This appeal has been filed by revenue on 28-6-2001 against order of learned CIT (Appeals)-I, New Delhi, dated 23-3-2001 in case of assessee in relation to assessment order under section 143(3) for assessment year 1997-98. In this appeal revenue has taken following grounds of appeal:- 'On facts and circumstances of case, ld. CIT (Appeals) erred in:- (i ) holding that amount of Rs. 29,08,03,436 on sale of shares, by lender, of NIIT shares owned by appellant but pledged to lender did not constitute capital gain exigible to tax in appellant's hand. (ii ) not applying ratio of Supreme Court order reported at 227 ITR 240. (iii ) ignoring fact that assessee can legally recover amount of Rs. 29,06,97,940 from third party for whose benefits assessee pledged his shares and sale proceeds of which were appropriated by financial institution. (iv ) ignoring provisions of section 2(47) and section 45. As per provisions contained in these sections, sale of these shares amounts to transfer resulting to capital gain taxable in hands of owner i.e., appellant.' 2. Facts of case leading to this appeal briefly are that assessee is finance company and during year it received income from interest, dividend and capital gains. During course of assessment proceedings learned Assessing Officer noted that there was sale of 11,72,900 shares of NIIT Ltd. Sale of these shares resulted in capital gain after allowing indexation of cost of acquisition amounting to Rs. 29,06,97,940. assessee, however, did not offer this capital gain for assessment. According to assessee, sale of these shares in view of guarantee given by assessee for loan taken by another company, did not result in any income to assessee. assessee did not receive any money from sale of these shares. Under provisions of section 45(1) 'any profits or gains arising from transfer of capital asset' were chargeable to income-tax. In case of assessee there was no profit or gains arising to assessee. 3. learned Assessing Officer held that plain reading of section 45(1) of Act talked about profits or gains arising from transfer of capital asset. It did not talk about money received or receivable and how gains arising from transfer of capital asset were utilized. Provisions of section 2(47) gave wide ranging definition of 'transfer'. In assessee's case certain shares belonging to assessee had been voluntarily pledged by assessee with certain credit institutions to help another company to raise loans. When assessee-company pledged shares, it was understood that in case of default creditor shall have right to sell shares to recover his dues. Hence, it was immaterial that assessee himself had not sold shares but shares had been sold on assessee's behalf by creditor with whom shares had been pledged by assessee. Since shares had been sold, capital gain had arisen. consideration for transfer ultimately seemed to have been received by debtor on whose behalf assessee had given guarantee. debtor whose debts had been discharged by sale of these shares was, in law, debtor to assessee for amount of consideration. That being so assessee's contention that it did not receive any consideration on account of transfer had to be rejected. assessee could not say that no consideration had been received just because somebody else had received consideration on his behalf and who was then legally assessee's debtor who could be enforced in law. Hence, in way assessee had exchanged his shares for debt owed by company on whose behalf assessee had given guarantee. learned Assessing Officer sought to support this view held by him by judgment of Hon'ble Supreme Court in case of V.S. Malhotra v . CIT [1997] 227 ITR 240 (wrongly mentioned in assessment order). According to learned Assessing Officer there was considerable similarity between case of V.S. Malhotra and that of assessee. In both cases property had been mortgaged and mortgaged by assessees themselves. It was not as if property had been mortgaged by previous owner and assessees had acquired only mortgaged interest in property. It was also not contention of assessee that debts against shares in question had been incurred to improve title of assessee. Instead debts had been incurred for purpose of helping another company raise loan by mortgaging assessee's shares voluntarily and at assessee's own sweet will. Following judgment of Hon'ble Supreme Court in case of V.S. Malhotra (supra) learned Assessing Officer held that discharge of mortgaged debts by sale of shares of assessee did not constitute diversion of sale consideration at source and that debt discharged by sale of shares could not be said to have enhanced rights of assessee in those shares, so as to constitute increase in cost of acquisition of shares to assessee. learned Assessing Officer further held that assessee's liability to pay tax could not be neutralized by any agreement entered into for charges created against shares voluntarily. bank or any other person did not have any overriding title to receipt. learned Assessing Officer held that capital gain tax was clearly leviable on assessee and any agreement as to mode of utilization of gain arising from transfer of any capital asset could not affect liability as to charge of tax on assessee. According to learned Assessing Officer charge of tax under statutory provisions of Income-tax Act could not be extinguished by any agreement as to method of utilization of income/gains that had arisen. application of income could not affect chargeability to tax under statutory provisions. Based on this reasoning learned Assessing Officer assessed sum of Rs. 29,06,97,940 as capital gain arising to assessee on sale of 11,72,900 shares of NIIT Ltd. 4. During course of hearing before learned CIT (Appeals), assessee argued that reliance placed by learned Assessing Officer on Supreme Court judgment in case of V.S.M.R. Jagdishchandran (supra) (wrongly mentioned in assessment order as V.S. Malhotra) was misplaced. In that case assessee had incurred expenditure for removal of mortgage debt created by assessee himself in relation to plots of land belonging to assessee. assessee claimed that expenditure, thus, incurred should be treated as cost of acquisition of property or cost of obtaining clear title to property. In case of assessee shares were pledged as collateral security with credit institutions for loan taken by third party, which shares were subsequently sold by lender in satisfaction of unpaid loan to third party. Therefore, Hon'ble Supreme Court judgment in V.S.M.R. Jagdishchandran's case (supra) had no application on facts of case of assessee which were wholly distinguishable. assessee referred to judgment of Hon'ble Supreme Court in case of R.M. Arunachalam v. CIT [1997] 227 ITR 222 that was referred to in V.S.M.R. Jagdishchandran's case. In that judgment Hon'ble Apex Court accepted that expenditure incurred for removal of mortgage debt incurred by previous owner could be treated as cost of acquisition. assessee further pointed out that in that case question as to whether estate duty could be treated as diversion at source was not considered because that was entirely independent issue which had not been considered by ITAT or High Court. assessee placed k reliance on judgment of Hon'ble Kerala High Court in case of CIT v. Smt. Thressiamma Abraham [1997] 227 ITR 802 (Ker.). In that case on similar facts Hon'ble Kerala High Court held that where entire sum had been appropriated towards discharge of mortgage debt and assessee in that case had not received pie as result of transfer, there could not be any income to assessee much less any capital gain. It was held by Hon'ble High Court that corporation to whom property had been mortgaged as guarantee for repayment of loan taken by third party had acted in exercise of overriding title in its favour. Before learned CIT (Appeals) assessee before us relied upon judgment of Hon'ble Supreme Court in case of Addl. CIT v. Mohanbhai Pamabhai [1997] 165 ITR 166 also, wherein it was held that unless consideration flows as result of transfer, section 45 is not attracted. assessee placed reliance on judgment of Hon'ble Supreme Court in case of Kunhayammed v. State of Kerala [2000] 245 ITR 360 also. 5. learned CIT (Appeals) found that issue before him was legal issue i.e., where assessee's assets which were pledged as guarantor to lending institution for loan taken by third party and in default of third party lender sold assessee's property in satisfaction of its dues and assessee did not receive any amount whatsoever out of sale proceeds, whether assessee was liable to pay capital gains tax thereon. learned CIT (Appeals) held that these facts were entirely different from facts decided by Hon'ble Supreme Court in V.S.M.R. Jagdishchandran's case (supra) and R.M. Arunachalam's case (supra). Facts of case of assessee were almost identical to facts in case of Smt. Thressiamma Abraham (supra). Following aforesaid judgment of Hon'ble Kerala High Court learned CIT (Appeals) held that sale proceeds of NIIT shares received by lender did not constitute capital gain exigible to tax in assessee's hands. Aggrieved by this order revenue is in appeal before us. 6. During course of hearing before us learned CIT, DR stated that assessee pledged 11,72,900 shares of M/s. NIIT Ltd. of which six lakh and odd shares were pledged between March to November, 1995 with M/s. Reliance Capital Ltd. as collateral security for loan of Rs. 20 crores taken by M/s. Swati Holding Ltd. Thereafter, 1,80,000 shares were pledged in month of August, 1996 to M/s. Kotak Mahindra Finance Ltd. as collateral security given for loan of Rs. 3 crores taken by M/s. Pertech Computers Ltd. Thereafter, assessee pledged 3,39,200 shares in March, 1997 to M/s. Industrial Reconstruction Bank of India as collateral security for loan of Rs. 10 crores taken by M/s. Pertech Computers Ltd. As both M/s. Swati Holding Ltd. and M/s. Pertech Computers Ltd. failed to repay loans to all three credit institutions, credit institutions sold shares in financial year 1996-97 and, thus, squared up loans taken by M/s. Swati Holding Ltd. and M/s. Pertech Computers Ltd. sale proceeds of shares, thus, sold amounted to Rs. 29,08,03,436. learned Assessing Officer reduced indexed cost of acquisition worked out at Rs. 1,05,496 from sale consideration and assessed capital gains of Rs. 29,06,97,940 and added same to income of assessee. 