VILAS KASHINATH SAKPAL, MUMBAI V. ITO WD 23(1)(4), MUMBAI

ITA 3885/MUM/2010

• Counselvise Citation: 388519914 RSA 2010
• Duration Of Justice: 2 year(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-06-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 29-05-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 13-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANOJ MISHRA
• Assessee Lawyers: SATISH MODY

Judgement Text

SHRI VIKAS KASHINATH SAKPAL. I.T.A . NO. 3885/MUM/2010 PAGE 1 O F 6 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH F, MUMBAI BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER & SHRI VIVEK VARMA, JUDICIAL MEMBER I.T.A.NO. 3885/MUM/2010 ASSESSMENT YEAR : 2006-07 SHRI VILAS KASHINATH SAKPAL, C/0. B.S.VASA, A/2, HIRA ANAND, 17, SWASTIK SOCIETY ROUND NO. 2, JVPD SCHEME, VILE PARLE (W), MUMBAI 400 056. PAN: SGZPS 1766 D VS. THE INCOME TAX OFFICER, WARD 23 (1)(4), MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : MR. SATISH MODY. RESPONDENT BY : MR. MANOJ MISHRA. DATE OF HEARING: 29-05-2012. DATE OF PRONOUNCEMENT: 06-06-2012. O R D E R PER VIVEK VARMA, JM : THE APPEAL ARISES FROM THE ORDER OF CIT(A) XXIII, M UMBAI DATED 08-03-2010. 2. THE SOLITARY GROUND OF APPEAL THAT IS BEING AGIT ATED BY THE ASSESSEE HEREIN IS ON ACCOUNT OF DISALLOWANCE OF CO ST OF IMPROVEMENT AMOUNTING TO RS. 28,53,245/-, BEING THE AMOUNT PAID TO THE BANK FOR THE RELEASE OF PROPERTY, KEPT AS GUARANTEE WITH THE BANK. 3. THE FACTS ARISING FROM THE ORDER OF THE REVENUE AUTHORITIES AND PLACED BEFORE US IN THE FOR OF ASSESSEES PAPER BOO K (APB) ARE THAT ASSESSEES FATHER, LATE MR. KASHINATH K. SAKPAL HAD PLACED HIS PROPERTY SHRI VIKAS KASHINATH SAKPAL. I.T.A . NO. 3885/MUM/2010 PAGE 2 O F 6 AS GUARANTEE AGAINST THE LOAN TAKEN BY M/S SHANTI P LASTIC PROCESSORS FROM DMK JAOLI SAHAKARI BANK LTD. AS THE LOAN TAKEN BY THIS CONCERN WAS UNDER DEFAULT, THE BANK ATTACHED THE PROPERTY K EPT AS THE GUARANTEE. ON 13-06-2005, MR. KASHINATH K. SAKPAL ( FATHER OF THE ASSESSEE) EXPIRED. THE PROPERTY KEPT AS GUARANTEE W ITH THE BANK, DEVOLVED ON THE THREE SONS OF LATE MR. KASHINATH K. SAKPAL, NAMELY, MR. VILAS KASHINATH SAKPAL, MR. SHAM KASHINATH SAKP AL AND MR. VIJAY KASHINATH SAKPAL. 4. AS THE INHERITORS OF THE IMPUGNED PROPERTY WANTE D TO SELL THE PROPERTY, THE FIRST STEP TO BE TAKEN WAS TO CLEAR T HE MORTGAGE ON THE PROPERTY, AGAINST WHICH THE SPECIAL RECOVERY & SALE S OFFICER, C0-OP. DEPT., MAHARASHTRA STATE HAD AWARDED DECREE AND CER TIFICATE DATED 04/07/2004 FOR THE RECOVERY OF THE DUES FROM THE SA LE OF THE SAID FLAT, AND AS CONSEQUENCE OF WHICH THE PROPERTY WAS UNDER THE WARRANT FOR ATTACHMENT NOTICE, DATED 05-07-2005. 