1996 (6) TMI 29 - HC - Income Tax

Acquisition Of Immovable Property, Acquisition Proceedings, Determination Of Fair Market Value Of Property, High Court, Income Tax Act, Movable Property

Summary

Issues Involved:

1. Applicability of Chapter XX-A of the Income-tax Act, 1961, to the transfer of immovable property executed before but registered after its effective date.
2. Determination of the fair market value of the property transferred.
3. Whether the transfer was with the object of avoiding tax as per section 269C of the Income-tax Act, 1961.

Issue-wise Detailed Analysis:

1. Applicability of Chapter XX-A of the Income-tax Act, 1961:

The Tribunal addressed whether Chapter XX-A, which came into effect on November 15, 1972, applies to a transfer executed on September 11, 1972, but registered on December 11, 1972. Citing the decision in Mahavir Metal Works (P.) Ltd. v. Union of India [1974] 95 ITR 197 (Delhi), the Tribunal concluded that the law applies to the transfer since the registration occurred after the effective date. The Tribunal held that for the purpose of Chapter XX-A, a transfer is effective only upon registration, and thus the provisions of Chapter XX-A were applicable.

2. Determination of the Fair Market Value:

The Tribunal examined the fair market value of the property, considering multiple valuation reports:

- Income-tax Inspector's Report: Valued the property at Rs. 2,72,280.
- Departmental Valuer's Report: Valued the property at Rs. 2,11,024.
- Transferee's Approved Valuer's Report: Valued the property at Rs. 1,57,968.
- Inspecting Assistant Commissioner's Valuation: Valued the property at Rs. 2,54,000.

The Tribunal noted discrepancies and inconsistencies in the valuation methods and figures used by the Department. It found that the Department's valuation was based on the highest possible values without sufficient justification. The Tribunal also considered the wealth-tax assessments of the assessee for the relevant years, which supported a lower valuation. Ultimately, the Tribunal concluded that the fair market value did not exceed the apparent consideration by more than 15%, thus negating the need for acquisition proceedings.

3. Object of the Transfer under Section 269C:

The Tribunal evaluated whether the transfer was made to evade tax under section 269C. It concluded that the Department failed to establish conclusive proof that the consideration was not truly stated in the instrument of transfer. The Tribunal noted that even if the fair market value exceeded the stated consideration by 25%, the presumption under section 269C(2)(b) is rebuttable. The Tribunal found that the Department did not prove any extra consideration passed or any other form of tax evasion by the transferor or transferee. Consequently, it held that the acquisition proceedings under section 269F(6) were unwarranted.

Additional Considerations:

The Tribunal also addressed the applicability of a circular issued by the Central Board of Direct Taxes, which stated that acquisition proceedings should be dropped if the apparent consideration is below Rs. 5 lakhs. The Tribunal agreed with the Delhi and Punjab & Haryana High Courts that the circular applies to proceedings at the appeal stage, thus supporting the cancellation of the acquisition proceedings.

Conclusion:

The Tribunal confirmed the cancellation of the acquisition proceedings initiated under section 269D of the Income-tax Act, 1961. The Department's appeal was dismissed, and no costs were awarded.