7. Shri S.K. Mishra, learned CIT, DR submitted that issue under consideration before us was directly covered by judgments of Hon'ble Supreme Court in cases of R.M. Arunachalam (supra) and V.S.M.R. Jagdishchandran (supra). In both judgments Hon'ble Supreme Court had held that self-created mortgage could not help assessee to reduce his liability for capital gains tax. This proposition was well-settled and no plea of harshness to tax payer could be considered to dilute this legal position. learned CIT, DR in particular brought attention to following portion of judgment in case of R.M. Arunachalam:- 'In taking view that in case where property has been mortgaged by previous owner during his lifetime and assessee, after inheriting same, has discharged mortgage debt, amount paid by him for purpose of clearing off mortgage is not deductible for purpose of computation of capital gains, Kerala High Court has failed to note that in mortgage there is transfer of interest in property by mortgagor in favour of mortgagee and where previous owner has mortgaged property during his lifetime, which is subsisting at time of his death, then after his death his heir only inherits mortgagor's interest in property. By discharging mortgage debt his heir who has inherited property acquires interest of mortgagee in property. As result of such payment made for purpose of clearing off mortgage interest of mortgagee in property has been acquired by heir. said payment has, therefore, to be regarded as 'cost of acquisition' under section 48 read with section 55(2) of Act. position is, however, different where mortgage is created by owner after he has acquired property. clearing off of mortgage debt by him prior to transfer of property would not entitle him to claim deduction under section 48 of Act because in such case he did not acquire any interest in property subsequent to his acquiring same. In CIT v. Daksha Ramanlal [1992] 197 ITR 123, Gujarat High Court has rightly held that payment made by person for purpose of clearing off mortgage created by previous owner is to be treated as cost of acquisition of interest of mortgagee in property and is deductible under section 48 of Act.' [Emphasis supplied by CIT, D.R.] learned CIT, DR further referred to judgment of Hon'ble Supreme Court in case of CIT v. Attili N. Rao [2001] 252 ITR 880 reversing decision of Hon'ble Andhra Pradesh High Court. According to learned CIT, DR Hon'ble Supreme Court held that in case of sale of mortgaged immovable property belong to assessee capital gain was chargeable to tax even though State deducted its due towards kist. According to Ld. D.R. these judgments showed that principle of diversion of overriding title was not applicable. He then referred to judgments of Hon'ble Madras High Court and Kerala High Court in CIT v. N. Vajrapani Naidu [2000] 241 ITR 560 and CIT v. S.R.V. Press & Publications (P.) Ltd. [2000] 241 ITR 626. According to learned CIT, DR those judgments held that self-created mortgage cannot help assessee to reduce his liability of capital gains tax. In such cases plea of hardship cannot be raised. learned DR further argued that those judgments showed that where properties of owner under pledge or mortgage were sold to pay all his debts, tax on capital gains did create hardship on account of compulsory sales, but hard cases did not make good law. Under provisions of Estate Duty Act, 1953, relief under section 50B was given where any property was sold to meet estate-duty liability. No such corresponding relief had been provided under capital gains tax. legal position was that if person sought to be taxed came within letter of law he must be taxed. learned CIT (DR) referred to observations of Rowlatt, J. in case of Cape Brandy Syndicate v. IRC 1 K.B. 64. He then referred to decision of ITAT, Mumbai in case of Fancy Corpn. Ltd. v. Dy. CIT [2000] 75 ITD 467 (Mum.). He pointed out that after taking into consideration judgment of Hon'ble Kerala High Court in case of Smt. Thressiamma Abraham (supra) ITAT had reached following conclusion:- 'We have to reject contention of assessee for deduction of Rs. 1,37,50,000 as expenses incurred in connection with transfer because of decision of Apex Court in case of V.S.M.R. Jagdishchandran (supra). Apex Court has dismissed appeal of assessee stating that questions raised were not arguable. To us, it appears that Apex Court has implicitly held that repayment of mortgage debt cannot be regarded as expenditure in connection with transfer. Actually, even on general principles, it is difficult to contemplate repayment of debt as expenditure incurred. For above reasons, we agree with contention of learned Departmental Representative that decision of Apex Court in case of V.S.M.R. Jagdishchandran (supra) is squarely applicable to facts of case and that even decision of Apex Court in case of R.M. Arunachalam (supra) supports case of Department. main plank of contention of learned counsel for assessee is that without repayment of mortgage debt, assessee could not have transferred property to IBPS. In entire argument, assessee has ignored fact that repayment of debt is consequential to obtaining of loan earlier and benefit that has debt is consequential to obtaining of loan earlier and benefit that has accrued to assessee because of loan does not figure anywhere in computation of capital gains or in argument of learned counsel for assessee. computation of capital gains has to be worked out as per self- contained code sections 45 to 55A of IT Act. starting point of computation is cost of acquisition of asset and terminal point is s l e consideration. fact that asset had been mortgaged at intermediate point does not seem to us to affect mode of computation of capital gains in view of said decision of Apex Court in case of V.S.M.R. Jagdishchandran (supra). As Apex Court has held, it will be different if assessee had acquired encumbered property and made payment towards discharge of encumbrance and betterment of its title. That is not situation here. Here is case where assessee has, after acquisition of asset, obtained benefit of commercial loan and in process mortgaged property. If, in circumstances of present case, deduction for repayment of mortgage debt is allowed, it seems to us to defeat very mode of computation of capital gains laid down in sections 48 to 55A of IT Act. As rightly observed by Assessing Officer, any person who wants to sell property and anticipates big capital gain can enter into loan transaction and mortgage property and claim benefit of deduction of repayment of loan. For reasons indicated hereinabove, we have to reject contention of assessee that provisions of Transfer of Property Act or even Board for Industrial and Financial Reconstruction Act come to assistance of assessee for deductibility of amount of Rs. 1,37,50,000 in computation of capital gains. BIFR Act, to our mind, operates in altogether different field and it in no way enables assessee to claim deduction for repayment of mortgage debt in computation of capital gains. We cannot see provisions of BIFR Act as in anyway impeding working out of provisions of IT Act in respect of computation of capital gains. For above reasons, we reject contentions of assessee and uphold orders of Revenue authorities.' learned DR in particular emphasized that if view taken by Hon'ble Kerala High Court in case of Smt. Thressiamma Abraham (supra) which had been over-ruled in Supreme Court judgment, was to be applied that would lead to major tax evasion device whereby any assessee anticipating big capital gain might avoid capital gains liability by entering into loan transaction and mortgage of property. 8. According to learned CIT, DR judgment of Hon'ble Kerala High Court in case of Smt. Thressiamma Abraham (supra) and other judgments relied upon by assessee and CIT (Appeals) no longer remained good law after judgments of Hon'ble Supreme Court in case of V.S.M.R. Jagdishchandaran (supra) and R.M. Arunachalam (supra). learned CIT, DR reasoned that Hon'ble Kerala High Court had decided case of Smt. Thressiamma Abraham (supra) following its own judgment in case of Ambat Echukutty Menon v. CIT [1978] 111 ITR 880 (Ker.) and that judgment has been reversed by Hon'ble Supreme Court in case of R.M. Arunachalam (supra). Similarly other judgments in case of Salay Mohamad Ibrahim Sait v. ITO [1994] 210 ITR 700 (Ker.) and K.V. Idiculla v. CIT [1995] 214 ITR 386 (Ker.) also had been over-ruled by judgment of Hon'ble Supreme Court in case of R.M. Arunachalam (supra). Furthermore, Hon'ble Kerala High Court in its subsequent judgment in case of C I T v. S.R.V. Press & Publications (P.) Ltd. (supra) had also over-ruled their earlier judgment in case of Smt. Thressiamma Abraham (supra) and held as under:- 'In view of quoted conclusions of Apex Court, view expressed b y this court and Andhra Pradesh High Court cannot be held to be applicable. We accordingly answer question referred in negative, in favour of Revenue and against assessee.' learned CIT, DR further argued that Hon'ble Bombay High Court had in case of CIT v. Roshanbabu Mohammed Hussein Merchant [2005] 275 ITR 231 examined relevance of judgment of Kerala High Court in case of Smt. Thressiamma Abraham (supra) after pronouncement of judgment of Hon'ble Apex Court in cases of R.M. Arunachalam (supra) and V.S.M.R. Jagdishchandaran (supra) and held as under:- 'As regards decisions of this court in case of Shakuntala Kantilal [1991] 190 ITR 56 followed in case of Abrar Alvi [2001] 247 ITR 312 and decision of Kerala High Court in case of Smt. Thressiamma Abraham (No. 1) [2001] 227 ITR 802 which are kly relied upon by counsel of assessee, we are of opinion that said decisions are no longer good law in light of subsequent decision of Apex Court referred to hereinabove.' learned CIT, DR, therefore, argued that relief granted by learned CIT (Appeals) based on judgment of Hon'ble Kerala High Court in case of Smt. Thressiamma Abraham (supra) was erroneous when that judgment had been over-ruled by judgments of Hon'ble Supreme Court. 9. learned CIT, DR argued that by pledging shares with credit institutions assessee did not transfer its interest in those shares and assessee had wrongly relied upon provisions of sections 172 to 176 of Indian Contract Act, 1882 in that behalf. That aspect of issue had been examined b y Hon'ble Andhra Pradesh High Court in case of Ghanshyamdas Kishan Chander v. CIT [1980] 121 ITR 121 wherein Hon'ble High Court held that where assessee had mortgaged some capital asset for settlement of debts and later sold same for payment of remaining debt, 'transfer' can be said to have taken place only when sale was effected and not when asset was mortgaged. For this proposition learned CIT, DR relied upon following passage appearing in that judgment:- 'The definition of 'transfer', in relation to capital asset under Income- tax Act, is different from transfer of any interest in specific immovable property. Section 58(a) of Transfer of Property Act defines 'mortgage as the' 'transfer of interest in specific immovable property for purpose of securing payment of money advanced or to be advanced by way of loan. . . .' transfer of interest in specific immovable property is different from transfer of totality of interest in respect of capital asset. Sovereign Parliament, in our view, designedly used expressions 'sale', 'exchange', 'relinquishment of asset', 'extinguishment of any rights in asset' and 'compulsory acquisition of asset under any law' in definition of 'transfer' under section 2(47) of Act. definition is so clear as to take in only effective conveyance of capital asset to transferee. But, however, mere delivery of immovable property alone cannot be treated to be equivalent to conveyance of immovable property so as to come within definition of 'transfer'. definition is clear enough. If any authority is needed; we find it in Alapati Venkataramiah v. CIT [1965] 57 ITR 185 (SC). Therein learned Judge, Sikri, J. (as he then was), speaking for court, observed at page 192 thus: 'Before section 12B can be attracted, title must pass to company by any of modes mentioned in section 12B, i.e., sale, exchange or transfer. It is true that word 'transfer' is used in addition to word 'sale' but even so, in context, transfer must mean effective conveyance of capital asset to transferee. Delivery of possession of immovable property cannot by itself be treated as equivalent to conveyance of immovable property.' For reasons stated above, we hold that there was no transfer of capital assets by creating mortgages in years 1934 and 1935 in respect of two properties and, therefore, transfer of assets had in fact taken place only in August, 1964, as rightly held by Tribunal.' learned CIT, DR, therefore, argued that at time of pledging of shares there was no transfer of interest within meaning of section 2(47) of Act because provisions of Indian Contract Act were not applicable to section 2(47). transfer took place only at time of sale of shares. This fact was further reinforced by clause 6 of Pledge Agreement which provided that if there was any balance left after appropriation of debt, same should be paid to pledger. 