Administering of provisions of Ch.XXC. - Income Tax - 1888/1991

INSTRUCTION NO. 1888/1991 Dated: September 16, 1991 The Board has received several grievance petitions over the recent years from the transferors, transferees and other parties regarding orders of pre-emptive purchase passed by various Appropriate Authorities (A.As) under chapter XXC. In this context it is observed that there is a need to reiterate the fundamental objectives of the provisions of Chapter XXC and to adopt a general policy of moderation by the AAs while considering cases for passing orders of pre-emptive purchase. 2. The main objective of the provisions of Chapter XXC is to check proliferation of black money in real estate transactions and to enforce declaration of the true value of immovable properties that are the subject of transfer between the parties. In administering the provisions of this Chapter, it has, however, to be ensured that no harassment is caused to bonafide and honest purchasers/sellers of property and there is no erosion of the confidence of the public in the sense of justice and fairplay of the Income-tax Department. 3. It was decided in the conference of A.As at Delhi on October, 17-18, 1986 that the right of pre-emptive purchase has to be exercised only when the AA has good reasons for acquiring the property. When the properties purchased under Chapter XXC are to be sold, in accordance with Instruction No. 1857 dated 19.9.1990, the reserve price is required to be fixed at a minimum of 15% above the purchase price or the apparent consideration. Thus, the right of pre-emptive purchase has to be exercised only if the fair market value is found to be atleast 15% more than the apparent consideration. This limit of 15% is not to be applied mechanically and in a strictly technical manner. A reasonable margin for probable errors in estimation needs to be made, particularly in view of the fact that the law does not allow any opportunity of being heard to the parties before the orders of purchase are passed.