1990 (3) TMI 7 - HC - Income Tax

Summary

Issues Involved:
1. Validity of the circular dated May 29, 1989, issued by the Inspector General of Registration.
2. Validity of the circular dated March 11, 1977, issued by the Inspector General of Registration.
3. Requirement of tax clearance certificate under section 230A of the Income-tax Act for transactions involving undivided shares.
4. Requirement of "no-objection certificate" from the Income-tax Department for properties valued below Rs. 10 lakhs.
5. Jurisdiction and authority of the Inspector General of Registration to issue circulars affecting the registration process.

Issue-wise Detailed Analysis:

1. Validity of the Circular Dated May 29, 1989:
The petitioners challenged the circular dated May 29, 1989, which required a "no-objection certificate" from the Income-tax Department for registration of documents conveying undivided interests in properties, even if the consideration was below Rs. 10 lakhs. The court found that this circular was outside the purview of the Registration Act and interfered with the quasi-judicial functions of the registering authority. The circular was deemed ex facie illegal and contrary to the provisions of the Income-tax Act, 1961, especially when the value of the property or interest transferred did not exceed Rs. 10 lakhs.

2. Validity of the Circular Dated March 11, 1977:
The circular dated March 11, 1977, required the production of a tax clearance certificate under section 230A of the Income-tax Act for transfers of undivided shares, even if the consideration was less than Rs. 2 lakhs. The court held that this circular was also ex facie illegal and without jurisdiction. The circular interfered with the quasi-judicial functions of the registering authority and was contrary to the plain terms of section 230A, which only required a tax clearance certificate if the valuation exceeded Rs. 2 lakhs.

3. Requirement of Tax Clearance Certificate Under Section 230A of the Income-tax Act:
Section 230A(1) of the Income-tax Act mandates a tax clearance certificate if the property value exceeds Rs. 2 lakhs. The court held that the Inspector General of Registration could not issue circulars requiring such certificates for transactions below this threshold. The provisions of the Income-tax Act should be strictly followed, and the circulars could not override the statutory requirements.

4. Requirement of "No-objection Certificate" for Properties Valued Below Rs. 10 Lakhs:
Chapter XXC of the Income-tax Act, which includes sections 269UA, 269UC, and 269UL, requires a "no-objection certificate" for properties valued above Rs. 10 lakhs. The court found that the circulars issued by the Inspector General of Registration, which required such certificates for properties below this value, were contrary to the provisions of the Income-tax Act. The circulars could not enlarge the scope of the Act and impose additional requirements not contemplated by the statute.

5. Jurisdiction and Authority of the Inspector General of Registration:
The court emphasized that the Inspector General of Registration's authority under section 60 of the Registration Act was limited to general superintendence and could not extend to issuing circulars that interfered with the quasi-judicial functions of registering authorities. The circulars in question were not merely clarificatory but imposed additional requirements that were not supported by the statutory provisions of the Income-tax Act or the Registration Act. The court concluded that the Inspector General of Registration acted beyond his jurisdiction by issuing these circulars.

Conclusion:
The court declared both circulars dated March 11, 1977, and May 29, 1989, as illegal and invalid. The writ petitions were allowed, and the registering authorities were directed to ignore the impugned circulars and proceed with the registration of documents in accordance with the provisions of the Income-tax Act and the Registration Act. There was no order as to costs.