10. learned CIT, DR argued that there was no force in contention o f assessee that it had not actually received any profit on sale of shares. Capital gains tax was attracted in cases where assessee had acquired right to receive profit and it was not necessary that assessee should have actually received profit. That view was supported by judgment of Hon'ble Madras High Court in case of T.V. Sundaram Iyengar & Sons Ltd. v. CIT [1959] 37 ITR 26. He placed reliance on following extract:- 'In order to attract liability to tax on capital gains under section 12B of Indian Income-tax Act, 1922, it is sufficient if in relevant accounting year profits have arisen out of sale of capital assets, that is to say, if assessee has right to receive profits. It is not necessary that assessee should have received them. When once profit have arisen in accounting year out of sale of capital assets, what parties did subsequent to that year will not have any bearing on their liability to tax in respect of that year.' learned CIT, DR argued that receipt need not be necessarily in terms of money it could be by negotiable instrument, by settlement and by adjustment. For that purpose reference was made to judgment in CIT v. Nainital Bank Ltd. [1966] 62 ITR 638 (SC); P.C. Roy & Co. (India) (P.) Ltd. v. A.C. Mukherjee, ITO [1959] 36 ITR 365 (Cal.); Maharaja Kamakhya Narain Singh v. CIT [1942] 10 ITR 177 (Pat.) and CIT v . V.S.U.R. Firm [1935] 3 ITR 158 (Rangoon). It, therefore, followed that adjustment of sale proceeds of shares towards debt was one of way of receipt by assessee and, in any case, in case of capital gains right to receive profit itself was sufficient to attract tax liability. For purpose of chargeability of capital gains tax there were only three conditions to be satisfied i.e., transfer of asset, profit or gains out of transfer and right to receive profit. In case of assessee all three conditions had been satisfied. 11. During course of proceedings before us learned CIT, DR argued that in case of assessee very fact that shares were pledged with credit institutions was not proved. In paper book filed with Tribunal assessee had included copy of agreement to pledge shares only in cases of Kotak Mahindra Finance Ltd. and M/s. Industrial Reconstruction Bank of India. These copies of agreement did not bear signatures of credit institutions and witnesses. Some part of agreements were left blank as seen at pages 93 and 156 of paper book. In absence of signatures of both parties it could not be said that any valid agreement had come into being. assessee had also not furnished any evidence that pledged shares were actually transferred in name of credit institutions and that was primary requirement for transfer of totality of assessee's interest in share certificates. From pages 109 to 126 of paper book it was seen that shares were in name of assessee even after pledging. At pages 95 to 107 of paper book assessee even after pledging. At pages 95 to 107 of paper book assessee had enclosed copies of share transfer forms. These share transfer forms were blank and name of credit institution had not been entered in column meant for names of transferee. 12. During course of hearing before us learned counsel for assessee argued that learned CIT (Appeals) had correctly decided that facts of assessee's case were entirely different from facts of case of V.S.M.R. Jagdishchandran (supra) and that on perusal of agreements and other relevant documents it was seen that creditors had unequivocal right of selling shares in question and that facts of case of assessee were fully covered by judgment of Hon'ble Kerala High Court in case of Smt. Thressiamma Abraham (supra). 13. learned counsel argued that in instant case undisputed facts were that assessee had not received any amount on sale of shares; that assessee had no substantial interest in any of creditor company and that assessee had given collateral security just to help debtor company. It was matter of record that lenders were given absolute right without giving n y notice to assessee to sell shares and appropriate proceeds against loan. For that purpose learned counsel invited our attention to clauses 5 and 6 of pledge agreement between assessee and Kotak Mahindra Finance Ltd. It was also matter of record that entire sale proceeds had been appropriated by creditors in satisfaction of outstanding loan against debtor company. Thus, from facts of case it was evident that there was overriding title of lenders in respect of sale proceeds and, therefore, there was diversion at source of sale proceeds itself and in that view of matter assessee was not chargeable to tax under head 'Capital gains'. learned counsel argued that under provisions of section 48 of Act sale proceeds received or receivable was foundation of capital gains tax. For that proposition, learned counsel relied upon following passage in case of CIT v. Mohanbhai Pamabhai [1973] 91 ITR 393 (Guj.), confirmed in Mohanbhai Pamabhai's case (supra): 'Section 45 which is charging section, undoubtedly, provides that any profits or gains arising from transfer of capital asset shall be chargeable to income tax under head 'Capital gains'. But, section 48 shows that transfer that is contemplated by section 45 is transfer as result of which consideration is received by assessee or accrues to assessee. Section 48 provides mode of computation of capital gains by enacting that income chargeable to tax as capital gain shall be computed by deducting from 'full value of consideration received or accruing as result of transfer of capital asset' following amounts, namely: (i ) expenditure incurred wholly and exclusively in connection with such transfer; and (ii ) cost of acquisition of capital asset and cost of any improvement thereto. amounts specified in clauses (i ) and (ii ) are to be deducted from 'consideration received or accruing as result of transfer of capital asset' for purpose of determining profits or gains chargeable to tax. It is, therefore, clear that transfer of capital asset, in order to attract capital gains tax, must be transfer as result of which consideration is received by assessee or accrues to assessee. If there is no consideration received or accruing to assessee as result of transfer, machinery section enacted in section 48 would be wholly inapplicable and it would not be possible to compute profits or gains arising from transfer of capital asset. transaction in order to attract charge of tax as capital gains must, therefore, clearly be such that consideration is received by assessee or accrues to assessee as result of transfer of capital asset.'[Emphasis supplied] learned counsel argued that in case before us neither any consideration was received by assessee nor any consideration was receivable by assessee. There was no consideration receivable even from debtors. No material had been brought on record to establish that assessee received or was entitled to receive any consideration in relation to sale proceeds of shares in question. On these facts no capital gain was chargeable to tax in assessment of assessee under provisions of section 45 read with section 48 of Act. 14. learned counsel for assessee took us closely through judgment of Hon'ble Kerala High Court in case of Smt. Thressiamma Abraham (supra) and argued that case of assessee was fully covered by Abraham (supra) and argued that case of assessee was fully covered by authority of Hon'ble Kerala High Court in that case. judgment of Hon'ble Supreme Court in case of V.S.M.R. Jagdishchandran (supra) was not applicable because in that case assessee had created mortgage on property for his own benefit and had already realized value thereof. learned counsel argued that while applying provisions of Income-tax law, it was 'Real Income' earned by assessee that was chargeable to tax. In support of this contention learned counsel kly relied upon judgment of Hon'ble Supreme Court in Sunil Siddharthbhai v. CIT [1985] 156 ITR 509 and in particular, following observations:- 'That profits or gains under Income-tax Act must be understood in sense of real profits or gains, that is to say, on ordinary commercial principles on which actual profits are computed, sense in which no commercial man would misunderstand, had been regarded as principle of general application, and there is catena of cases of this court which affirms that principle. Reference may be made to Calcutta Co. Ltd. v. CIT [1959] 37 ITR 1 (SC), CIT v. Bai Shirinbai K. Kooka [1962] 46 ITR 86 (SC), Poona Electric Supply Co. Ltd. v. CIT [1965] 57 ITR 521 (SC), CIT v. Birla Gwalior (P.) Ltd. [1973] 89 ITR 266 (SC) and Bafna Textiles v. ITO [1975] 98 ITR 1 (Kar.).' learned counsel argued that provisions of sections 172 to 176 of Indian Contract Act, 1872, regulated transactions of pledge. Under those provisions bailment of goods as security for payment of debt or performance of promise was called 'pledge'. Under such contract deposit of goods was made as security for debt and right to property vested in pawnee so far as necessary to secure debt. Under pledge though no title to goods passed to pawnee, but right to retain possession remained with pawnee and pawnee also had right, in case of default, to sell goods after reasonable notice of intended sale given to pawnor. Once pawnee sold goods right of pawnor to redeem came to end but pawnee was bound to apply sale proceeds towards satisfaction of debt and to pay balance, if any, to pawnor. learned counsel referred to judgment of Hon'ble Supreme Court in case of Lallan Prasad v. Rahmat Ali AIR 1967 SC 1322 that there were two essential ingredients of pawn- (i ) property pledged should be actually or conclusively delivered to pawnee, and (ii ) pawnee had special property in pledge but general property therein remained in pawner and wholly reverted to him on discharge of debt. Again in case of Bank of Bihar v. State of Bihar AIR 1971 SC 1210 Hon'ble Apex Court reiterated above legal position and held that so long as claim of pawnee was not satisfied no other creditor of pawnor had any right to take away goods or its price. 