5. THE ASSESSEE PAID THE DEMAND AS CLAIMED BY THE R ECOVERY CELL OF THE LENDER BANK AND GOT THE PROPERTY RELEASED. V IDE LETTER DATED 08- 07-2005 ISSUED BY THE BANK, THE BANK CANCELLED THE BANK LOAN/CHARGE ON THE IMPUGNED PROPERTY. THE ASSESSEE ALONG WITH H IS TWO BROTHERS SOLD THE PROPERTY ON WHICH THE LONG TERM CAPITAL GA IN WAS COMPUTED AT RS. 1,10,712/- WHICH WAS DISTRIBUTED EQUALLY AMONGS T THE THREE LEGAL HEIRS OF LATE MR. KASHINATH K. SAKPAL. 6. AT THE ASSESSMENT STAGE, THE AO ENQUIRED INTO TH E ENTIRE TRANSACTION AND CALLED FOR THE DETAILS. ON THE SUBM ISSIONS MADE BY THE SHRI VIKAS KASHINATH SAKPAL. I.T.A . NO. 3885/MUM/2010 PAGE 3 O F 6 ASSESSEE, THE AO CAME TO THE CONCLUSION THAT THE LO AN WAS NOT TAKEN BY THE FATHER, BUT WAS TAKEN BY MR. VIJAY K. SAKPAL AND SINCE HE IS ALIVE, WHAT WAS THE NEED OF THE ASSESSEE TO CLEAR T HE DEBT OF THE BANK TO HAVE THE PROPERTY RELEASED. HE FURTHER OBSERVED THAT ATMOST IT CAN BE CONSIDERED TO BE THE LOAN GIVEN BY THE TWO BROTH ERS TO THE THIRD BROTHER MR. VIJAY K. SAKPAL. HE, THEREFORE, ON THES E OBSERVATIONS NEGATED THE CLAIM OF IMPROVEMENT OF THE PROPERTY, T O CLEAR THE LOAN. 7. AGGRIEVED, THE ASSESSEE APPROACHED THE CIT(A), W HO SUSTAINED THE OBSERVATIONS OF THE AO ON THE FACTS AND HE DIST INGUISHED THE CASES OF CIT VS. DAKSHA RAMANLAL, REPORTED IN 197 ITR 123 (GUJ) AND CIT V/S ROSHANBABU MOHAMMAD HUSSEIN MERCHANT, REPORTED IN 2 75 ITR 231 (BOM), OBSERVING THAT THE MORTGAGE HAS BEEN CREATED BY THE APPELLANT SUO MOTO AND THEREFORE THE EXPENDITURE IN CURRED BY THE APPELLANT TO CLEAR OF THE MORTGAGE DEBT WOULD NOT E NTITLE HIM TO DEDUCTION U/S 48(1) . HE FURTHER OBSERVED, THAT THE APPELLANT WAS NOT ENTITLED TO THE DEDUCTION OF THE EXPENDITURE INCURR ED TO REMOVE THE ENCUMBRANCES CREATED BY THE APPELLANT HIMSELF . HE, THEREFORE, REJECTED THE ASSESSEES CONTENTION. 8. AGGRIEVED, THE ASSESSEE IS NOW BEFORE THE ITAT. 9. BEFORE US, THE ASSESSEE NARRATED THE FACTS AS PL ACED IN THE APB. THE A.R. REITERATED THE ENTIRE FACTS AND SUBMITTED THAT THE FACTS PICKED BY THE CIT(A) ARE ITSELF FAULTY. HE POINTS OUT THAT IN PARA 3.3 OF THE CIT(A)S ORDER, THE CIT(A) IS WRONG TO STATE, THAT THE MORTGAGE HAS BEEN CREATED BY THE APPELLANT . THIS, THE A.R. STATES, ITSELF IS AN INFIRM SHRI VIKAS KASHINATH SAKPAL. I.T.A . NO. 3885/MUM/2010 PAGE 4 O F 6 OBSERVATION, BECAUSE AS PER THE FACTS NARRATED BY T HE AO AND VIDE SUBMISSIONS MADE BEFORE THE CIT(A), IT WAS NOT THE ASSESSEE WHO HAD CREATED THE MORTGAGE, BUT IT WAS THE FIRM WHO HAD T AKEN THE LOAN AND THE GUARANTEE WAS GIVEN BY MR. KASHINATH K. SAKPAL, WHO WAS THE OWNER OF THE PROPERTY. THE A.R. THEREFORE POINTED O UT THAT THE CIT(A) TREADED ON THE WRONG PATH. HE ALSO POINTED OUT THAT THE FACTS OF THE CASE ARE FORTIFIED NOT ONLY THE DECISION OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT V/S DAKSHA RAMANLAL, REPORTED IN 19 7 ITR 123, BUT ALSO BY THE HON'BLE SUPREME COURT IN THE CASE OF CI T V/S RM ARUNACHALAM, REPORTED IN 227 ITR 232 AT 239, WHEREI N, THE