V.S.M.R. JAGADISHCHANDRAN (DEAD) BY L.RS, vs COMMISSIONER OF INCOME TAX, MADRAS

The Supreme Court addressed the appeal regarding the computation of capital gains under the Income Tax Act, specifically examining Section 256(2). The Court held that the discharge of mortgage debts does not constitute a diversion at source nor can it be treated as an enhancement of the cost of acquisition. The Tribunal's decision, which was upheld by the High Court, confirmed that the amount paid to clear the mortgage debt cannot be considered as part of the cost of acquisition or improvement of the property, thus affirming the capital gains assessment of Rs. 68,400.