15. learned counsel, thus argued that on facts of case of assessee before us there was overriding title of lenders in respect of sale proceeds. Therefore, there was diversion at source of sale proceeds itself and assessee was not liable to charge under head 'Capital gains'. In any case provisions of section 45 read with section 48 were not attracted in case of assessee. Section 48 showed that transfer contemplated by section 45 was transfer as result of which consideration was received by assessee or accrued to assessee. If in case like that of assessee neither any consideration was received nor any consideration accrued, there would be no capital gains chargeable to tax. There was clear authority of Supreme Court in case of Mohanbhai Pamabhai (supra) to that effect. 16. learned counsel argued that none of judgments relied upon by learned D.R. were applicable to facts of case of assessee before us. First case relied upon by learned D.R. i.e., R.M. Arunachalam (supra) was case in which question for consideration was whether amount of estate duty payable could be reduced from sale proceeds of asset while computing capital gains. Hon'ble Apex Court held that it could not be said that estate duty payable was either 'cost of acquisition' or 'cost of improvement' within meaning of section 48, so as to be reduced from sale proceeds while working out amount of capital gains. It was important to note that in that case Hon'ble Apex Court did not permit assessee to raise question of diversion at source on account of overriding charge of estate duty because that was entirely independent issue which had not been considered by Tribunal or High Court. In case of V.S.M.R. Jagdishchandran (supra), there was mortgage that had been created by that assessee for value received by assessee in that case, whereas in case assessee for value received by assessee in that case, whereas in case of assessee before us pledge had been made for benefit of third party and not assessee himself. For that reason ratio of that judgment was entirely inapplicable. In case of SRV Press & Publication (P.) Ltd. (supra) again there was mortgage created by assessee for his own benefit. That was precisely crucial fact in case o f V.N. Vajrapani Naidu (supra) also. As to case of Attili N. Rao (supra), assessee had mortgaged his property to Excise Department of State of Andhra Pradesh as security for amount payable by assessee to State. When from out of sale proceeds State deducted its dues and paid over balance to assessee, Hon'ble Supreme Court held that capital gains was chargeable on full price realized. learned counsel argued that in none of cases relied upon by learned CIT, DR sale proceeds were entirely applied for benefit of third party alone leaving mortgagor high and dry. In those cases mortgagor had received benefit in terms of money or money's worth equal to mortgagee's interest. 17. learned counsel vehemently contested argument of revenue that judgment of Hon'ble Kerala High Court relied upon by CIT (Appeals) in case of Smt. Thressiamma Abraham (supra) was no longer good law. It was important to note that said judgment had neither been reversed, nor same has been adversely commented upon by Apex Court or even Kerala High Court. In case of SRV Press & Publication (P.) Ltd. (supra), Hon'ble Kerala High Court only stated that views expressed in case o f Smt. Thressiamma Abraham (supra) were not applicable to facts of case before them. That aspect had been clearly brought out in judgment of Hon'ble Calcutta High Court in case of Gopee Nath Paul & Sons v. Dy. CIT [2005] 278 ITR 240. It, therefore, followed that said judgment had all along continued to be good law. It was true that in case of Roshanbabu Mohammed Hussein Merchant (supra) Hon'ble Bombay High Court had observed that decision in case of Smt. Thressiamma Abraham (supra) was no longer good law in light of subsequent decisions of Apex Court. Those observations were required to be seen in context of assessee in that case, who had voluntarily sought to sell property in order to discharge his obligations towards creditor. In case of assessee before us shares were sold by mortgagor to discharge obligations of M/s. Pertech and M/s. Swati and not assessee himself. 18. learned counsel argued that there was transfer of interest in accordance with provisions of Indian Contract Act at time of pledging of shares of assessee to credit institution. Provisions of section 2(47) did not alter that position. case of Ghanshyamdas Kishan Chander (supra) was case relating to immovable property. learned D.R. overlooked that in case of assessee lenders had been given absolute right without giving any notice to assessee, to sell shares and appropriate proceeds against loans, as was evident from enclosures 5 and 6 of pledge agreement between assessee and M/s. Kotak Mahindra Finance Ltd. In case of assessee, apart from pledging of shares, duly signed bank transfer deeds had been handed over to lenders. lenders had been duly authorized to attend general body meeting of NIIT Ltd. Thus, there was transfer of complete interest by assessee-company to lenders for purposes of third party and as such neither in law nor on fact, any consideration was received by or accrued to assessee-company on sale of shares of M/s. NIIT by lenders. 19. learned counsel for assessee took k exception to attempt made by learned CIT, DR that in instant case pledge of shares was not proved by assessee. In instant case, learned Assessing Officer had not doubted even for moment genuineness of assessee's transactions that assessee had pledged its shares in respect of loans taken by third party and that subsequently those shares were sold by lenders in order to satisfy loans given by them to third party. learned DR failed to appreciate that facts of case were as admitted in order of assessment itself. He sought to doubt those facts on no valid basis or material but by merely making allegation. assessee had after signing agreements handed over same to credit institutions along with share transfer deeds. As such all signed documents were in possession of credit institutions and third parties and assessee had furnished copies of such documents as were lying in possession of assessee. learned CIT, DR was not justified to make allegation for which department had not carried out any enquiry even as on date learned CIT, DR made his submissions before Tribunal. as on date learned CIT, DR made his submissions before Tribunal. 20. We have carefully considered rival submissions. In this appeal there is no dispute as to facts of case. case of assessee is that t h e assessee voluntarily pledged shares belonging to him and unequivocally gave delivery of possession to certain credit institutions as collateral security for loan of Rs. 13 crores taken by M/s. Pertech Computers Ltd. (hereinafter referred to as 'Pertech') and loan of Rs. 20 crores taken by M/s. Swati Holdings Ltd. (hereinafter referred to as 'Swati') from those credit institutions. As both Pertech and Swati failed to repay loan to credit institutions, credit institutions sold shares in financial year 1996-97 towards satisfaction of amounts owed to them by Pertech and Swati. sale proceeds of shares pledged by assessee amounted to Rs. 29,08,03,436 and same were entirely applied towards repayment of loan taken by Pertech and Swati and assessee did not receive single paisa out of sale proceeds. Both learned Assessing Officer and learned CIT (Appeals) do not dispute correctness of these facts. During course of hearing before us learned CIT, DR made feeble attempt to create confusion on ground that copy of agreement to pledge shares with M/s. Kotak Mahindra Finance Ltd. and M/s. Industrial Reconstruction Bank of India did not bear signatures of credit institutions and witnesses. Some narrations in agreement were left blank. On consideration of matter we do not see much force in these arguments of learned CIT, DR. learned CIT, DR merely sought to doubt facts found in order of assessment itself on basis of almost no material at all. In paper book filed by assessee photocopies of share certificates and blank share transfer forms signed by assessee and various other papers signed by assessee in this connection have been filed and those very documents are said to have been furnished before learned Assessing Officer and CIT (Appeals) as well. learned counsel for assessee pointed out that copies of agreement were duly signed by assessee and handed over to credit institutions and if that were not so credit institutions could not have sold assessee's shares and appropriated proceeds. 21. In instant case, learned Assessing Officer has held that assessee cannot say that no consideration has been received by him just because some body else has received consideration on his behalf. According to learned Assessing Officer debtor whose debts had been discharged by sale of assessee's shares was, in law, debtor to assessee for amount of consideration and, therefore, in way assessee had exchanged his shares for debt owed by Pertech and Swati on whose behalf assessee had given guarantee. In support of these arguments, learned Assessing Officer has relied upon Supreme Court judgment in case of V.S.M.R. Jagdishchandran (supra). It is seen that assessee in that case had executed mortgage of house property and plots of land in respect of certain debts owed by that assessee. Subsequently that assessee sold house property and plots of land subject to encumbrance. In Income-tax assessment proceedings that assessee sought to reduce debts in computation of capital gains as increase in cost of acquisition of property or as cost of improvement of property or as cost of obtaining clear title to property. Hon'ble Supreme Court held that since mortgage was created by assessee himself it was not case of increase in cost of acquisition or cost incurred for obtaining clear title to property. It was, therefore, held that amount deducted by buyer for discharge of mortgage debt out of sale proceeds could not be claimed as deduction in computation of capital gains. After consideration we find that only similarity between facts of that case is that assessee before us also himself created mortgage. But similarity ends here. In case of V.S.M.R. Jagdishchandran (supra) mortgage debt represented that assessee's own debt created for consideration of value received in past. In case of assessee third parties' debts were discharged resulting into no profit or gain at all to assessee before us. Secondly, in that case assessee himself sold property and received sale consideration after discharge of mortgage debt. In case of assessee before us sale was forced upon assessee by credit institutions. Furthermore we do not see in this case any authority to proposition canvassed by learned Assessing Officer that on sale of shares pledged by assessee, assessee had exchanged his shares for debt owed by Pertech and Swati and, therefore, assessee could not say that no consideration had been received by assessee. During course of hearing before us Ld. Counsel for assessee stoutly denied this suggestion. 