1995 (3) TMI 76 - HC - Income Tax

Determination Of Fair Market Value Of Property, Immovable Property By Central Government, Income Tax Act, Movable Property

Summary

Issues:
1. Interpretation of Section 269UD(1A) of the Income-tax Act, 1961.
2. Application of fair market value in determining pre-emptive purchase.
3. Non-application of mind by the appropriate authority in issuing the order.

Analysis:
1. The petitioners entered into an agreement to sell a property and submitted the required Form No. 37-1 to the appropriate authority as per Chapter XX-C of the Income-tax Act, 1961. The authority issued a notice under section 269UD(1A) calling for a show-cause on the pre-emptive purchase of the property. The petitioners responded with detailed information and documents, challenging the authority's reliance on a specific sale instance to undervalue the property.

2. The petitioners contended that the authority did not consider their arguments and passed the order for pre-emptive purchase without determining the fair market value of the property. The authority's order was based on a surmise that the property was undervalued by more than 15%, without a concrete assessment of the fair market value. The petitioners argued that such an order lacked proper application of mind and violated legal principles established by previous court decisions.

3. The High Court found merit in the petitioners' argument, emphasizing the necessity for the appropriate authority to determine the fair market value of the property before concluding undervaluation. Citing the decision in Vimal Agarwal v. Appropriate Authority, the court reiterated that the fair market value must be ascertained based on all relevant circumstances to justify any claim of undervaluation. As the authority failed to conduct this essential evaluation, the court ruled the order under section 269UD(1) as illegal and directed the authority to issue the necessary "no objection" certificate to the petitioners within 30 days.

In conclusion, the High Court quashed and set aside the impugned order dated September 30, 1994, passed by the appropriate authority under section 269UD(1) of the Income-tax Act, 1961. The court's decision highlighted the importance of a thorough assessment of fair market value in cases of pre-emptive purchase to ensure legal compliance and fair treatment of property owners.