2000 (3) TMI 44 - HC - Income Tax

Issues Involved:
1. Payment of balance consideration along with interest.
2. Validity of the discount provision under section 269UA(b)(2) of the Income-tax Act, 1961.
3. Determination of the starting point for discounting the sale consideration.

Detailed Analysis:

1. Payment of Balance Consideration Along with Interest:
The petitioner filed Writ Petition No. 17590 of 1997 seeking a writ of mandamus directing the respondent to pay the balance consideration of Rs. 9,01,500 along with interest. The petitioner entered into an agreement with Banque Nationale de Paris for the sale of property for Rs. 3,23,27,500. The balance sum of Rs. 3,18,27,500 was to be paid at the time of lodgement of the sale deed for registration. The appropriate authority ordered the purchase of the property by the Central Government for Rs. 3,14,26,000, discounting Rs. 9,01,500 from the total consideration. The petitioner challenged this discount and sought the balance amount with interest.

2. Validity of the Discount Provision Under Section 269UA(b)(2) of the Income-tax Act, 1961:
Writ Petition No. 17591 of 1997 was filed to declare the provisions of sub-clause (2) of clause (b) of section 269UA of the Income-tax Act, 1961, ultra vires. The petitioner argued that the discounting provision is arbitrary and violates his right to hold property. The court referred to the Karnataka High Court decision in C. Venkata Rao v. Union of India [1999] 236 ITR 895, which upheld the validity of the discounting provision, stating that it is based on logic and public policy. The court held that the discounting principle is not arbitrary, unreasonable, or unjust, and does not violate the Constitution.

3. Determination of the Starting Point for Discounting the Sale Consideration:
The petitioner contended that the discounting should commence from the date of tender of payment by the appropriate authority, not from the date of the agreement. The court examined conflicting views from various High Courts. The Gujarat High Court in Pradip Ramanlal Sheth v. Union of India [1993] 204 ITR 866, and the Bombay High Court in Smt. Vimla Devi G. Maheshwari v. S. K. Laul [1994] 208 ITR 734, held that discounting should start from the date of the agreement. However, the Bombay High Court in Shrichand Raheja v. S. C. Prasad, Appropriate Authority [1995] 213 ITR 33, and the Karnataka High Court in C. Venkata Rao v. Union of India [1999] 236 ITR 895, held that discounting should commence from the date of tender of payment.

The court agreed with the latter view, stating that the definition in section 269UA(b) does not specify that discounting should start from the date of the agreement. The court concluded that the appropriate authority should redetermine the discounted value starting from the date of tender of payment.

Conclusion:
The court dismissed Writ Petition No. 17591 of 1997, upholding the validity of the discounting provision under section 269UA(b)(2) of the Income-tax Act, 1961. However, it allowed Writ Petition No. 17590 of 1997, directing the appropriate authority to redetermine the discounted value payable to the petitioner from the date of tender of payment and to pay the correct amount with interest at 8% per annum from the date of the judgment until payment. There were no orders as to costs.

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