22. During course of hearing before us learned CIT, DR heavily relied, in addition to Hon'ble Supreme Court judgment in case of V.S.M.R. Jagdishchandran (supra), on judgment of Hon'ble Apex Court in case of R.M. Arunachalam (supra). assessee in that case argued that in computation of capital gains estate duty paid by that assessee should be treated as cost of acquisition or cost of improvement of property sold by that assessee. Hon'ble Supreme Court held that creation of charge under section 74(1) of Estate Duty Act only meant that amount recoverable by way of estate duty would have priority over other liabilities of Accountable Person. It could not, therefore, be said that title of that assessee in immovable properties acquired was incomplete and imperfect in any way. It could not be said that as result of payment of estate duty, there was improvement in title of that assessee. While Hon'ble Apex Court upheld view taken by High Court, Their Lordships did not endorse view of Kerala High Court in Ambat Echukutty Menon's case (supra) and approved view taken by Hon'ble Gujarat High Court in case of CIT v. Daksha Raman Lal [1992] 197 ITR 123 on basis that there is distinction between mortgage of property during life time of previous owner and mortgage created by present owner after he has acquired property. After consideration we find that there is vital distinction between facts of case o f R.M. Arunachalam (supra) and assessee before us. In that case question for consideration was related to whether estate duty paid would constitute any part of cost of acquisition of or cost of improvement to property. In case before us we are not concerned with cost of acquisition at all but with question that whether sale proceeds of shares pledged by assessee can be construed as any part of 'the full of consideration received or accruing' to assessee before us. We may also mention here that in case o f R.M. Arunachalam (supra) Hon'ble Supreme Court did not permit assessee to raise question relating to diversion at source by way of estate duty paid. 23. For same reason as in respect of judgments in case of V.S.M.R. Jagdishchandran (supra) and R.M. Arunachalam (supra), we do not find much assistance in judgments in case of Attili N. Rao (supra) , N. Vajrapani Naidu (supra) and S.R.V. Press and Publications (P.) Ltd. (supra). In case o f Attili N. Rao (supra), assessee had mortgaged property belonging to him to State Excise Department to provide security for amounts of 'Kist' which were due from him to State. Eventually State sold immovable property by auction and deducted amount due to it towards kist and interest and paid over balance to assessee. assessee contended that amount of kist deducted by State was charge over immovable property. Hon'ble Supreme Court held that what was sold by State at auction was immovable property that belonged to assessee. price that was realized belonged to assessee. From out of price State deducted amounts due from assessee. In case before us amounts that have been deducted from sale proceeds of mortgaged shares are not amounts due from assessee before us but from Pertech and Swati i.e., third parties. In case of N. Vajrapani Naidu (supra), vendee paid creditors of vendor and balance sale proceeds to vendor. Here again amounts deducted from sale proceeds are amounts that were due from vendor and not third parties. application of sale proceeds in discharge of vendor's liability amounted to application of sale proceeds by vendor himself towards value received in past. In case of S.R.V. Press & Publications (P.) Ltd. (supra) assessee, private limited company, went into liquidation. Liquidator discharged liability of assessee on sale of immovable property of assessee-company. Here again is case where debts that had been discharged from out of sale proceeds, were debts that belong to assessee himself and not any third party. 24. In short, various judgments kly relied upon by learned Assessing Officer and learned DR, as discussed by us in paragraphs 21 to 23 above, do not advance case of revenue because they are cases where encumbrance was created by owner of property during his own life time for his own benefit in consideration of value already received, while in case of assessee before us shares had been pledged only as collateral security for loans taken by third parties. revenue has not even for moment disputed that while assessee was deprived of his ownership over shares in question, assessee derived no benefit whatsoever therefrom either before or during or after sale of assessee's shares by credit institutions. Significantly in cases relied upon by revenue Hon'ble Supreme Court have drawn distinction between encumbrance in property created by previous owner and encumbrance created by present owner himself. reason for distinction appears to be in fact in former situation present owner derived no benefit whatsoever from out of encumbrance created by previous owner, whereas in second situation previous owner had already derived benefit in terms of money or money's worth resulting into encumbrance being created. If this logic is applied, case of assessee before us is at par with cases where encumbrance is created by previous owner of property. In our humble opinion, judgments of Hon'ble Supreme Court in cases referred to in paras 22 and 23 above do not lay down proposition of law that any encumbrance whatsoever created during ownership of present owner should always be ignored. At any rate, in case before us present owner i.e., assessee himself did not create any encumbrance. He pledged shares only by way of collateral security. It was only on failure of third parties to discharge their debts that assessee lost title over its property. That is second vital distinction between facts of cases relied upon by revenue and facts of case of assessee before us. point that we are making has been clearly noticed by Mumbai Bench of Tribunal in their decision in case of Fancy Corpn. Ltd. (supra), on which reliance has been placed by learned CIT, DR. Hon'ble Tribunal have, inter alia, observed:- 'In entire argument, assessee has ignored fact that repayment of debt is consequential to obtaining of loan earlier and benefit that has accrued to assessee because of loan does not figure anywhere in computation of capital gains or in argument of learned counsel for assessee. computation of capital gains has to be worked out as per self-contained code sections 45 to 55A of IT Act. starting point of computation is cost of acquisition of asset and terminal point is sale consideration. fact that asset had been mortgaged at intermediate point does not seem to us to affect mode of computation of capital gains in view of said decision of Apex Court in case of V.S.M.R. Jagdishchandran (supra). As Apex Court has held, it will be different if assessee had acquired encumbered property and made payment towards discharge of encumbrance and betterment of its title. That is not situation here. Here is case where assessee has, after acquisition of asset, obtained benefit of commercial loan and in process mortgaged property.' 25. As pointed out by us earlier main plank of decision of learned Assessing Officer is that Pertech and Swati, whose debts had been discharged by sale of shares owned and pledged by assessee before us became debtor to assessee for amount of sale proceeds of shares of assessee applied towards discharge of loans taken by them. learned CIT, DR has further contended before us that there was no transfer of shares from assessee to credit institutions at time when shares were pledged by assessee and transfer can be said to have taken place only when sale of those shares was effected by credit institutions. For that proposition, learned CIT, DR has relied upon judgment of Hon'ble Andhra Pradesh High Court in Ghanshyamdas Kishan Chander's case (supra). learned counsel for assessee has kly contested these arguments. He has argued that in absence of any undertaking in that behalf from Pertech and Swati in favour of assessee before us, there was no legal basis to hold that on sale of shares in question by credit institutions Pertech and Swati became debtors to assessee of equal amount. learned counsel has further argued that assessee had already done all that was required of him for 'transfer' at time of pledging of shares itself. assessee had handed over original share certificates and duly signed blank transfer deeds and handed over same to lenders. lenders had been duly authorized to attend t h e General Body Meeting of NIIT - company whose shares had been pledged by assessee. Thus, there was transfer of complete interest by assessee-company to lenders subject to redemption of assessee's shares in event of Pertech and Swati honouring their obligations towards lenders. On consideration of matter we see considerable force in these contentions of assessee. There is no material to hold that on sale of assessee's shares by credit institutions Pertech & Swati became debtors of assessee of equal amount, not to speak of worthlessness of whole thing even if that were so. If Pertech and Swati could not honour their obligations towards credit institutions, much could not be made of if they had become debtors of assessee. However, be that as it may, fact of matter is that on sale of assessee's shares no amount became recoverable by assessee from Pertech and Swati either. assessee lost valuable assets for no consideration or benefit at all. There is also considerable force in contention of assessee that transfer of shares in question on part of assessee was complete when shares were pledged. While placing reliance over judgment of Hon'ble Andhra Pradesh High Court in case of Ghanshyamdas Kishan Chander (supra), learned CIT(A) has not noticed that subject-matter of transfer in that case was immovable property and issue related to period prior to amendment of section 2(47) by Finance Act, 1987 with effect from 1-4-1988. In case of equity shares, ownership changes hands with delivery of possession of share certificates along with transfer deeds signed by party in whose name share certificates stand registered for time being in records of company. Once signatures of title holder recorded on share certificate are duly made on transfer deed as transferee, share certificate may and often do change hands any number of times until subsequent holders opting to seek registration of shares in their names by lodging duly completed share transfer form along with share certificates in designated office of company. Thus, for all practical purposes assessee had already completed his part as transferor at time of pledging of share certificates with credit institutions. 26. learned CIT, DR has relied upon judgment of Hon'ble Madras High Court in case of T.V. Sundaram Iyengar & Sons Ltd. (supra) also and argued that for purpose of attracting liability to tax on capital gains it was not necessary that assessee should have actually received profits and it was sufficient that assessee had right to receive profit. There is no doubt as to general proposition that provisions of section 45 relating to capital gains come into operation on accrual basis and not on actual receipt basis. Accrual, as rightly stated by learned CIT, DR pre-supposes right to receive. learned CIT, DR has, therefore, referred to clause 6 of agreement between assessee and credit institutions and argued that assessee had right to receive profit from sale of shares if there was any balance left after appropriation of debt by credit institutions. learned CIT, DR has, however, not noticed that on facts and in circumstances of case assessee did not receive single paisa because entire sale proceeds were consumed in appropriation of debt owed by Pertech and Swati and there was no balance left. Thus, on facts and circumstances of case assessee neither received nor had any right to receive any part of sale proceeds of shares in question. 