2000 (12) TMI 2 - SC - Income Tax

To determine whether there has been an undervaluation, the true consideration for the transfer has to be determined and, necessarily, it has to be determined as on the date of the agreement for transfer. That this is so is clear from the latter part of clause (b), which we have quoted ; the phrase the discounted value of such consideration as on the date of such agreement for transfer therein indicates the point of time from which the period for discounting must be calculated.

Summary

Issues:
Interpretation of section 269UA(b) of the Income-tax Act, 1961.

Analysis:
The judgment of the Supreme Court pertained to appeals against a Division Bench of the High Court of Gujarat's judgment on writ petitions involving the interpretation of section 269UA(b) of the Income-tax Act, 1961. Section 269UA falls within Chapter XX-C of the Act, dealing with the purchase of immovable properties by the Central Government in specific transfer cases. The definition of "apparent consideration" under section 269UA(b) is crucial for determining the consideration for the transfer as specified in the agreement. The contention raised by the appellants was regarding the discounting of the price mentioned in the transfer agreement. The appellants argued that any discount should relate to the period between the payment by the Central Government and the last payment under the agreement. However, the argument was not advanced concerning the possibility of discounting the price mentioned in the agreement.

The Supreme Court highlighted the provisions of sections 269UG and 269UH, emphasizing the timeline for payment by the Central Government upon purchase of immovable property. Section 269UA(b) does not link the apparent consideration determination with the payment to be made by the Central Government under Chapter XX-C. The Court clarified that the apparent consideration is to be determined based on the agreement's consideration, with any future payments discounted to their present value as of the agreement date. The discount is calculated based on the period between the agreement date and the payment due date, assuming an element of interest for the delayed payment.

The Court referred to a judgment of the High Court at Bombay and disagreed with its interpretation. The Supreme Court emphasized that the purpose of Chapter XX-C and the definition of "apparent consideration" is to ascertain whether there has been an undervaluation in the transfer of immovable property. The determination of true consideration must be made as of the agreement date, as indicated by the phrase "the discounted value of such consideration as on the date of such agreement for transfer" in section 269UA(b). Therefore, the Court dismissed the appeals, upholding the interpretation of section 269UA(b) and its application in assessing the true consideration for property transfers.