1996 (6) TMI 48 - HC - Income Tax

Appropriate Authority Immovable Property By Central Government Interest Payable Movable Property Valuation Officer

Summary

Issues Involved:
1. Validity of the compulsory purchase order.
2. Fair market value determination of the property.
3. Appropriate authority's reliance on comparable sale instances.
4. Entitlement and calculation of interest on the balance purchase price.

Detailed Analysis:

1. Validity of the Compulsory Purchase Order:
The petitioner challenged the order of compulsory purchase dated March 25, 1994, passed by the appropriate authority, Bombay. The order concluded that the fair market value of the property was Rs. 46 lakhs on the date of the agreement (June 22, 1992) against the disclosed consideration of Rs. 38 lakhs, with a difference exceeding 15%. The court found that the initiation of proceedings under Chapter XX-C was without any basis, as the terrace was not exclusive to the subject property and there was no additional FSI (Floor Space Index) involved. Consequently, the impugned order was deemed arbitrary and set aside.

2. Fair Market Value Determination:
The appropriate authority determined the fair market value of the property at Rs. 46 lakhs, giving a market rate of Rs. 3,415 per square foot. However, the court noted that the authority did not specify which sale instance it relied upon to conclude this value. The discounted rate per square foot of the property under purchase was Rs. 2,613, and out of the eight sale instances referred to, the price was more than that of the five sale instances relied upon by the appropriate authority. Thus, it could not be inferred that the petitioner had undervalued the consideration or that the apparent consideration was less than 15% of the fair market value.

3. Appropriate Authority's Reliance on Comparable Sale Instances:
Initially, the appropriate authority relied on three sale instances for passing the first order, which were related to bungalows, not flats. Later, five additional sale instances were considered, but the authority did not clarify how these instances were used to determine the fair market value of Rs. 46 lakhs. The court highlighted that the sale instances were not comparable as they involved different types of properties (bungalows vs. flats) and lacked specific reliance on any particular sale instance.

4. Entitlement and Calculation of Interest on the Balance Purchase Price:
Respondents Nos. 5 and 6 contended that they were deprived of their money for 21 months due to the interim order passed by the court. The court agreed that the petitioner should pay interest on the balance purchase price of Rs. 34,20,000 at the rate of 20% per annum for 21 months. This decision was aligned with the Supreme Court's principle that interest should be paid if a seller is unable to get the purchase price due to a court's stay order.

Conclusion:
The petition was allowed, quashing the impugned order dated March 25, 1994. The appropriate authority was directed to hand over possession of the flat to the petitioner within 15 days. The petitioner was instructed to pay interest at the rate of 20% per annum on the balance purchase price for 21 months within one month. Respondents Nos. 5 and 6 were to execute the necessary documents for the sale of the flat. Rule was made absolute with no order as to costs, and the issuance of a certified copy of the judgment was expedited.