BY DISCHARGING THE MORTGAGE DEBT HIS HEIR WHO HAS INHE RITED THE PROPERTY ACQUIRES THE INTEREST OF THE MORTGAGEE IN THE PROPE RTY. AS A RESULT OF SUCH PAYMENT MADE FOR THE PURPOSE OF CLEARING OFF T HE MORTGAGE THE INTEREST OF THE MORTGAGEE IN THE PROPERTY HAS BEEN ACQUIRED BY THE HEIR. THE SAID PAYMENT HAS, THEREFORE, TO BE REGARDED AS COST OF ACQUISITION UNDER SECTION 48 READ WITH SECTION 55(2) OF THE ACT . THE POSITION IS, HOWEVER, DIFFERENT WHERE THE MORTGAGE IS CREATED BY THE OWNER AFTER HE HAS ACQUIRED THE PROPERTY. THE CLEARING OFF OF THE MORTGAGE DEBT BY HIM PRIOR TO TRANSFER OF THE PROPERTY WOULD NOT ENTITLE HIM TO CLAIM DEDUCTION UNDER SECTION 48 OF THE ACT BECAUSE IN SUCH A CASE HE DID NOT ACQUIRE ANY INTEREST IN THE PROPERTY SUBSEQUENT TO HIS ACQU IRING THE SAME. IN CIT V. DAKSHA RAMANLAL (1992) 197 ITR 123, THE GUJA RAT HIGH COURT HAS RIGHTLY HELD THAT THE PAYMENT MADE BY A PERSON FOR THE PURPOSE OF CLEARING OFF THE MORTGAGE CREATED BY THE PREVIOUS O WNER IS TO BE TREATED AS COST OF ACQUISITION OF THE INTEREST OF THE MORTG AGEE IN THE PROPERTY AND IS DEDUCTIBLE UNDER SECTION 48 OF THE ACT. THE AFORESAID VIEW WAS REITERATED BY THE SUPREME CO URT IN THE CASE OF V.S.M.R. JAGADISHCHANDRA (DECD.) VS. CIT, (1997) 2 27 ITR 240. IF THESE TWO JUDGMENTS ARE APPLIED TO THE PRESENT CASE, IT WOULD BE SEEN THAT THERE WAS NO CREATION OF A CHARGE ON THE FLAT UNDER THE LEAVE AN D LICENCE AGREEMENT WHICH AMOUNTED TO A TRANSFER OF AN INTEREST IN THE PROPER TY BY THE LATE V.D.THAKKER SO THAT IT CAN BE SAID THAT BY BORROWING MONIES FROM T HE TRUSTEE IN ORDER TO PAY OFF THE SECURITY DEPOSIT TO THE EXIM BANK, THE ASSESSEE HAD GOT THE PROPERTY RELEASED FROM THE CHARGE. 6. MR.SHAH HOWEVER REFERRED TO THE JUDGMENT OF THE CALCUTTA HIGH COURT IN GOPEE NATH PAUL AND SONS AND ANR. VS. DCIT, (2005) 278 ITR 240 AND SUBMITTED THAT THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF RM. ARUNACHALAM (SUPRA) HAS BEEN EXPLAINED. IT IS SUBM ITTED THAT A CASE OF COST OF ACQUISITION AS WAS BEFORE THE SUPREME COURT IN THE ABOVE JUDGMENT WAS DIFFERENT FROM A CASE WHERE THE PAYMENT IS MADE FOR PERFECTING THE TITLE. IT IS THE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSES SEE THAT AS IN THE CALCUTTA PAGE - 7 IT(SS)A NO.42/AHD/2006 -7- CASE WHERE THE ASSESSEE COULD NOT SELL THE PROPERTY WITHOUT REMOVING THE LIABILITY TO ALLAHABAD BANK, IN THE PRESENT CASE AL SO THE ASSESSEE TRUST COULD NOT HAVE SOLD THE FLAT WITHOUT REPAYING THE LOAN ALONG WITH INTEREST TO THE TRUSTEE. APPARENTLY MR.SHAH IS REFERRING TO THE CHARGE IN FA VOUR OF THE TRUSTEE. HOWEVER, IT SEEMS TO US THAT THE CREATION OF A MERE CHARGE IS NOT SUFFICIENT AND WHAT IS REQUIRED IS THAT THERE SHOULD HAVE BEEN A T RANSFER OF THE INTEREST IN THE PROPERTY