There was difference of opinion on the allowability of loan liability of mortgaged property is allowable deduction or not . The matter was referred to third member . Third member held that the payment towards discharge of outstanding loan liability out of the sale proceeds of mortgaged property is a mere application of income and not a diversion of sale proceeds by overriding title. The assessee cannot claim such application as deduction for the purpose of computing Capital Gain in terms of s. 48 of the Act. The legal position prevailing prior to SARFAESI Act is also germane even after the enactment of SARFAESI Act ( ITA No. 4964/Mum/2013, dt. 05.09.2019)(AY.2010-11)
Perfect Thread Mills Ltd. v. DCIT ( 2019) 183 DTR 25 / 202 TTJ 1/ (2020) 77 ITR 603/ 181 ITD 1( TM )(Mum)(Trib) www.itatonline.org
S. 48: Capital gains- Loan liability of mortgaged property – Doctrine of over-riding title- Not deductible from sale consideration while computing the capital gains .[ S. 4,45, 47(xii), 48(1), SAFAESI ACT ,2002 , S.13 ]