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TMI Blog2011 (8) TMI 434X X X X Extracts X X X X X X X X Extracts X X X X ..... crease that an effective transfer can be made by the said sale certificate. In these circumstances, it is for the appellant (Income Tax Department) to make payment of unearned increase. Of course, in case its dues are still payable, it is open to them to take appropriate proceedings against the defaulter assessee in accordance with law. - 842 OF 2003 - - - Dated:- 16-8-2011 - MR. JUSTICE DIPAK MISRA, MR. JUSTICE SANJIV KHANNA, JJ. For Appellant: Mr. Sanjeev Rajpal, Advocate. For Respondents: Mr. Vinay Kumar Garg, Ms. Namrata Singh Mr. Fazal Ahmad, Advocates for respondent SANJIV KHANNA, J.: Commissioner of Income-Tax, Delhi IX has filed the present intra-Court appeal under the Letters Patent Act and has assailed the decision dated 22nd August, 2003 allowing Writ Petition (Civil) No. 3736/2001 filed by Monoflex India (Pvt.) Limited, the respondent No. 1 herein. The second respondent to the present appeal is the Delhi Development Authority. 2. The appeal was admitted to hearing on 24th November, 2003 and an interim order was passed staying operation of the impugned decision. After hearing on 21st February, 2011, the matter was relisted on 26th April, 2011 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if advised, by initiating appropriate legal proceedings. The respondent No. 2 will issue a no objection certificate (NOC) and the same will be registered with the Registering Authority to confer a proper title on the purchasers. The respondent No. 2 shall also issue NOC to the purchasers for sanctioning the building plan simultaneously on mutation being carried out in order to enable construction on the plot in question. 5. It may be stated here that the respondent No. 1, Monoflex India Private Limited is a private limited company and is not the auction purchaser. This fact is noticed in the impugned decision (refer paragraph 23). Raj Kumar Dhingra had initially participated in the auction on behalf of partnership firm M/s R.K Enterprises though subsequently the sale certificate was issued in the name of five persons mentioned above with 1/5th share to each including Raj Kumar Dhingra (HUF). The learned Single Judge has held as under: ―23) This aspect, in my considered view, is not really material in view of the submission recorded on the initial date of hearing itself that without going into the question of the successor entities, the transfer be made in the name of five ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vate limited company, the said respondent was willing to accept the conveyance deed in the name of the original purchasers. Respondent No.1 will be bound by the said statement. 8. This brings us to the core and the main issue, whether or not unearned increase is payable and if payable, whether the same is payable by purchasers or by the appellant or by the original sub-lessee. The relevant clauses of the perpetual sub-lease read as under: ―(6)(a) The Sub-Lessee shall not sell, transfer, assign or otherwise part with the possession of the whole or any part of the industrial plot in any form or manner, benami or otherwise, to a person who is not a member of the Lessee. (b) The Sub-Lessee shall not sell, transfer, assign or otherwise part with the possession of the whole or any part of the industrial plot to any other member of the Lessee except with the previous consent in writing of the Lessor which he shall be entitled to refuse in his absolute discretion. PROVIDED that, in the event of the consent being given, the Lessor may impose such terms and conditions as he thinks fit and the Lessor shall be entitled to claim and recover a portion of the unearned increase in the va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the lessor to purchase the property after deducting 50% unearned increase. Unearned increase is also payable in case of involuntary sale or transfer, whether it is by or through an executing or insolvency court. 10. Absolute ownership consists of a bundle of supporting rights. Ownership is an aggregate of several rights, like right to possession, right to enjoy the usufruct of land, etc. An absolute owner is entitled to transfer his entire bundle of rights which he enjoys or transfer one or more of the supporting rights. Transfer of rights whether in entirety or in part can be made by the absolute owner in a manner prescribed under the Transfer of Property Act,1882 read with or in terms of other statutory enactments, if applicable. Transfer by way of lease is not an absolute transfer but a transfer of some of the supporting rights, as the absolute owner who becomes a lessor retains certain rights. The lessor who executes the lease does not cease to be the owner. The rights which are transferred to the lessee may be conditional or unconditional. The rights between the lessor and the lessee if in writing are governed by the instrument i.e. the lease deed. The terms of the lease ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of a certificate, and such sale has become absolute, the purchaser s right, title and interest shall be deemed to have vested in him from the time when the property is sold, and not from the time when the sale becomes absolute‖ 8. (1) Whenever assets are realised by sale or otherwise in execution of a certificate, the proceeds shall be disposed of in the following manner, namely : (a) they shall first be adjusted towards the amount due under the certificate in execution of which the assets were realised and the costs incurred in the course of such execution; (b) if there remains a balance after the adjustment referred to in clause (a), the same shall be utilised for satisfaction of any other amount recoverable from the assessee under this Act which may be due on the date on which the assets were realised; and (c) the balance, if any, remaining after the adjustments under clauses (a) and (b) shall be paid to the defaulter. (2) If the defaulter disputes any adjustment under clause (b) of sub-rule (1), the Tax Recovery Officer shall determine the dispute.]