Devendra Kumar Shroff v. ITO - Taxpublishers.in

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The Tax Publishers2020 TaxPub(DT) 1757 (Kol-Trib)

INCOME TAX ACT, 1961

Section 45

Where assessee (guarantor) claimed that consideration from sale of land was remitted to bank to square up loan liability of certain third party, considering that fact was not clear as to whether or not money routed through assessee's bank account before being finally appropriated towards dues of borrower, because in such case there could not be diversion of income by overriding title as claimed by assessee, matter was remanded back to AO for verification of facts.

Capital gains - Leviability - Diversion of income by overriding title - Assessee as guarantor remitted consideration from sale of land to bank (lender) for squaring up loan liability of a third party (borrower)

Assessee-individual was owner of an immovable property and he mortgaged same as secured asset with bank (lender of loan) and assessee stood as guarantor for loan taken by a corporate entity. Loan was classified as NPA by lender bank, which proceeded to take possession of assessee's immovable property under SARFESI Act. According to assessee, after asset was sealed by bank, same was sold to a company. Assessee contended that sale consideration was directly deposited by purchaser to bank and assessee did not receive any consideration from sale of immovable property. Case of assessee was that capital gain on transfer of mortgaged property was not leviable. Held: It was found that vide a letter was written to buyer of property, to deposit the full value of consideration with SBI before signing conveyance deed. However, facts were not clear. It was not clear from document as to whether SBI conducted sale by public auction and then consideration money was deposited by buyer directly with the bank; or sale of property was carried out by assessee and sale consideration was deposited by buyer in assessee's account as per SBI's instruction or in account of borrower. If assessee got sale of property and consequently, if money was routed through bank account of assessee before being finally appropriated towards dues of borrower, there could not be diversion of income by overriding title and in that fact situation, capital gains tax liability would arise in assessee's hands. Issue was remanded to AO to verify correct facts as stated above.

Distinguished:CIT v. Attili N. Rao (2001) 252 ITR 880 (SC) : 2001 TaxPub(DT) 1632 (SC), V.S.M.R. Jagadishchandran (Decd.) v. CIT (1997) 227 ITR 240 (SC) : 1997 TaxPub(DT) 1309 (SC) and RM. Arunachalam v. CIT (1997) 227 ITR 222 (SC) : 1997 TaxPub(DT) 1307 (SC).

REFERRED : CIT v. Sunil J. Kinariwala (2003) 259 ITR 10 (SC) : 2003 TaxPub(DT) 0813 (SC), CIT v. George Henderson and Co. Ltd. (1967) 66 ITR 622 (SC) : 1967 TaxPub(DT) 0360 (SC), CIT v. Sitaldas Tirathdas (1961) 41 ITR 367 (SC) : 1961 TaxPub(DT) 0145 (SC), Gopee Nath Paul and Sons & Anr. v. Dy. CIT (2005) 278 ITR 116 (Cal) : 2005 TaxPub(DT) 1393 (Cal-HC), CIT v. Roshanbabu Mohammed Hussein Merchant (2005) 275 ITR 231 (Bom) : 2005 TaxPub(DT) 1285 (Bom-HC), CIT v. SRV Press and Publications (P.) Ltd. (2000) 241 ITR 626 (Ker.) : 2000 TaxPub(DT) 0903 (Ker-HC), CIT v. Smt. Thressiamma Abraham (No. 1) (1997) 227 ITR 802 (Ker) : 1997 TaxPub(DT) 0739 (Ker-HC), KV. Idiculla v. CIT (1995) 214 ITR 386 (Ker) : 1995 TaxPub(DT) 0778 (Ker-HC), Salay Mohamad Ibrahim Sait v. ITO & Anr. (1994) 210 ITR 700 (Ker) : 1994 TaxPub(DT) 1189 (Ker-HC), Ambat Echukutty Menon v. CIT (1978) 111 ITR 880 (Ker) : 1978 TaxPub(DT) 0551 (Ker-HC), CIT v. Mohanbhai Pamabhai (1973) 091 ITR 0393 (Guj) : 1973 TaxPub(DT) 0093 (Guj-HC), CIT v. RM Amin (Legal Representative of the Late Chunibai J. Amin) 1971 TaxPub(DT) 0245 (Guj-HC) , Addl. CIT v. Glad Investments (P.) Ltd. (2006) 8 SOT 0612 (Del) : 2006 TaxPub(DT) 1695 (Del-Trib) and Addl. CIT v. Mohanbhai Pamabhai (1997) 165 ITR 166 (SC) : 1987 TaxPub(DT) 1259 (SC).