HON'BLE APEX COURT HELD AS UNDER, IN CIT V. DAKSHA RAMANLAL [1992] 197 ITR 123, THE GUJARAT HIGH COURT HAS RIGHTLY HELD THAT T HE PAYMENT MADE BY A PERSON FOR THE PURPOSE OF CLEARING OFF THE MORTGA GE CREATED BY THE PREVIOUS OWNER IS TO BE TREATED AS COST OF ACQUISIT ION OF THE INTEREST OF THE MORTGAGEE IN THE PROPERTY AND IS DEDUCTIBLE UND ER SECTION 48 OF THE ACT. HE FURTHER POINTED OUT THAT IN THIS CASE, THE HON' BLE APEX COURT HAD CONSIDERED THE DECISION OF THE HON'BLE GU JARAT HIGH COURT IN DAKSHA RAMANLAL (SUPRA) AND THE CONTRARY DECISION G IVEN BY HON'BLE KERALA HIGH COURT IN AMBAT ECHUKUTTY MENON V/S CIT REPORTED IN 111 ITR 880. CLOSING THE ARGUMENTS, THE A.R. SUBMITTED THAT COST OF IMPROVEMENT, AS CLAIMED FOR THE PURPOSES OF COMPUTA TION OF LTCG MUST BE ALLOWED. 10. THE D.R RELIED ON THE VIEWS TAKEN BY THE REVENU E AUTHORITIES. SHRI VIKAS KASHINATH SAKPAL. I.T.A . NO. 3885/MUM/2010 PAGE 5 O F 6 11. WE HAVE HEARD BOTH THE SIDES AND HAVE ALSO GONE THROUGH THE FACTS OF THE CASE AND CASE LAWS POINTED OUT BY EITH ER SIDE. THE AO, UNDISPUTEDLY HAS BROUGHT OUT THE CORRECT FACTS AS S UBMITTED BY THE ASSESSEE, THAT THE LOAN WAS TAKEN BY THE FIRM FROM DMK JAOLI SAHAKARI BANK LTD., MUMBAI, WHEREIN ASSESSEES FATHER, LATE MR. KASHINATH K. SAKPAL MORTGAGED HIS PROPERTY. AFTER THE DEMISE OF THE FATHER, THE PROPERTY WAS INHERITED BY THE LEGAL HEIRS OF LATE M R. KASHINATH K. SAKPAL AND AN AMOUNT OF RS. 28,53,245/- WAS PAYABLE TO THE BANK. THE AO ALSO DOES NOT DISPUTE THE FACT THAT THE DUES TO THE BANK WERE ACTUALLY CLEARED. WE MUST ALSO OBSERVE THAT THE CIT (A), SOMEHOW, WENT ON ANOTHER LINE OF THOUGHT, WHEREIN HE OBSERVE D THAT IT WAS THE ASSESSEE WHO HAD MORTGAGED THE PROPERTY, WHICH, TO OUR MIND IS TOTALLY WRONG, SO FAR AS THE FACTS OF THE CASE ARE CONCERNED. 12. WE ALSO FEEL THAT THE CASE OF THE ASSESSEE IS C OMPLETELY FORTIFIED BY THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT V/S RM ARUNACHALAM (SUPRA), WHEREIN AT PAGE 239 IT WAS HEL D AS UNDER: IN CIT V. DAKSHA RAMANLAL [1992] 197 ITR 123, THE GUJARAT HIGH COURT HAS RIGHTLY HELD THAT THE PAYMENT MADE B Y A PERSON FOR THE PURPOSE OF CLEARING OFF THE MORTGAGE CREATE D BY THE PREVIOUS OWNER IS TO BE TREATED AS COST OF ACQUISIT ION OF THE INTEREST OF THE MORTGAGEE IN THE PROPERTY AND IS DE DUCTIBLE UNDER SECTION 48 OF THE ACT. 13. RESPECTFULLY FOLLOWING THE DECISION OF THE HON' BLE SUPREME COURT, WE ALLOW THE CLAIM OF THE ASSESSEE. WE, THER EFORE, SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE AO TO ALLOW THE CLAIM OF RS. 28,53,245/- MADE BY THE ASSESSEE. 14. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. SHRI VIKAS KASHINATH SAKPAL. I.T.A . NO. 3885/MUM/2010 PAGE 6 O F 6 ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 0 6/06/2012. SD/- SD/- (B.RAMAKOTAIAH) ( VIVEK VARMA ) ACCOUNTNAT MEMBER JUDIC IAL MEMBER