27. We now turn to judgment of Hon'ble Kerala High Court in case o f Smt. Thressiamma Abraham (supra) on which considerable reliance was placed by learned counsel of assessee. It is because there is considerable verisimilitude between facts of that case and facts of case of assessee before us. assessee in that case also stood guarantor and her immovable property was mortgaged to Kerala Financial Corporation for loan given by Kerala Financial Corporation to third party, National Tyre and Rubber Co. India Ltd. entire sale proceeds of assessee's property went into appropriation by Kerala Financial Corporation and, thus, assessee did not receive single pie. Thereafter amount of loan was credited in books of account of National Tyre & Rubber Co. India Ltd. in name of assessee under head 'Unsecured loans'. On these facts learned Assessing Officer held that in view of fact that sale proceeds were credited in assessee's name in account of National Tyre and Rubber Co. India Ltd., assessee should be deemed to have received entire sale proceeds. learned Assessing Officer, therefore, computed capital gain on sale proceeds of Rs. 13,12,414 at Rs. 12,62,414. learned CIT(A) held that there was no personal obligation of Smt. Thressiamma Abraham (supra) to discharge liability of National Tyre & Rubber Co. India Ltd. and there was constructive receipt of entire money by assessee. On assessee's appeal Tribunal held that assessee's full ownership stood diminished by reason of transfer of interest in property by way of mortgage and, therefore, there was expenditure incurred for purpose of transferring full ownership right in property. Against these findings of Tribunal revenue took up matter in reference to Hon'ble Kerala High Court. revenue, inter alia, contended that assessee was not entitled to deduction of amount paid to Kerala Financial Corporation for discharge of mortgage as deduction under section 48(1)(a)(i ) from sale consideration because such deduction was impermissible in light of Kerala High Court decision in case of Ambat Echukutty Menon (supra) and Supreme Court decision in case of CIT v. George Henderson & Co. Ltd. [1967] 66 ITR 672. Hon'ble Kerala High Court held that Tribunal appeared to have been proceeding in wholly unnecessary direction of statutory provisions relating to deduction from full value of consideration by resorting to section 48 of Act. Kerala Financial Corporation was acting on basis of overriding title resulting into assessee receiving not single pie from sale proceeds. As to reliance placed by revenue on judgments of Kerala High Court in cases of Ambat Echukutty Menon (supra) , Salay Mohamad Ibrahim Sait (supra) and K.V. Idiculla (supra) Hon'ble Kerala High Court found that facts in those cases were entirely different as those cases related to question of deduction from full value of consideration, situation in case of Smt. Thressiamma Abraham (supra) was diversion of amounts at source by overridding title.The issue in case of Smt. Thressiamma Abraham (supra) was basic question as to whether any capital gains arose on undisputed factual matrix. 28. impugned order of learned CIT(A) has heavily relied upon judgment of Hon'ble Kerala High Court in case of Smt. Thressiamma Abraham (supra). During course of hearing before us learned CIT, DR has vehemently argued that aforesaid judgment is no longer good law after judgments of Hon'ble Supreme Court in case of V.S.M.R. Jagdishchandran (supra) and R.M. Arunachalam (supra) . learned CIT, DR has further argued that Hon'ble Bombay High Court in case of Roshanbabu Mohammed Hussein Merchant (supra) found that decision of Kerala High Court in case of Smt. Thressiamma Abraham (supra) was longer good law in light of subsequent decision of Apex Court. learned counsel for assessee kly disputed these contentions of learned CIT, DR. He argued that judgment of Hon'ble Kerala High Court in case of Smt. Thressiamma Abraham (supra) had neither been reversed, nor same had been adversely commented upon by Apex Court. There was no subsequent judgment of Hon'ble Kerala High Court where earlier judgment in case of Smt. Thressiamma Abraham (supra) was dissented from. As to observations of Hon'ble Bombay High Court in case of Roshanbabu Mohammed Hussain Merchant (supra), those observations were required to be seen in context of facts of that case. 29. We find that central issue in this appeal before us is whether ratio of judgments of Hon'ble Supreme Court in cases of R.M. Arunachalam (supra) and V.S.M.R. Jagdishchandran (supra)/Attili N. Rao (supra) cover case before us against assessee. We have noted vital distinction between facts of cases decided by Hon'ble Supreme Court and facts of appeal before us while discussing those cases in paras 21 and 22 above. In none of cases third party liability was involved. Those were cases where assessees had created mortgage in consideration of value already received by them for their own benefit. Those were not cases where assessees lost asset without receiving single paisa in consideration of extinguishment of their rights over asset. We find that there are two recent judgments delivered after taking into consideration Supreme Court judgments in cases of R . M . Arunachalam (supra) and V.S.M.R. Jagdishchandran (supra) relating to guarantee given and loss of asset on account of third party liability. judgment of Hon'ble Bombay High Court in case of Roshanbabu Mohammed Hussein Merchant (supra) supports case o f revenue, while judgment of Hon'ble Calcutta High Court in case of Gopee Nath Paul & Sons (supra) is in favour of assessee. 30. In case of Roshanbabu Mohammed Hussein Merchant (supra) assessee was shareholder of company known as Merchant Steel Industries, in which her husband was director. Merchant Steel raised loan from State Bank of Saurashtra and for repayment of loan assessee stood as one of guarantors and assessee had offered plot of land belonging to her as security for repayment of loan. Thereafter assessee after obtaining permission from bank, sold part of plot of land for consideration of Rs. 3,92,000 and deposited entire amount with State consideration of Rs. 3,92,000 and deposited entire amount with State Bank of Saurashtra towards discharge of debt. assessee claimed that long-term capital gain arising on sale of above land was exempt from capital gains tax. learned Assessing Officer rejected contentions of assessee and taxed capital gains, but on assessee's appeal learned CIT (Appeals) decided in favour of assessee. On appeal filed by revenue, Tribunal upheld order of CIT (Appeals) on ground that first, sale proceeds were diverted by overriding title in favour of bank and, secondly, amount paid by assessee to discharge debt was expenditure incurred by assessee for removing encumbrance which was absolutely essential to effectively transfer plot of land. On revenue's appeal Hon'ble Bombay High Court referred to judgment of Hon'ble Supreme Court in case of R.M. Arunachalam (supra) and subsequent judgments in case of V.S.M.R. Jagdishchandran (supra) and Attili N. Rao (supra) and held as under:- 'From aforesaid decisions of Apex Court, it is clear that there is distinction between obligation to discharge mortgage debt created by previous owner and obligation to discharge mortgage debt created by assessee himself. Where property acquired by assessee is subject to mortgage created by previous owner, assessee acquires absolute interest in that property only after interest created in property in favour of mortgagee is transferred to assessee, that is after discharge of mortgage debt. In such case, expenditure incurred by assessee to discharge mortgage debt created by previous owner to acquire absolute interest in property is treated as 'cost of acquisition' and is deductible from full value of consideration received by assessee on transfer of that property. However, where assessee acquires property which is unencumbered, then, assessee gets absolute interest in that property on acquisition. When assessee transfers that property, assessee is liable for capital gains tax on full value (less admitted deductions) realised, even if encumbrance is created by assessee himself on that property and assessee is under obligation to remove that encumbrance for effectively transferring property. In other words, expenditure incurred by assessee to remove encumbrance created by assessee himself on property which was acquired by assessee without any encumbrance is not allowable deduction under section 48 of Income-tax Act. It is true that in none of aforesaid cases Apex Court has specifically held that repayment of mortgage debt created by assessee himself is not expenditure incurred for effectively transferring property. However, it is implicitly held by Apex Court that expenditure incurred to remove encumbrance created by assessee himself on property on which assessee had absolute interest is not expenditure incurred for effectively transferring property as contemplated under section 48 of Income-tax Act. It is not in dispute that in both appeals which are before us, property on which encumbrance was created by assessee was acquired by assessee free from encumbrances. Therefore, in light of decisions of Apex Court referred to hereinabove, it must be held that assessee is not entitled to deduction of expenditure incurred to remove encumbrance created by assessee himself. contention that assessee has not received pie from transfer and entire sale proceeds realised on transfer of mortgaged asset has been appropriated towards discharge of mortgage is also without any merit. As held by Apex Court, when property belonging to assessee is sold in discharge of mortgage created by assessee him-self, then, irrespective of t h e amount actually received by assessee, capital gain has to be computed on full price realised (less admissible deduction) on transfer of asset. To illustrate, suppose assessee mortgages its capital asset and obtains loan of Rs. 1 lakh from bank. Thereafter, if assessee transfers said capital asset with consent of bank for Rs. 1 lakh and pays entire amount of Rs. 1 lakh to bank to discharge mortgage created by assessee, then it is not open to assessee to contend that capital gains tax is not leviable on transfer of property because assessee has not received pie on transfer of that capital asset. As regards decisions of this court in case of Shakuntla Kantilal [1991] 190 ITR 56 followed in case of Abrar Alvi [2001] 247 ITR 312 and decision of Kerala High Court in case of Smt. Thressiamma Abraham (No. 1) [2001] 227 ITR 802 which are kly relied upon by counsel for assessee, we are of opinion that said decisions are no longer good law in light of subsequent decisions of Apex Court referred to hereinabove.' 