1986 (3) TMI 41 - HC - Income Tax

Summary

Issues Involved:
1. Legitimacy of interference under Article 226.
2. Delay in payment of compensation.
3. Definition and extinguishment of lease as an encumbrance.
4. Legislative competence of Union Parliament regarding Section 269-I.
5. Violation of Article 14 of the Constitution.
6. Allegation of unguided, uncanalised, and uncontrolled power under Section 269-I.

Detailed Analysis:

1. Legitimacy of Interference under Article 226:
The court examined whether these cases warranted interference under Article 226 of the Constitution. The acquisition proceedings were finalized on April 1, 1985, and the impugned notices were issued to effectuate this order. The court noted that any interference would essentially be an attempt to undo the acquisition proceedings, which had become final and binding. The court opined that the petitioners' delay and conduct disqualified them from obtaining equitable relief under Article 226. Despite this, the court chose to examine other grounds as well.

2. Delay in Payment of Compensation:
The petitioners argued that the delay in paying the compensation, which had lost its market value, justified annulling the impugned notice. The court clarified that the proceedings for acquisition became final only on April 1, 1985, and the property did not vest in the Central Government until delivery. Section 269K of the Act mandates that compensation is payable only after the property vests in the Central Government. The court found no merit in the contention of delay in payment of compensation and rejected the same.

3. Definition and Extinguishment of Lease as an Encumbrance:
The petitioners contended that a lease created under the Transfer of Property Act was not an encumbrance capable of extinguishment under Section 269-I(4) of the Act. The court noted that the term "encumbrance" is not defined in the Act but must be understood in context. The court agreed with the Gujarat High Court's view in Rambhai Manja Nayak v. Union of India [1983] 142 ITR 211, which held that a lease is an encumbrance and can be extinguished under Chapter XX-A of the Act. The court rejected the petitioners' contention.

4. Legislative Competence of Union Parliament Regarding Section 269-I:
The petitioners argued that Section 269-I was beyond the competence of the Union Parliament as it dealt with land rights, a state subject. The court held that Chapter XX-A of the Act, enacted to counteract tax evasion, falls under the legislative competence of the Union Parliament by virtue of Article 246(1) and Entry No. 82 of List I (Union List) of the Seventh Schedule to the Constitution. The court found no merit in the contention and rejected it.

5. Violation of Article 14 of the Constitution:
The petitioners claimed that Section 269-I violated Article 14 by treating tenants under the Karnataka Rent Control Act differently. The court noted that Chapter XX-A aims to counteract tax evasion and necessitates dispossessing those in possession of the property. The court, applying principles from the Supreme Court's ruling in Prakash Amichand Shah v. State of Gujarat [1986] 1 SCC 581, found no violation of Article 14. The court also agreed with the Gujarat High Court's rejection of a similar challenge in Rambhai Manja Nayak's case. The contention was rejected.

6. Allegation of Unguided, Uncanalised, and Uncontrolled Power under Section 269-I:
The petitioners argued that Section 269-I conferred unguided and uncontrolled power on the authority. The court detailed the procedural safeguards in Chapter XX-A, including the requirement for the Inspecting Assistant Commissioner to notify and consider objections from interested parties. The court concluded that the power was not unguided or uncontrolled and did not suffer from excessive delegation. The contention was rejected.

Conclusion:
The court dismissed all the writ petitions, finding no merit in any of the contentions raised by the petitioners. The court also granted a certificate of fitness to appeal to the Supreme Court, acknowledging that the questions decided were substantial questions of law of general importance. Additionally, the court stayed the operation of its order for 60 days to allow the petitioners to seek further relief from the Supreme Court.