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1996 (11) TMI 4 - SC - Income TaxAppellant/transferee is a partnership-firm with the name Prima Realty but the cheque described the payee as Prime Reality Ltd. which referred to a different legal entity, a limited company, instead of a firm - non-compliance with the requirement of section 269UG(1) - held that the adjustment of the exact amount due between the persons having a share in the total amount of consideration was an internal arrangement between them and would not vitiate the tender of the amount of consideration
Issues Involved:
1. Compliance with Section 269UG(1) of the Income-tax Act, 1961. 2. Validity of the tender of consideration. 3. Consequences of non-compliance with Section 269UG(1). Issue-wise Detailed Analysis: 1. Compliance with Section 269UG(1) of the Income-tax Act, 1961: The appellant challenged the compulsory purchase order dated April 26, 1995, on the grounds that it stood abrogated under Section 269UH(1) due to the Central Government's failure to tender the consideration within the specified period as required by Section 269UG(1). The material facts reveal that the agreement for sale was made on January 13, 1995, and the compulsory purchase order was passed on April 26, 1995. The amount of consideration, Rs. 3,58,84,384, was required to be tendered by May 31, 1995. The Central Government issued cheques on May 31, 1995, but the cheque for the appellant was incorrectly made out for Rs. 60 lakhs instead of Rs. 66 lakhs and was addressed to "Prime Reality Ltd." instead of "Prima Realty, partnership firm". The appellant returned the cheque on June 19, 1995, and filed a writ petition on June 21, 1995, which was dismissed by the Bombay High Court. The appeal contended that the purchase order must be quashed due to non-compliance with Section 269UG(1). 2. Validity of the Tender of Consideration: The court examined whether the tender of consideration was valid. The appellant argued that the tender was made only on June 1, 1995, when the cheque was delivered, not when it was posted on May 31, 1995. The court referred to established legal principles, stating that if the creditor authorized the debtor to send a cheque by post, the post office becomes the agent of the creditor upon posting. The court found that in the ordinary course of business, it was reasonable to send the cheque by post, and thus, the tender was made on May 31, 1995, when the cheque was posted. However, the court found merit in the appellant's contention regarding the incorrect amount and incorrect payee name on the cheque. The cheque for Rs. 60 lakhs instead of Rs. 66 lakhs and addressed to "Prime Reality Ltd." did not constitute a valid tender to the appellant. 3. Consequences of Non-compliance with Section 269UG(1): The court concluded that the incorrect description of the payee in the cheque resulted in non-compliance with Section 269UG(1). The cheque described the payee as "Prime Reality Ltd.", a different legal entity from "Prima Realty, partnership firm". This misdescription could not be considered a mere misnomer, as it referred to a distinct legal entity. Consequently, the tender of the amount was deficient by Rs. 60 lakhs, leading to non-compliance with Section 269UG(1). As a result, the order dated April 26, 1995, under Section 269UD(1) stood abrogated, and the property revested in the transferors under Section 269UH(1). The court directed the appellants to refund the amount of Rs. 2,98,84,384 to the Central Government with interest at 12% per annum from June 1, 1995, and all other legal consequences would follow. Conclusion: The appeal was allowed, and the compulsory purchase order was quashed due to non-compliance with Section 269UG(1). The property revested in the transferors, and the appellants were directed to refund the remaining amount to the Central Government with interest.
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