IN FAVOUR OF A THIRD PERSON WHICH CAN BE G OT RELEASED ONLY UPON PAYMENT SO THAT THE ASSESSEES TITLE TO THE PROPERT Y IS COMPLETE AND PERFECT. THIS IN OUR HUMBLE OPINION IS THE EFFECT OF THE JUD GMENT OF THE SUPREME COURT CITED ABOVE WHERE, WITH REFERENCE TO SECTION 74(I) OF THE ESTATE DUTY ACT, WHICH ALSO CREATED A CHARGE ON THE PROPERTY, IT WAS OBSERVED THAT THE CHARGE ONLY MEANS THAT IN THE MATTER OF RECOVERY OF ESTATE DUTY, THE CLAIM OF ESTATE DUTY WILL HAVE PRECEDENCE OVER OTHER CLAIMS AGAINST THE ACCOUNTABLE PERSON. THUS, EVEN IF WE ACCEPT THE CONTENTION THAT THERE WAS CHA RGE IN FAVOUR OF THE TRUSTEE, WHO HAD ADVANCED THE MONEY TO THE TRUST, THAT CHARG E ONLY MEANS THAT THE TRUSTEE WAS ENTITLED TO PREFERENCE OVER OTHER CLAIM S AGAINST THE ASSESSEE TRUST. THERE WAS NO TRANSFER OF INTEREST IN THE PROPERTY I N FAVOUR OF THE TRUSTEE BY REASON OF THE CHARGE SO THAT IT CAN BE SAID THAT BY REPAYING THE BORROWING TO THE TRUSTEE THE ASSESSEE TRUST OBTAINED A PERFECT OR CO MPLETE TITLE TO THE FLAT. IN THE CALCUTTA CASE (SUPRA) IT WAS FOUND THAT THE PROPERT Y WAS SUBJECT TO AN ENCUMBRANCE WITHOUT REMOVING WHICH THE SALE OR TRAN SFER OF THE PROPERTY COULD NOT BE EFFECTED AND THEREFORE IT WAS HELD THAT THE AMOUNT SPENT FOR REMOVING THE ENCUMBRANCE ATTRACTED SECTION 48(I). IN THE PRESE NT CASE, IT IS DIFFICULT TO SAY THAT THE ASSESSEE COULD NOT HAVE SOLD THE PROPERTY WITHOUT DISCHARGING THE LIABILITY IN FAVOUR OF THE TRUSTEE. THERE IS NO E VIDENCE TO THAT EFFECT. 7. FOR THE AFORESAID REASONS, WE ARE UNABLE TO FIND FAULT WITH THE ORDERS OF THE DEPARTMENTAL AUTHORITIES WHO HAVE DISALLOWED TH E CLAIM FOR DEDUCTION OF RS.15.66 LAKHS IN COMPUTING THE CAPITAL GAINS ON TH E SALE OF THE FLAT. ACCORDINGLY, GROUND NOS.1 AND 2 ARE DISMISSED. PAGE - 8 IT(SS)A NO.42/AHD/2006 -8- 8. GROUND NO.3 IS AGAINST THE DIRECTION OF THE CIT( A) TO CONSIDER THE VALUATION REPORT OF THE REGISTERED VALUER REGARDING THE FAIR MARKET VALUE OF THE PROPERTY AS ON 1-4-1981 IN COMPUTING THE CAPITAL GA INS. AT THE TIME OF THE HEARING, THIS GROUND WAS NOT ARGUED. EVEN OTHERWIS E, WE DO NOT SEE ANYTHING WRONG IN THE DIRECTION. THE GROUND IS ACCORDINGLY DISMISSED. 9. GROUND NO.4 WHICH IS AGAINST THE DISALLOWANCE OF THE IT EXPERT FEES OF RS.14,000/- IS DISMISSED AS NOT PRESSED. 10. GROUND NO.5 WHICH IS AGAINST THE CHARGING OF IN TEREST UNDER SECTION 234C IS CONSEQUENTIAL. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DI SMISSED WITH NO ORDER AS TO COSTS. ORDER PRONOUNCED IN THE OPEN COURT 9 TH OCTOBER, 2009. SD/- SD/- (P.K. BANSAL) ACCOUNTANT MEMBER (R.V.EASWAR) VICE-PRESIDENT PLACE : AHMEDABAD DATE : 09-10-2009 COPY OF THE ORDER FORWARDED TO: 1) : ASSESSEE 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR, ITAT, AHMEDABAD