1997 (3) TMI 58 - HC - Income Tax

Summary

Issues Involved:
1. Jurisdiction under Chapter XX-C of the Income-tax Act.
2. Nature of the agreement as a "development agreement".
3. Consideration and its components.
4. Applicability of the definitions of "transfer" and "apparent consideration".
5. Comparison with market value and alleged under-valuation.
6. Relevance of previous judicial decisions.
7. Procedural aspects and fairness of the impugned order.

Detailed Analysis:

1. Jurisdiction under Chapter XX-C of the Income-tax Act:
The petitioners contended that the "development agreement" does not fall within the scope of Chapter XX-C of the Income-tax Act, thus making the impugned order without jurisdiction. However, the court held that jurisdiction cannot be conferred by a party if it is not within the statute's four corners. Chapter XX-C aims to ensure tax is properly paid on the market value of transferred immovable property, preventing tax evasion. The court found that the agreement involved a transfer of an 88% undivided share in the land for a consideration, thus falling within the definition of "transfer" under section 269UA(f).

2. Nature of the Agreement as a "Development Agreement":
The petitioners argued that the agreement was not a sale since part of the consideration was not in money but in the future construction of built-up space. The court noted that neither the Income-tax Act nor the Transfer of Property Act recognizes a "development agreement" as a special mode of transfer. The agreement must fall within recognized modes of transfer, and the transaction was considered an exchange involving a transfer of property for both money and future construction.

3. Consideration and Its Components:
The consideration included Rs. 20,63,489 in cash and the construction of 2,740 sq. ft. of built-up space valued at Rs. 10,18,211. The court held that the market value of the construction as of the agreement date should be considered for determining the apparent consideration. The aggregate of monetary consideration and the value of the construction was less by over 15% of the market value, indicating under-valuation.

4. Applicability of the Definitions of "Transfer" and "Apparent Consideration":
The court examined the definitions under section 269UA and concluded that the transaction involved a transfer of an undivided share in the land for a consideration, which included both money and a "thing" (future construction). The court disagreed with the view that Chapter XX-C does not apply to agreements where consideration includes future construction.

5. Comparison with Market Value and Alleged Under-Valuation:
The court compared the apparent consideration of Rs. 30,52,891 with the fair market value of Rs. 54.21 lakhs, based on a nearby property sale. The difference was about 37.60%, indicating under-valuation. The petitioners' arguments regarding the tenant eviction, loss of title deeds, and urgent need for funds were not substantiated with evidence. The court found no justification for the lower price and upheld the authority's finding of under-valuation.

6. Relevance of Previous Judicial Decisions:
The court referred to judgments from the Calcutta and Patna High Courts but found them not applicable. The decision in Hari Krishna Kanoi v. Appropriate Authority was not relevant as it dealt with jurisdiction limits. The Mahabodhi Society of India case involved mala fides and limitation issues, with obiter dicta on non-monetary consideration. The Ashis Mukerji case did not invalidate the order based on statutory inapplicability but on the incorrect subject matter of acquisition.

7. Procedural Aspects and Fairness of the Impugned Order:
The court found that the show-cause notice and subsequent hearing addressed the petitioners' objections. The authority's comparison with a nearby property sale was valid, and the petitioners failed to rebut the presumption of under-valuation intended to evade tax. The court dismissed the petitions, finding no procedural unfairness or reliance on irrelevant facts.

Conclusion:
The court concluded that the "development agreement" involved a transfer of an undivided share in the land for a consideration, partly in money and partly in future construction. The provisions of Chapter XX-C were applicable, and the impugned order was within jurisdiction. The apparent consideration was significantly lower than the market value, justifying the authority's action to prevent tax evasion. The petitions were dismissed, upholding the impugned order.