31. In case of Gopee Nath Paul (supra) facts of case have been recorded by Hon'ble High Court in following words: 'It appears from materials on record that there was suit between Allahabad Bank and Gobindo Sheet Metal. In said suit Allahabad Bank claimed certain amount to extent of Rs. 25,00,000 approx. on account of Gobindo Sheet Metal's liability towards loan obtained from Allahabad Bank which was sought to be recovered together with declaration of hypothecation of certain movable goods including stock-in-trade. At same time, there was another suit in which arbitration agreement was sought to be filed on account of dispute including dispute involved in respect of dissolution of two firms, Gopee Nath Paul and Sons and Gobindo Sheet Metal Works and Foundry between partners of respective two firms, i.e., parties who were common. In latter suit, there was compromise in which both firms stood dissolved from date agreed in terms of settlement and receiver was appointed in terms thereof for purpose of selling these two firms as going concerns. From subsequent orders, it appears that those firms could not be sold as going concerns on account of liability of Gobindo Sheet Metal towards Allahabad Bank. After having passed several orders, by order dated April 27, 1989, court directed to deposit of Rs. 25,00,000 with Registrar of this court to be kept in fixed deposit with Allahabad Bank free from lien and all attachments until further orders of this Court. This was done in order to effectuate transfer of assets of these two firms after securing payment of liability towards Allahabad Bank in respect of one of firms. It appears that there was but one sale comprising assets of both firms and bid of one Ganesh Prasad at Rs. 3,51,00,000 was accepted as highest bid and that payment towards same was made in driblets from time to time.' After considering arguments of parties Hon'ble Calcutta High Court delivered their verdict in following words: 'The decision in S.R.V. Press and Publications (P.) Ltd. [2000] 241 ITR 626 (Ker.), cited by Mr. Som is also distinguishable and would have no manner of application in present case in view of fact that amount was spent in that case after receipt of consideration by liquidator to discharge liability of assessee in respect of finance received from Kerala Finance Corporation on security of property which was created after acquisition in course of winding up proceeding. There was nothing from which it would be held that such payment was absolutely necessary. On other hand, learned counsel for assessee in that case had conceded that section 48 of Act had no application to facts of said case. However, alternative argument of assessee was that corporation had overriding title over property. amount paid was clearly relatable to title. Thus, it appears that there was no claim that payment of that amount was expenditure incurred wholly and exclusively in connection with transfer. There is another distinguishing feature so far as present case is concerned. Here entire assets of business of two firms as going concern were sought to be sold but could not be sold without removing liability towards Allahabad Bank. assets included whole business of two firms and if liability was not met before sale, in that event, in this present case sale consideration would have been reduced by liability payable to Allahabad Bank. Therefore, decision cited does not help us in facts and circumstances of case to take different view. decision in R.M. Arunachalam [1997] 227 ITR 222 (SC) dealt with question of cost of acquisition, which is not case here. It was not related to perfection of title. Therefore, this decision does not help us in context in which we are supposed to decide present case. Conclusion: criteria is perfection of title in order to effect sale. In this present case, without removing liability of Allahabad Bank, title of purchaser could not be perfected. Having regard to facts and circumstances of this case and position in law as discussed above, meeting of liability of Allahabad Bank relating to assets of Gobindo Sheet Metal was expenditure incurred wholly and exclusively in connection with transfer.' 32. After careful consideration we are of view that we should follow judgment of Hon'ble Calcutta High Court in case of Gopee Nath Paul (supra) and of Hon'ble Kerala High Court in case of Smt. Thressiamma Abraham (supra) in preference to judgment of Hon'ble Bombay High Court in case o f Roshanbabu Mohammed Hussein Merchant (supra) for following reasons: (1) Both in cases of R.M. Arunachalam (supra) and V.S.M.R. Jagdishchandran (supra), Hon'ble Supreme Court were not considering situation pertaining to loss of capital asset on account of guarantee for third party loan. In case of R.M. Arunachalam (supra) question was whether estate duty paid can be treated as part of cost of acquisition of asset to inheritor. In case of V.S.M.R. Jagdishchandran (supra) and Attili N. Rao (supra) encumbrance was created by owner of capital asset for his own benefit and those assessees had already received value corresponding to mortgage liability. Thus, in none of cases there was any loss or erosion in value of capital asset without any benefit whatsoever to owner. We are immediately reminded of famous dictum of Lord Halsbury in case of Qninn v. Leathem [1901] AC 495 (HL) 'A case is only authority for what it actually decides. I entirely deny that it can be quoted for proposition that may seem to follow logically from it'. There are any number of Indian authorities to same effect e.g.,Goodyear India Ltd. v. State of Haryana [1991] 188 ITR 402 (SC); CIT v. Sun Engg. Works (P.) Ltd. [1992] 198 ITR 297 (SC); CWT v. Dr. Karan Singh [1993] 200 ITR 614 (SC). (2) In case of Smt. Thressiamma Abraham (supra) Tribunal held that amount paid by that assessee to discharge debt was expenditure incurred by assessee for removing encumbrance. Hon'ble Kerala High Court, though upheld decision, clarified that Tribunal appeared to have been proceeding in wholly unnecessary direction by resorting to provisions relating to deduction from full value of consideration provided under section 48 of Act. According to view taken by Hon'ble Kerala High Court in case of Smt. Thressiamma Abraham (supra) crux of matter was not any expenditure for removal of encumbrance but reduction in full value of consideration on account of diversion of amounts at source. It is significant to note here that this aspect of diversion of income at source by overriding title was not allowed to be raised in case of R.M. Arunachalam (supra) and Hon'ble Apex Court observed: 'The submission regarding diversion in relation to amount paid by way of estate duty has been raised by assessee for first time before this court. Before Tribunal as well as before High Court contentions urged on behalf of assessee were confined to claim for deduction by way of cost of acquisition or cost of improvement under section 48 of Act. questions referred by Tribunal to High Court have to be considered in light of said submissions. submission regarding diversion involves question whether apart from deductions permissible under express provision contained in section 48 of Act, deduction on account of diversion is permissible in matter of computation of capital gains under Act. This is entirely independent issue which has not been considered by Tribunal or High Court. It cannot be permitted to be raised for first time at this stage. We, therefore, do not propose to go into this question.' It is, therefore, submitted with respect that question that assessee did not receive single pie in whole transaction remains unanswered by judgments of Apex Court in cases of R.M. Arunachalam (supra) , V.S.M.R. Jagdishchandran (supra) and Attili N. Rao (supra). (3) In case of Roshanbabu Mohammad Hussein Merchant (supra) assessee had sought permission from bank and voluntarily deposited part of sale proceeds of plot of land towards discharge of debt so as to have clear title over remaining plot of land; whereas in case of Smt. Thressiamma Abraham (supra) as well as in case before us mortgaged property had been sold by credit institutions. (4) In instant case assessee had already handed over share certificates in original along with duly signed bank transfer deeds to credit institutions. Thus, assessee had already completed his part of transfer at time of pledge of shares and in event of failure on part of Pertech and Swati credit institutions could freely sell shares in open market. (5) During course of arguments in case of Smt. Thressiamma Abraham, revenue had placed reliance on earlier judgments of Kerala High Court in cases of Ambat Echukutty Menon (supra) ; Salay Mohd. Ibrahim Sait (supra) and K.V. Idiculla (supra) , but same were distinguished by Hon'ble High Court in case of Smt. Thressiamma Abraham. These three judgments relied upon by revenue have been expressly over-ruled by Hon'ble Supreme Court in case of R.M. Arunachalam (supra). (6) In instant case what appears to us to be clinching issue is fact that assessee before us has not received single paisa from out of sale proceeds of assessee's shares running into crores of rupees. At cost of repetition we may state here that there is not whisper in order of Assessing Officer or learned CIT(A) that assessee, at any stage before, during or after pledge of shares in question, received anything in terms of money or money's worth in relation to parting with of assessee's shares for benefit of Pertech and Swati. There is thus no force in contention of learned CIT(DR) that under clause 6 of agreement assessee could receive surplus sale proceeds after credit institutions satisfied their rights in full. Fact of matter is that there was no surplus. We may make it clear that we are not impressed by fact of any hardship involved to assessee but by legal principle, to our mind, applicable to such situation. During course of hearing before us learned CIT, DR argued that at time of pledging these shares assessee must be aware of fact that he could loose his right over shares on account of pledging these shares with credit institutions. We have no difficulty in accepting this contention. Of course assessee must have known risk involved. Having regard to huge amount involved it may also be safely assumed that assessee should have been reasonably aware of very likelihood of loosing capital asset. If these hazards did not deter assessee, assessee was within his legal rights to do whatever he felt like to do with his absolute property. assessee was even entitled to throw these shares from window of running train if he so wished because he was shares from window of running train if he so wished because he was absolute owner of these shares. In case before us there is not even wishper of any advantage received by assessee. On facts of case as they have emerged before us only possible inference is that assessee made kind of gift of these shares in favour of Pertech and Swati. 