1993 (3) TMI 28 - HC - Income Tax

Summary

Issues Involved:
1. Applicability of Section 230A of the Income-tax Act, 1961.
2. Requirement of income-tax clearance certificate for registration of settlement deeds.
3. Determination of property value for the purposes of Section 230A.

Detailed Analysis:

1. Applicability of Section 230A of the Income-tax Act, 1961:
The primary issue revolves around whether Section 230A of the Income-tax Act, 1961, applies to the registration of the settlement deeds dated December 29, 1977, and January 7, 1978. The petitioner argued that Section 230A does not apply since the deeds pertain only to the half share of the first respondent, and the value of this half share is less than Rs. 50,000.

The court examined the scope of Section 230A(1), which mandates that no document transferring property valued at more than Rs. 50,000 shall be registered without an income-tax clearance certificate. The court referenced previous judgments, including N. C. Rangesh v. Inspector-General of Registration and R. Lokeswari v. State of Tamil Nadu, which clarified that the criterion should be the value of the property or the interest of the person in such property being transferred, not the value of the entire property.

2. Requirement of Income-tax Clearance Certificate:
The second respondent refused to register the settlement deeds because the value of the entire property exceeded Rs. 50,000, and the first respondent did not produce the income-tax clearance certificate. The petitioner contended that only the value of the first respondent's share should be considered, which was below the Rs. 50,000 threshold.

The court agreed with the petitioner, citing that according to the plain words of Section 230A(1), the income-tax clearance certificate is necessary only when the value of the right, title, or interest of the transferor exceeds Rs. 50,000. The court rejected the interpretation suggested by the Central Board of Direct Taxes in its circular dated December 10, 1992, which stated that the value of the whole property should be considered.

3. Determination of Property Value:
The court analyzed the settlement deeds and affidavits, confirming that the first respondent was settling only a half share in the properties. The value of the half share in the settlement deed dated December 29, 1977, was Rs. 40,350, and in the deed dated January 7, 1978, it was Rs. 31,000. Since these values were below Rs. 50,000, the court concluded that Section 230A did not apply, and the income-tax clearance certificate was not required.

The court cited similar cases, such as Samudrala Ganesh Rao v. State of A. P., which supported the view that the value of the interest being transferred, not the entire property, should be considered for Section 230A.

Conclusion:
The court concluded that respondents 2 and 3 erred in insisting on the income-tax clearance certificate based on the value of the entire property rather than the value of the first respondent's share. The writ petitions were allowed, the impugned orders were quashed, and the second respondent was directed to register the settlement deeds without requiring the income-tax clearance certificates.