|The Tax Publishers2021 TaxPub(DT) 0052 (Mad-HC) : (2021) 431 ITR 0112 : (2021) 278 TAXMAN 0131
INCOME TAX ACT, 1961
The clearing off of the mortgage debt by assessee prior to transfer of the property would not entitle him to claim deduction under section 48 because in such a case, assessee did not acquire any interest in the property subsequent to his acquiring the same.
Capital gains - Deduction under section 48 - Clearing off mortgaged debt prior to transfer of property -
Assessee received amount on sale of property and same was directly paid to the Bank by the purchaser in discharge of the mortgage. It claimed that there was a diversion of the sale proceeds towards redeeming the interest of the mortgagor and therefore the amount so diverted was not liable to capital gains tax. Held: In case of RM. Arunachalam v. CIT [(1997) 227 ITR 222 (SC) : 1997 TaxPub(DT) 1307 (SC)], it was held that where the mortgage had been created by the owner after he had acquired the property, the clearing of the mortgage by him prior to the transfer of the property would not entitle him to claim deduction under section 48 because, in such a case he did not acquire any interest in the property subsequent to his acquiring the same. Following the same, assessee would not be entitled to claim of deduction under section 48.
Followed:RM. Arunachalam v. CIT [(1997) 227 ITR 222 (SC) : 1997 TaxPub(DT) 1307 (SC)]
FAVOUR : Against the assessee.
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