33. In case of Shiv Shankar Lal v. CIT [1974] 94 ITR 433 (Delhi), assessee sold on July 25, 1961, 6120 sq. yds., out of large plot of land belonging to him, to company comprising of himself, his wife and his son as shareholders for sum of Rs. 93,450. On August 25, 1961 assessee sold 5678 sq. yds. from out of remaining portion of same land to another party at rate of Rs. 60 per sq. yd. assessee claimed capital loss in relation to property sold to family company. There was provision of section 52 on statute book in relation to relevant assessment year 1962-63. Assessing Officer sought to apply provisions of section 52 and substitute price at which assessee sold part of land to family company by what, according to him, was fair market value thereof on date of sale. Agreeing with view expressed by Hon'ble Madras High Court in case of Sundram Agencies (P.) Ltd. v. CIT, Hon'ble Delhi High Court held that provisions of section 52 did not discard or avoid honest transactions made out of love and affection or for other conceivable reasons other than avoidance or reduction of liability to tax on capital gains. It was, therefore, held that transaction was exempt from assessment under section 45 of Act by virtue of section 47(iii ) of Act. 34. In case of Addl. CIT v. Mrs. Avtar Mohan Singh [1982] 136 ITR 645 Hon'ble Delhi High Court have reiterated position that in case where transfer is made for inadequate consideration, in absence of any material to establish under-statement of consideration, it would be transaction in nature of gift and accordingly exempt from charge of capital gains tax by virtue of provisions of section 47(iii ) of Act. In that judgment Hon'ble Delhi High Court have, inter alia, observed as under: 'It would appear to me that if transfer is not bona fide and declared consideration is lower than consideration received it would be case of understatement and provisions of section 52 of Act would be attracted. On other hand, if transfer is bona fide and declared consideration is actual consideration received, there would be no declaration of understatement. In such case, difference between declared consideration and fair market value would be gift in common and ordinary accepted sense of word. part constituting sale and part constituting gift being bifurcated, purchaser donee would get as bounty difference in declared consideration and fair market value. In other words, he would get something for nothing. This being true nature of gift as known in common parlance, if bona fide transaction is not bifurcated in this manner, then even if one rupee is all that is charged and received for property, of which fair market value is rupees ten lakhs revenue would contend that capital gains tax as also gift tax would be attracted; whereas if nothing is charged then only gift tax would be attracted. This is certainly anomalous situation. It would, therefore, appear to us that this dichotomy is essential for bona fide transaction. We think that this conclusion also derives support from object and intendment of exemption in section 47(iii ) which is that transfers involving element of bounty need not be considered for capital gains. situations contemplated in this clause are those in which person effects transfer by way of conferring favour on another and are incompatible with idea of realisation of any gains by such transfer. As already pointed out, there is no logical reason why capital gains should be excluded if transferor receives no consideration at all but should be attracted when he takes single rupee. language of section 47(iii ) does not compel such construction and only meaning of word 'under' in that clause can be 'involving' or 'by way of'; to extent to which there is shortfall of consideration transfer can be said to be 'under' or 'by way of' gift, word 'gift' being used in its ordinary meaning in common parlance and not in sense in which it is used in G.T. Act, or Transfer of Property Act.' same position has been reiterated by Hon'ble Delhi High Court in their judgment in case of CIT v. Bharat Development (P.) Ltd. [1986] 158 ITR 159 that in case of sale if price at which shares are sold is less than intrinsic value of shares, in that case provisions of section 47(iii ) of Act intrinsic value of shares, in that case provisions of section 47(iii ) of Act would apply. We may point out that aforesaid judgments of Delhi High Court in cases of Shiv Shanker Lal (supra), Mrs. Avtar Mohan Singh (supra) and Bharat Development Private Ltd. (supra) have been rendered in relation to provisions of section 52 that have been omitted from Income-tax Act with effect from 1-4-1988. As result now there is no authority in law to tax, in absence of any under-statement of consideration or colourable device, to charge capital gains on amount not actually received by or accrued to assessee. We see no difficulty in arriving at conclusion that under provisions of section 45 assessee cannot be charged to tax in relation to amount other than amount actually received by or accruing to him as consideration for transfer. provisions of section 45 bring to charge of tax, 'any profits or gains arising from transfer of capital asset'. levy is only if profits or gains arise to assessee, not otherwise. This aspect is made very clear by provisions of section 48 which lay down for purpose of computation of income chargeable under head 'Capital gains' certain deductions to be made from 'the full value of consideration received or accruing as result of transfer of capital asset'. revenue has to establish that certain consideration was either received or accrued to assessee in whose hands income under head 'Capital gains' is sought to be assessed. 35. In case of George Henderson & Co. Ltd. (supra) Hon'ble Supreme Court have stated this position in following words: 'For reasons already stated, we are of opinion that expression 'full value of consideration' cannot be construed as market value but as price bargained for by parties to sale. dictionary meaning of word 'full' is 'whole or entire, or complete' (Shorter Oxford English Dictionary). word 'full' has been used in this section in contrast to 'a part of price'. Consequently, words 'full price' mean 'the whole price'. Clause (2) of section 12B itself clearly suggests that if no deductions are made as mentioned in sub- clause (ii ) thereof, then that amount represents full value of consideration or full price. In other words, when deductions are made as specified in sub- clauses (i ) and (ii ), then that amount does not represent full value. expression 'full value' means whole price without any deduction whatsoever and it cannot refer to adequacy or inadequacy of price bargained for. Nor has it any necessary reference to market value of capital asset which is subject-matter of transfer.' 36. In case of Mohanbhai Pamabhai (supra), affirmed by Hon'ble Supreme Court in Mohanbhai Pamabhai's case (supra) , Hon'ble Gujarat High Court have stated position in following words: 'But, section 48 shows that transfer that is contemplated by section 45 is transfer as result of which consideration is received by assessee or accrues to assessee. Section 48 provides mode of computation of capital gains by enacting that income chargeable to tax as capital gain shall be computed by deducting from 'full value of consideration received or accruing as result of transfer of capital asset' following amounts, namely: (i ) expenditure incurred wholly and exclusively in connection with such transfer; and (ii ) cost of acquisition of capital asset and cost of any improvement thereto. amounts specified in clauses (i ) and (ii ) are to be deducted from 'consideration received or accruing as result of transfer of capital asset' for purpose of determining profits or gains chargeable to tax. It is, therefore, clear that transfer of capital asset, in order to attract capital gains tax, must be transfer as result of which consideration is received by assessee or accrues to assessee. If there is no consideration received or accruing to assessee as result of transfer, machinery section enacted in section 48 would be wholly inapplicable and it would not be possible to compute profits or gains arising from transfer of capital asset. transaction in order to attract charge of tax as capital gains must, therefore, clearly be such that consideration is received by assessee or accrues to assessee as result of transfer of capital asset. Where transfer consists in extinguishment of right in capital asset, there must be element of consideration for such extinguishment, for then only it would be transfer exigible to capital gains tax. This view is clearly supported by recent decision given by Division Bench of this court in Commissioner of Income-tax v. R.M. Amin.' 37. In case of K.P. Verghese v. ITO [1981] 131 ITR 587 (SC) it has clearly been held that burden to prove understatement of consideration is on revenue. Their Lordships have observed: 'It is well-settled rule of law that onus of establishing that conditions of taxability are fulfilled is always on revenue and second condition being as much condition of taxability as first, burden lies on revenue to show that there is understatement of consideration and second condition is fulfilled. Moreover, to throw burden of showing that there is no understatement of consideration, on assessee would be to cast almost impossible burden upon him to establish negative, namely, that he did not receive any consideration beyond that declared by him.' 38. We are now left with argument of revenue that constructively assessee should be treated to have received amounts of sale proceeds. It is argued that credit institutions sold shares in question on behalf of assessee and sale proceeds were applied in discharge of debts owed to credit institutions by Pertech and Swati on behalf of assessee. We do not see any basis for these arguments of revenue. It is not case of revenue that assessee sold shares belonging to him first and deposited sale proceeds with credit institutions as security. What assessee parted with and entirely for benefit of Pertech & Swati, were share certificates themselves. assessee had at that stage completed his part of transferor and it was open to anybody to insert his name as transferee and claim ownership of shares in question. If at all assessee applied anything for benefit of Pertech & Swati, it was share certificates themselves and not sale proceeds of share certificates. Credit institutions subsequently sold these shares in open market not on behalf of assessee but on behalf of Pertech & Swati. By appropriation of sale proceeds by credit institutions, it is liability of Pertech & Swati that was discharged and no consideration was either received or accrued to assessee before us. On these facts it is difficult to say how capital gains liability is attracted in hands of assessee before us. As early as in Raja Bejoy Singh Dhudhuria v. CIT [1933] 1 ITR 135 (PC) in case of Raja Bejoy Singh Dhudhuria (supra), Hon'ble Privy Council have held as under: 'When Act by section 3 subjects to charge 'all income' of individual, it is what reaches individual as income which it is intended to charge. In present case decree of court by charging appellant's whole resources with specific payment to his step mother has to that extent diverted his income from him and has directed it to his step mother; to that extent what he receives for her is not his income. It is not case of application by appellant of part of his income in particular way, it is rather allocation of sum out of his revenue before it becomes income in his hands.' 39. In view of discussion in foregoing paragraphs, we hold that profits or gains arising from sale of 11,72,900 shares of NIIT Ltd. in question cannot be charged to tax in hands of assessee before us because no value of consideration was either received or accrued as result of transfer of those shares. Moreover, even if notionally any consideration on sale of transfer accrued to assessee, there was diversion of entire consideration at source before it became income in hands of assessee. 40. In result, this appeal filed by revenue fails and is accordingly dismissed. *** ADDITIONAL COMMISSIONER OF INCOME TAX v. GLAD INVESTMENTS (P) LTD.