Sale of Mortgaged Assets & Addition of Capital gains of Rs.27.39 Crores


Sale of Mortgaged Assets & Addition of Capital gains of Rs.27.39 Crores 

ITAT Delhi case of WGF Financial Services Pvt Ltd (ITA 8218 / DEL / 2019) has hele that

Short Overview of the case is as under:

The lenders were making pressure on the assessee to honor its guarantee taken by it for the repayment of the loan by the borrower.

 Since the borrower defaulted in repaying the loan taken from Indiabulls Financial Services Ltd. (IBFSL), the assessee was asked to sell the mortgaged property.

 The assessee was of the view that this is not a capital gain since, the property was sold to recover the loan by the lender and no money was received by the assessee for its benefit or use.

 The AO was of the view that since the Sale Deed itself mentioned that there was no mortgage and that the assessee was the sole and absolute owner, it cannot be said that the sale was forced sale and made an addition as a capital gain of Rs 27.39 crores.

ITAT Delhi held as under:

The entire sale consideration was realized by the assessee and thereafter the sale consideration was taken by IBFSL in discharge of its loan.

The income did accrue to the assessee and it cannot be said that the assessee sold the said plots of land involuntarily as forced sale.

In short,  ITAT refused to delete addition of Rs.27.39 Crores as a taxable long-term capital gain. The reading of the Judgement would be relevant for other cases as well where there is a sale of mortgaged assets.