2020 (3) TMI 549 - HC - Income Tax

Order passed u/s 269UD(1) - Empowerment appropriate authority to invest the consideration amount deposited with it in Government or other securities - HELD THAT - Once an order is passed u/s 269UD(1) the immovable property in question covered by the said order shall vest in the Central Government. As per sub-section (1) of Section 269UG, the amount of consideration payable on account of such purchase shall be tendered to the person or persons entitled to receive such payment within a period of one month from the end of the month in which the immovable property concerned becomes vested in the Central Government. In the instant case, orders under Section 269UD(1) were passed on 30.08.1994. Therefore, in terms of Section 269UG(1), the consideration amount was required to be paid within one month from the end of month of August, 1994 i.e. within 30th September, 1994. As per the affidavit of respondent No.1, cheques covering the two principal amounts were offered to the petitioners on 21.07.1995 much after the statutory period as discussed above. The amounts which were required to be paid by 30th September, 1994 were offered to the petitioners on 21.07.1995. Because of pendency of the two writ petitions whereby petitioners had assailed the legality and validity of the two orders passed under Section 269UD(1), naturally petitioners declined to accept the two cheques. The two cheque amounts were thereafter deposited by respondent No.1 in Fixed Deposit Account. The two writ petitions filed by the petitioners assailing the orders under Section 269UD(1) were finally closed on withdrawal on 28.04.1999 whereafter cheques covering the two principal amounts of ₹ 65,93,334.00 and ₹ 32,96,667 were handed over to the petitioners on 12.05.1999. As per own statement of respondent No.1, these two amounts which were kept in Fixed Deposit Account had earned interest of ₹ 8,66,417.00 and ₹ 4,33,208.00 upto 12.05.1999. Petitioners initial refusal to accept the aforesaid amount on 21.07.1995 in view of pendency of the two writ petitions assailing the two orders passed u/s 269UD is understandable. Respondent No.1 did not inform the Court regarding payment and refusal of the cheque amounts. Respondent No.1 had deposited the cheque amounts in Fixed Deposit Account on which interest accrued. Had the two amounts been paid promptly to the petitioners in terms of Section 269UG(1), it is the petitioners who would have got the benefit of the interest on the said amounts, in fact more, considering the delay in making the payments from 30.09.1994 to 21.07.1995. Sub-section (4) of Section 269UG empowers the appropriate authority to invest the consideration amount deposited with it in Government or other securities and may thereafter direct the interest or other proceeds that may accrue on such investment to be paid to the interested party. This is to be paid as a benefit which the interested party might have had from the immovable property in respect of which such amount was deposited. It was not justified on the part of the appropriate authority to refuse payment of interest to the petitioners when it had actually earned interest on the two principal amounts by taking the plea that there was no direction from the Court for payment of interest. In fact the interest was earned on the money that belonged to the petitioners. It would be wholly unfair and unjust if the appropriate authority is allowed to appropriate the interest amount accrued on the money legitimately belonging to the petitioners.

Summary

Issues Involved:
1. Entitlement to interest on the amounts deposited with the appropriate authority.
2. Compliance with statutory provisions under Chapter XXC of the Income Tax Act, 1961.
3. Legality of withholding interest by the appropriate authority.

Detailed Analysis:

1. Entitlement to Interest on the Amounts Deposited with the Appropriate Authority:
The petitioners sought a direction for the respondent to pay benefits, including interest, on the amounts of ?65,93,334.00 and ?32,96,667.00 from the date of transfer into the Public Deposit Account till 21.05.1999 and thereafter for wrongful withholding. The court examined the provisions of Section 269UG(4) of the Income Tax Act, which mandates that the appropriate authority may invest the consideration amount deposited with it and pay the interest accrued to the parties interested. The court found that the appropriate authority earned interest on the amounts deposited in Fixed Deposit Accounts but refused to pay this interest to the petitioners, which was deemed unjust and unfair.

2. Compliance with Statutory Provisions under Chapter XXC of the Income Tax Act, 1961:
The court analyzed the statutory framework under Chapter XXC, specifically Sections 269UA, 269UD, 269UE, 269UF, and 269UG. It was noted that once an order is passed under Section 269UD(1), the property vests in the Central Government, and the consideration must be paid within one month from the end of the month in which the property vests. In this case, the order was passed on 30.08.1994, and the consideration was required to be paid by 30.09.1994. However, the cheques were offered to the petitioners on 21.07.1995, which was beyond the statutory period, leading to the petitioners' refusal to accept the cheques due to pending litigation.

3. Legality of Withholding Interest by the Appropriate Authority:
The court found that the appropriate authority's refusal to pay interest on the deposited amounts was not justified, as the authority had earned interest on the petitioners' money. The court emphasized that the interest accrued should benefit the petitioners, as they would have earned the interest if the amounts had been paid promptly. The court directed the Prothonotary to release the interest amount of ?12,99,625.00 (?8,66,417.00 plus ?4,33,208.00) along with further accrued interest to the petitioners.

Conclusion:
The writ petition was allowed, directing the release of the interest amount to the petitioners, with no order as to costs. The judgment highlighted the importance of adhering to statutory timelines and ensuring that benefits accrued on deposited amounts are rightfully paid to the entitled parties.