2017 (3) TMI 203 - HC - Income Tax

Tender of amount of consideration to the person or persons entitled thereto - purchase by Central government on immovable property in certain cases of transfer - whether the person or persons entitled thereto would only mean to transferor or transferors would require re-consideration? - Held that - In the detailed show cause filed by the petitioner before the appropriate authority, there was no objection raised that the amount paid by the petitioner was required to be paid by the Revenue to the petitioner or that the petitioner has paid the amount as stated in the present writ application. The agreement was executed on 15th November, 1989 and Form 37-I was filed on 30th November, 1989. Therefore, in the absence of the factual basis before the appropriate authority that any amount was paid by the petitioner, the appropriate authority was not required to examine the consequences of non-payment of such amount by the Revenue to the petitioner. It is no doubt true that in terms of Section 269 UG, the amount of consideration is required to be tendered to the person or persons entitled thereto which would include the transferee provided the transferee proves that certain payments were made by it in pursuance of the agreement to sale executed. Since no dispute was raised before the appropriate authority regarding non-payment of alleged payment made by the transferee, therefore, it cannot be said that payment made by the Revenue to the transferor is any way illegal and therefore, the petitioner is entitled to re-vesting of the property. We may also say that in terms of Section 269UH, if the amount is not paid within the time fixed, the property shall re-vest after the expiry of the aforesaid period. We find that re-vesting can be claimed only by the transferor and not by the petitioner, who is a transferee in terms of Section 269 UH (1) of the Act. The sale in favour of the petitioner in pursuance of agreement dated 15th November, 1989 would not be deemed to be complete on account of intervening action of the Revenue in terms of Chapter XX-C of the Act. Thus, we do not find any merit in the present writ application. The same is, thus, dismissed.

Summary

Issues Involved:
1. Legality of the order of purchase dated 27th September 1995.
2. Compliance with the principles of natural justice.
3. Entitlement to revesting of the property due to alleged non-payment of full sale consideration.
4. Interpretation of "person or persons entitled thereto" under Section 269UG of the Income-Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Legality of the Order of Purchase Dated 27th September 1995:
The petitioner challenged the order dated 27th September 1995 passed by the appropriate authority under Chapter XX C of the Income-Tax Act, 1961. The petitioner argued that the order was beyond the prescribed period as the ad-interim stay was vacated on 3rd December 1990. However, the court found that the initial order of purchase was passed on 25th January 1990, which was set aside on 13th July 1995 due to non-compliance with natural justice principles as per the Supreme Court's judgment in C.B. Gautam vs. Union of India. The fresh order of purchase was passed within two months of the end of the month in which the previous order was set aside, thus complying with the legal timeframe.

2. Compliance with the Principles of Natural Justice:
The initial order of purchase dated 25th January 1990 was set aside on 13th July 1995 because it was passed without granting an opportunity of hearing to the parties, violating the principles of natural justice. This was in line with the Supreme Court's judgment in C.B. Gautam vs. Union of India, which mandated compliance with natural justice principles. The fresh order of purchase dated 27th September 1995 was issued after following due process, thereby addressing the previous violation.

3. Entitlement to Revesting of the Property Due to Alleged Non-Payment of Full Sale Consideration:
The petitioner claimed revesting of the property, arguing that the full sale consideration was not paid, specifically citing an extra cost of ?30,000 for Kota Stone and security at ?3 per sq. ft. The court found that the Revenue had paid ?25.62 lakhs to the transferor, which was the apparent consideration as per Form 37-I and the agreement. The court noted that any additional cost for Kota Stone was not part of the apparent consideration and had not been disputed by the transferor after the order was passed. Therefore, the petitioner's argument for revesting based on non-payment of the extra cost was rejected.

4. Interpretation of "Person or Persons Entitled Thereto" under Section 269UG of the Income-Tax Act, 1961:
The court examined whether the transferee (petitioner) was entitled to the consideration amount paid by the Revenue under Section 269UG. The court concluded that the term "person or persons entitled thereto" could include the transferee if the transferee proved the payments made in pursuance of the sale agreement. However, since the petitioner did not raise this issue before the appropriate authority, the court found no basis to claim that the payment made by the Revenue to the transferor was illegal. The court also clarified that revesting under Section 269UH could only be claimed by the transferor, not the transferee.

Conclusion:
The court dismissed the writ application, finding no merit in the petitioner's arguments. The order of purchase dated 27th September 1995 was upheld as it complied with the legal timeframe and principles of natural justice. The petitioner's claim for revesting based on alleged non-payment of full consideration was rejected, and the interpretation of "person or persons entitled thereto" did not support the petitioner's case for revesting.