2004 (8) TMI 61 - HC - Income Tax

In this petition under article 226 of the Constitution, the petitioner has prayed for a direction to the respondents, particularly the appropriate authority (under Chapter XX-C), to pay the petitioner interest at the rate of 18 per cent. per annum on the apparent consideration amount for the period from July 31, 1992 till December 3, 1992 when the petitioner was paid apparent consideration of Rs. 30,56,218 after certain deductions. The claim is made under subsection (4) of section 269UG - petition is partly allowed. The respondents are directed to pay the petitioner interest at the rate of 6 per cent, per annum on the amount of Rs. 30,56,218 for the period from September 1,1992 to November 30,1992.

Issues:
1. Petitioner's entitlement to interest on apparent consideration amount.
2. Interpretation of provisions under section 269UG of the Income-tax Act, 1961.
3. Consideration of factors affecting the entitlement to interest.
4. Determination of the period and rate of interest payable to the petitioner.

Issue 1: Petitioner's Entitlement to Interest on Apparent Consideration Amount:
The petitioner sought interest at 18% per annum on the apparent consideration amount from July 31, 1992, to December 3, 1992. The petitioner's claim was made under subsection (4) of section 269UG of the Income-tax Act, 1961. The petitioner had executed an agreement to sell a property and filed necessary forms, following which the appropriate authority acquired the property after deductions. The petitioner demanded interest due to delays in payment and subsequent litigations. The court analyzed the petitioner's entitlement to interest based on the circumstances and legal provisions.

Issue 2: Interpretation of Provisions under Section 269UG of the Income-tax Act, 1961:
The court examined the provisions of sub-section (4) of section 269UG, which stipulate the investment of consideration deposited with the appropriate authority to earn interest. The court emphasized that the appropriate authority could invest the amount even without a specific application from the owner or interested parties. The court noted that the authority's failure to invest the amount despite possessing the property and receiving the consideration was unjustified. The court rejected arguments that the petitioner's failure to apply for investment absolved the authority from its duty to invest the amount and ensure it earned interest.

Issue 3: Consideration of Factors Affecting Entitlement to Interest:
The court addressed arguments against the petitioner's entitlement to interest, including the petitioner's acceptance of a substantial amount in full settlement and responsibility for delays due to litigations. The court clarified that accepting the amount did not waive the petitioner's right to claim interest. The court emphasized that the authority should have invested the amount promptly, especially after obtaining possession, regardless of the petitioner's actions. The court considered these factors in determining the petitioner's entitlement to interest on the delayed payment.

Issue 4: Determination of Period and Rate of Interest Payable to the Petitioner:
After analyzing the circumstances, the court decided that the petitioner should receive interest from September 1, 1992, to November 30, 1992, on the amount of Rs. 30,56,218. The court specified the rate of interest at 6% per annum for this period based on relevant financial considerations. The court declined to grant interest on other amounts paid to third parties and rejected the petitioner's request for interest on the interest amount during the petition's pendency. The court partially allowed the petition, directing the respondents to pay the specified interest amount to the petitioner within a specified timeframe.

This detailed analysis of the judgment from the High Court of Gujarat highlights the legal intricacies involved in determining the petitioner's entitlement to interest on the apparent consideration amount under the Income-tax Act, 1961.

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