1994 (1) TMI 49 - HC - Income Tax

Income Tax Act Movable Property Purchase Of Immovable Property By Central Government Rent Control

Summary

Issues Involved:
1. Validity of the proceedings under section 269UD(1) of the Income-tax Act, 1961.
2. Rights of the tenant under the Tamil Nadu Buildings (Lease and Rent Control) Act.
3. Arbitrariness of the provisions in the Income-tax Act, 1961, relating to pre-emptive purchase and dispossession.
4. Application of the Supreme Court's decision in C. B. Gautam v. Union of India.

Detailed Analysis:

1. Validity of the proceedings under section 269UD(1) of the Income-tax Act, 1961:
The petitioner-company challenged the order dated June 22, 1989, issued by the appropriate authority under section 269UD(1) of the Income-tax Act, 1961, which mandated the purchase of the property at door Nos. 109 and 110, Anna Salai, Madras-2, by the Central Government for Rs. 26,00,000. The petitioner argued that the provisions for pre-emptive purchase and dispossession were arbitrary and unrelated to the objective of tackling black money and tax evasion. The respondent countered that the provisions were introduced to contain black money and tax evasion, and the vesting of the property free from encumbrances included tenancy rights as an encumbrance.

2. Rights of the tenant under the Tamil Nadu Buildings (Lease and Rent Control) Act:
The petitioner, as a tenant in occupation, claimed statutory protection under the Tamil Nadu Buildings (Lease and Rent Control) Act and argued that they could not be evicted without following the Rent Control Act's provisions. The respondent maintained that the vesting of the property in the Central Government free from encumbrances extinguished the tenancy rights, and the Rent Control Act would not apply.

3. Arbitrariness of the provisions in the Income-tax Act, 1961, relating to pre-emptive purchase and dispossession:
The petitioner contended that the provisions for pre-emptive purchase and dispossession were arbitrary and did not relate to the objective of tackling black money and tax evasion. The respondent argued that these provisions were necessary to ensure that the property vested in the Central Government free from encumbrances, including tenancy rights.

4. Application of the Supreme Court's decision in C. B. Gautam v. Union of India:
The court referred to the Supreme Court's decision in C. B. Gautam v. Union of India, where it was held that the property purchased under section 269UD(1) would vest in the Central Government subject to bona fide encumbrances or leasehold interests subsisting thereon, except for monthly tenancies. The Supreme Court struck down the expression "free from all encumbrances" in section 269UE(1) and held that the property would vest in the Central Government subject to such encumbrances and leasehold interests. The court observed that if the agreement to sell provided that the property was free of all encumbrances, it would vest in the Central Government free of such encumbrances. However, statutory tenancy rights under the Rent Control Act would not be protected, and the Central Government could terminate such tenancies.

Conclusion:
The court concluded that since the agreement dated March 30, 1989, provided for a sale free of all encumbrances, the property would vest in the Central Government free of such encumbrances. The petitioner, as a statutory tenant, was not entitled to protection under the Tamil Nadu Buildings (Lease and Rent Control) Act, and the Central Government could terminate the tenancy. However, the petitioner could not be summarily dispossessed, and the respondent was directed to take steps to determine the tenancy and take possession. The writ petition was dismissed, and the rule nisi was discharged without any order as to costs.