1992 (7) TMI 25 - HC - Income Tax

Capital Employed, Depreciation, Developement Rebate, New Industrial Undertaking, Special Deduction From Profits And Gains

Summary

Issues Involved:

1. Deduction of Rs. 35,333 from the apparent consideration.
2. Deduction of Rs. 1,02,062 from the apparent consideration.
3. Interest on the amount of Rs. 1,02,062 wrongfully deducted.

Issue-Wise Detailed Analysis:

1. Deduction of Rs. 35,333 from the Apparent Consideration:

The petitioner challenged the deduction of Rs. 35,333 from the apparent consideration of Rs. 17,75,000 for the compulsory purchase of his property by the Central Government. The petitioner argued that the entire amount mentioned in the agreement of sale should be treated as apparent consideration and paid in full without deductions. The respondents justified the deduction based on the definition of "apparent consideration" under section 269UA(b) of the Income-tax Act, which allows for the discounting of deferred payments. The court noted that the agreement allowed the deferred payment of Rs. 13,25,000 until February 29, 1992. According to the statutory scheme, this deferred amount had to be discounted at 8% per annum as per rule 48-I of the Income-tax Rules. The court concluded that the deduction of Rs. 35,333 was justified and legally permissible, as it was in accordance with the statutory provisions.

2. Deduction of Rs. 1,02,062 from the Apparent Consideration:

The petitioner also challenged the deduction of Rs. 1,02,062, representing 50% of the costs of registration fees and stamp duty agreed to be borne by the petitioner as per clause 14 of the agreement of sale. The respondents argued that this deduction was justified as it was part of the consideration specified in the agreement. The court, however, disagreed, stating that clause 14 dealt with miscellaneous costs related to the execution of the sale deed and did not specify any part of the consideration for the transfer of the property. The court held that the apparent consideration should be derived from the operative clauses of the agreement (clauses 1 to 3) and not from clause 14, which dealt with future contingencies. Consequently, the deduction of Rs. 1,02,062 was found to be unauthorized and ultra vires the statutory scheme.

3. Interest on the Amount of Rs. 1,02,062 Wrongfully Deducted:

The petitioner sought interest at the rate of 18% per annum on the wrongfully deducted amount of Rs. 1,02,062 from January 31, 1992. The respondents opposed this, arguing that the petitioner was not willing to receive any amount under the order until April 1, 1992, when he confined his challenge to the disputed deductions. The court found merit in the respondents' argument that the petitioner was not entitled to interest from January 31, 1992, but held that interest should be awarded from April 1, 1992, when the petitioner made his claim for the disputed amount clear. The court deemed 12% per annum to be a reasonable rate of interest.

Conclusion:

The court allowed the petition to a limited extent, quashing the deduction of Rs. 1,02,062 and directing the respondents to pay this amount to the petitioner with 12% interest from April 1, 1992, until payment. The operation of the order was stayed for three months to allow the respondents to contest it before the Supreme Court. There was no order as to costs.