1994 (1) TMI 29 - HC - Income Tax

Appropriate Authority, High Court, Movable Property, Petition Against Order, Purchase Of Immovable Property By Central Government, Supreme Court, Writ Petition

Issues Involved:
1. Validity of the order under Section 269UD(1) of the Income-tax Act, 1961.
2. Applicability of Chapter XX-C of the Income-tax Act to court-ordered sales.
3. Alleged undervaluation of the property.
4. Entitlement to interest on the sale consideration.

Detailed Analysis:

1. Validity of the Order under Section 269UD(1) of the Income-tax Act, 1961:
The writ petitions challenge the order dated February 13, 1991, by the appropriate authority under Section 269UD(1) of the Income-tax Act, 1961, for the property located at 40, Rajaji Salai, First Line Beach, Madras-600 001. The petitioners argue that the order is invalid as it involves a court-ordered sale, which they claim should be exempt from the provisions of Chapter XX-C of the Income-tax Act. The court noted that the appropriate authority had ordered the purchase of the property by the Central Government for a discounted consideration of Rs. 59,79,448, which was contested by the petitioners.

2. Applicability of Chapter XX-C of the Income-tax Act to Court-Ordered Sales:
The petitioners contended that the provisions of Chapter XX-C, specifically Section 269UD(1), should not apply to sales ordered by the court. They referenced the Supreme Court's observations in C. B. Gautam v. Union of India [1993] 199 ITR 530, which suggested that the provisions were intended to curb tax evasion through undervaluation of property. The petitioners argued that applying these provisions to court-ordered sales would undermine the court's authority. However, the court held that the appropriate authority's option to purchase the property was not negated by the court's permission for the sale, indicating that Chapter XX-C could still be invoked if circumstances warranted.

3. Alleged Undervaluation of the Property:
The Revenue argued that there was substantial undervaluation of the property, justifying the invocation of Section 269UD(1). The counter-affidavit filed by the respondents stated that there were reasons to believe that the apparent consideration was significantly undervalued, which necessitated the purchase by the Central Government. The court decided that this issue should be examined by the appropriate authority through a limited/summary inquiry, as per the Supreme Court's guidance in C. B. Gautam's case.

4. Entitlement to Interest on the Sale Consideration:
The petitioner in Writ Petition No. 16812 of 1991 argued that the trust was deprived of using the sale consideration due to the prolonged proceedings, and hence, should be compensated with interest. The court referred to an earlier order by Kanakaraj J., which directed the Income-tax Department to pay interest at 18% per annum on the sale consideration if the writ petitions were dismissed. The court agreed with this contention, citing the Supreme Court's decision in Rajalakshmi Narayanan v. Margaret Kathleen Gandhi [1993] 201 ITR 681, which recognized the right to interest in similar circumstances. Consequently, the court directed that if the appropriate authority decided to order the purchase of the property by the Central Government, interest at 18% per annum should be paid from February 13, 1991, till the date of payment. Conversely, if the authority decided not to invoke Section 269UD(1), the agreement-holders would pay interest at 21% per annum from December 10, 1990, till the date of payment.

Conclusion:
The impugned order of the appropriate authority was set aside. The court directed the appropriate authority to treat Form No. 37-I as filed on January 5, 1994, and to complete the proceedings in accordance with Section 269UD(1) of the Income-tax Act, ensuring compliance with the Supreme Court's judgment in C. B. Gautam's case. The writ petitions were allowed with no costs.

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