"Urban Ceiling Act" - on the provisions of Chapter XXA of the Income-tax Act, 1961. - Income Tax - 1141/CBDT

INSTRUCTION NO. 1141/CBDT Dated : January 24, 1978 Section(s) Referred: 269 Statute: Income - Tax Act, 1961 References have been received from some of the Commissioners of Income-tax regarding the impact of the Urban Land (Ceiling and Regulation) Act, 1976 - hereinafter referred to as the "Urban Ceiling Act" - on the provisions of Chapter XXA of the Income-tax Act, 1961 and certain issues arising therefrom. The matter has been examined in consultation with the Ministry of Law. 2. Under the Urban Ceiling Act, a person holding vacant land in excess of the ceiling limit has to file a statement under section 6 of the Act; under section 8, the Competent Authority has to prepare a draft statement and serve the same on the person concerned inviting objections thereto. After disposal of such objections, the Competent Authority has to prepare a revised draft statement and serve it on the persons concerned under section 9. Thereafter, the Competent Authority has to publish a (preliminary) notification under section 10(1) giving particulars of the vacant land in excess of the ceiling limit and stating that such land is to be acquired by the State Government. After considering any claims which may be preferred by the persons interested in the land, the Competent Authority has to publish a final notification under section 10(3), whereupon the land vests absolutely in the State Government, Section 5 of the Urban Ceiling Act speaks about transfer of vacant land and legal consequence thereof under certain circumstances. 3. Section 269R of the Income-tax Act provides as under:- "Notwithstanding anything contained in the land Acquisitions Act, 1894, or any corresponding law for the time being in force, no immovable property referred to in section 269C shall be acquired for any purpose of the Union under that Act or such law unless the time for initiation of proceedings for the acquisition of such property under this chapter has expired without such proceedings having been initiated or unless the Competent Authority has declared that such property will not be acquired under this Chapter." Section 42 of the Urban Ceiling Act, on the other hand, provides: "The provisions of the Act shall have effect notwithstanding anything in consistent therewith in any other Law for the time being in force or any custom, usage or agreement or decree or order of a court, tribunal or other authority." 4. Regarding the mutual inter-action of section 269R of the Income-tax Act and section 42 of the Urban Ceiling Act, the Ministry of Law have advised that where there is a conflict between the relevant provisions of the two Acts, the provisions of the Urban Ceiling Act override those contained in Chapter XXXA. In other words, if the property is hit by the Urban Ceiling Act, the provisions of Chapter XXA would not survive any longer. The Ministry of Law have, however, explained and advised further that acquisition by Central Government under Chapter XXA is in the nature of compulsion, i.e. it is not a voluntary sale by the owner/transferor to the Government as contemplated by section 5 of the Urban Ceiling Act. Further, under section 10(3) of the Urban Ceiling Act, it is only the property belonging to the owner/transferor which vests in the State Government. Therefore, if a property is acquired by Central government under another provision of law, which empowers it to do so, it ceases to belong to the owner/transferor and hence cannot vest in the State Government. Property held by the Central Government is also exempt from the provisions of Urban Ceiling Act vide section 19 thereof. The Law Ministry has thus advised that if the Central Government comes to hold possession of the immovable property under Chapter XXA of the Income-tax Act and the property ceases to be the property of the owner/transferor before the date of issue of the notification under sec.10(3) of the Urban Ceiling Act, the Urban Ceiling Act will not apply to such land held by the Central Government. 5. The following are some of the specific legal issues arising in the above context: (i) Whether the provisions of section 19 of the Urban Ceiling Act would exempt only such vacant lands as are held by the Central Government at the commencement of the said Act (17th February, 1976) or whether it would apply even to the vacant land which may be acquired by the Central Government after the said date but before the date of issue of the notification under section 10(3) of the said Act; (ii) whether (if the lands are acquired by the Central Government after the commencement of the said Act but before the date of issue of notification under section 10(3) of the said Act) the exemption under section 19 of the Urban Ceiling Act would be available even if the notification under section 10(3) is issued with effect from a date anterior to the date of issue of the notification; and (iii) Whether it is open to the Competent Authority to refrain from issuing notice under section 269I of the Income-tax Act, 1961 even though the order under section 269F has become final in terms of the Explanation to section 269(i) of the Income-tax Act, 1961, if so, whether the Central Government is liable to any action by the transferor/transferee of the property under consideration for acquisition. 6. Regarding (i) of the preceding paragraph, the Board has advised that it is not necessary that the immovable property should have been held by the Central Government at the commencement of the Urban Ceiling Act. What is necessary is that the property should have been held by the Central government before the said property becomes vested in the State Governments which happens only by virtue of a notification under section 10(3) of the Urban Ceiling Act. Regarding (ii) of the preceding paragraph, the Law Ministry has advised that even though the State Government can pass an order under section 10(3) of the Urban Ceiling Act, with effect from a date anterior to the date of issue of the notification, yet if in the meantime, the Central Government has acquired such property of the owner/transferee, the same would be exempt under section 19 of the Urban Ceiling Act. In other words, if the Central Government holds possession of the vacant land by the date of issue of the notification under section 10(3) of the Urban Ceiling Act, the provisions of the Urban Ceiling Act will not apply to such land held by the Central Government on the said date. Regarding (iii), we have been advised that the Department is within its right not to take possession of the property under section 269I if it is so inclined, in view of the impending application of the Urban Ceiling Act or for any other reason. In this connection, it may be relevant to reproduce hereunder the following advice given by the Law Ministry: " It is, therefore, essentially for the Board to decide whether or not to go ahead with the acquisition proceedings already initiated by the Departmental Officers as under Chapter XXA of the Income-tax Act, 1961. I, however, had occasion to examine several files wherein orders of acquisition had become final under section 269f(6) of the Income-tax Act, 1961 but possession whereof had not been taken over by the Departmental authorities under section 269I of the Act. In such cases, it is open to the Board to instruct its officers not to take possession of the property if it so chooses. So long as the possession is not taken, the land does not become vested in the Central Government. The question, then, is whether having initiated acquisition proceedings under Chapter XXA of the Act, if such land is not taken possession of, would the Central Government be liable to any action by the transferor of the said property? If the transferor suffers any damages and could prove so, it is open to such transferor to claim such damages against the Central Government. In such action, it would, of course, be open to the Central Government to plead that its acquisition proceedings under Chapter XXA could not be proceeded with because of the Urban Ceiling Act. It could also be contended that the purpose behind the acquisition proceedings under Chapter XXA is to frustrate any evasion of the fiscal law by the transferor in not giving the correct sale price in the deed of the transfer and that the same object could be better achieved by the State Government acquiring such land under the Urban Land Ceiling Act. Unless the transferor could be alleged and proved that the acquisition proceedings were not proceeded with a mala fide intention, it would appeal to me that any action by the transferor could be successfully met by the Central Government. However, it may be necessary to go into facts and circumstances of each case before coming to any definite conclusion."