‖ 11. (1) Where any claim is preferred to, or any objection is made to the attachment or sale of, any prop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re a notice has been served on a defaulter under rule 2, the defaulter or his representative in interest shall not be competent to mortgage, charge, lease or otherwise deal with any property belonging to him except with the permission of the Tax Recovery Officer, nor shall any civil court issue any process against such property in execution of a decree for the payment of money. (2) Where an attachment has been made under this Schedule, any private transfer or delivery of the property attached or of any interest therein and any payment to the defaulter of any debt, dividend or other moneys contrary to such attachment, shall be void as against all claims enforceable under the attachment.‖ 14. Rule 4 permits and allows Tax Recovery Officer to recover the arrears of tax by attachment and sale of ―defaulter s immoveable property‖. Thus, what can be sold and attached is a defaulter s immoveable property i.e. the interest of the defaulter in the immoveable property and not interest of a third person in the immoveable property. Obviously respondent No.2 s interest could not have been sold or transferred for recovery of the defaulter s dues. The right of the defaulte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st is hedged with the conditions or fetters, the sale will be made subject to the said condition/fetters. The rights of the lessor do not get affected. 15. The question whether a prior charge/condition on an immoveable property can be ignored by a Tax Recovery Officer on the ground that income tax dues are State dues and have to be given precedent, is well settled. It has been held that income tax dues will not have precedent or priority, subject to Rule 16 of the II Schedule. (See Dena Bank Vs. Bhikhabhai Prabhudas Parekh Co. Ors., (2000) 5 SCC 694). It is not the case of the appellant that Rule 16 has been invoked or is applicable in the present case. Rule 16 per se is not applicable as the covenant relating to 50% unearned increase is specified in the sub lease deed itself by which the leasehold rights were transferred to the defaulter assessee. 16. In this regard, it may be appropriate to refer to Rule 11.Rule 11 of the Schedule II relates to investigation by the Tax Recovery Officer when there is a dispute about the title of the property i.e. whether the defaulter assessee has any right, title and interest in the property or the right, title and interest in the prope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alization of Income-Tax Dues from M/s Gulab Singh Sethi Sons, 53, Najafgarh Road, New Delhi-15 will be offered for sale by public auction at site at 11-30 A.M. On Friday 18th Sept., 1981 at 11-30 A.M. atSite. Brief Conditions of Sale 1. The sale is subject to conditions prescribed in second schedule to the Income-Tax Act, 1961 and Income-Tax Certificate proceeding rules 1962. 2. Proffer for any deed will be deemed an acceptance of all the conditions of sale in toto. The purchasers are advised to satisfy themselves before bidding in every respect. 3. The highest bidder shall pay 25% of the Bid in cash or by Bank Draft in favour TRO XX, New Delhi at the spot and Balance within 15 days from the date of sale. 4. Right of acceptance or rejection of any bid is reserved with the Tax Recovery Officer XX, Vikash Bhawan, New Delhi. 5. The Transfer will be made by a Sale Certificate to the auction purchaser whose bid is accepted. 6. Other terms and conditions of auntion will be announced on the spot. 7. Any further information please contact Tax Recovery Officer XX on any working day during office hours and from the auctioneers. 8. The purchaser has to deposit Rs.2000/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ropriate that respondent No. 1 shall deposit the amount of unearned increase of Rs. 6,12,852.04 with respondent No. 2 within a period of six weeks from today without prejudice to the rights of respondent No. 1 to impugn the same in accordance with law against respondent No. 2. Respondent No. 2 will also have a right to claim interest on the unearned increase from respondent No. 1, in case so advised, by initiating appropriate legal proceedings. The case of the purchasers will be processed by respondent No. 2 for issuance of no objection certificate within a period of two weeks thereafter and on such no objection certificate being submitted and formalities being completed, the sale certificate shall be registered by the registering authority within a maximum period of one month thereafter. The purchasers shall on registration of the sale certificate file the same with respondent No. 2 for mutation and complete the necessary formalities and respondent No. 2 shall mutate the property in the name of the purchasers within a maximum period of one month thereafter. Respondent No. 2 shall also issue no objection certificate to the purchasers for sanction of building plans simultaneously on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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