1995 (8) TMI 10 - HC - Income Tax

Summary

Issues Involved:
1. Validity of the order under section 269UD(1) of the Income-tax Act, 1961.
2. Determination whether the transaction is one single sale or multiple sales.
3. Applicability of section 269UD(1) to individual transactions involving shares less than Rs. 10 lakhs.
4. Legal implications of partitioned property sales.

Detailed Analysis:

1. Validity of the order under section 269UD(1) of the Income-tax Act, 1961:
The petitioners sought the quashing of the order dated November 6, 1987, passed under section 269UD(1) of the Income-tax Act, 1961. This order directed the purchase of the suit property by the appropriate authority for an amount equal to the apparent consideration. The court found that the transactions should not have been treated as a single transaction, thus invalidating the applicability of section 269UD(1) to all but one of the transactions.

2. Determination whether the transaction is one single sale or multiple sales:
The primary issue was whether the transaction evidenced by the agreement to sell and receipt of delivery of possession dated August 25, 1987, should be treated as one transaction or five separate transactions. The court concluded that the transaction must be deemed as four separate transactions of immovable property entered into by four owners in favor of five vendees, not a single composite transaction.

3. Applicability of section 269UD(1) to individual transactions involving shares less than Rs. 10 lakhs:
The court referenced multiple precedents, including K. V. Kishore v. Appropriate Authority [1991] 189 ITR 264 (Mad), which held that when individual shares in a property are sold for less than Rs. 10 lakhs, section 269UD(1) is not applicable. The court applied this principle and determined that the transactions by Pritipal Singh, Gurcharan Singh, and Gulshan Kaur, each being less than Rs. 10 lakhs, did not attract section 269UD(1).

4. Legal implications of partitioned property sales:
The court examined the partition of the property among the heirs of Harbans Singh and Jaswant Singh, which was evidenced by a memorandum of partition dated June 5, 1987. Each co-owner had a definite share in the property, and the agreement to sell dated August 25, 1987, reflected these individual shares. The court emphasized that each vendor could have entered into separate agreements to sell their respective shares, and the fact that they chose to document the transactions in a single agreement did not alter the nature of the individual transactions.

Conclusion:
The court allowed Civil Writ Petitions Nos. 3286 of 1987, 3288 of 1987, and 3290 of 1987, thereby setting aside the impugned order dated November 6, 1987, and all proceedings under Chapter XX-C of the Income-tax Act, 1961, concerning the interests in the property belonging to Pritipal Singh, Gurcharan Singh, and Gulshan Kaur. However, the order stood valid for the property owned by Jaswant Singh. The court directed that the statement in Form No. 37-I be treated as submitted only by Jaswant Singh for his 50% share, with the remaining part of the form deemed redundant. The appropriate authority was allowed to issue a show-cause notice and potentially conduct an enquiry for compulsory purchase under section 269UD(1), with conditions for payment of apparent consideration plus interest if such an order is made. No order as to costs was issued, and all five petitions were disposed of.