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TMI Blog2015 (11) TMI 306X X X X Extracts X X X X X X X X Extracts X X X X ..... he fair market value raises a rebuttable presumption that there is an attempt to evade taxes. In C.B. Gautam’s case (1992 (11) TMI 1 - SUPREME Court) this Court observed that an allegation of such undervaluation of more than 15% raises a rebuttable presumption of evasion of taxes which renders an opportunity to show cause necessary. Therefore, such an opportunity must be read into the provisions of Chapter XXC The High Court has failed to render a finding on the relevance of comparable sale instances, particularly, why a sale instance in an adjoining locality has been considered to be valid instead of a sale instance in the same locality. The other aspects of the impugned order of the appropriate authority in the earlier part of judgment seems to have been missed. In the result, we find that the appeal deserves to be allowed and is hereby allowed. The impugned order dated 20.02.2004 passed by the High Court of Bombay at Nagpur is set aside. Consequently, order dated 29.07.1994 passed by the appropriate authority under Section 269UD (1) of the Act is also set aside. - Civil Appeal No. 430 of 2007 - - - Dated:- 4-11-2015 - Madan B. Lokur And S. A. Bobde, JJ. JUDGMENT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ta, the learned senior counsel, this form contains only the nomenclatures of transferor and transferee and contemplates only the transaction of a transfer and not an arrangement of collaboration. Therefore, the appellants were constrained to describe themselves as transferor and a transferee. Accordingly, they mentioned that the consideration for the transfer of the subject property was ₹ 100.40 lakhs towards the cost of share of 22% of Vidarbha Engineering, which was to be constructed by Unitech builder at its own cost. This submission was made as a preface to the contention that in fact and in law, Vidarbha Engineering has not transferred the property held by it to Unitech, but that it has only allowed Unitech to make a construction on the land. Indeed, we have considered this submission notwithstanding the self description of the parties as transferor and transferee since it involves the true construction of a document which is always a substantial question of law. We find much substance in the contention. In the first place, Vidarbha Engineering itself is a lessee holding the land on lease of 30 years from Nagpur Improvement Trust. It has no authority to transfer the la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he nature referred to in sub-clause (ii) of clause (d), means the doing of anything (whether by way of admitting as a member of or by way of transfer of shares in a cooperative society or company or other association of persons or by way of any agreement or arrangement or in any other manner whatsoever) which has the effect of transferring or enabling the enjoyment of, such property. 5. It may appear at first blush that the collaboration agreement involves an exchange of property in the sense that the land holder transfers his property to the developer and the developer transfers 22% of the constructed area to the land holder but on a closer look this impression is quickly dispelled. Exchange is defined vide Section 118 of the Transfer of Property Act, 1882 as a mutual transfer of the ownership of one thing for the ownership of another, Section 118 Exchange defined.-When two persons mutually transfer the ownership of one thing for the ownership of another, neither thing or both things being money only, the transaction is called exchange . A transfer of property in completion of an exchange can be made only in manner provided for the transfer of such property by sale.. But it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g a transaction by way of sale, exchange or lease of such land, building or part of a building; . In terms of Section 269UA(2)(d) of the Act Immovable property consists of :- (a) not only land or building vide sub-clause (i) but also (b) any rights in or with respect to any land or building including a building which is to be constructed. Transfer of such rights in or with respect to any land or building is defined in clause (f) of sub-section (2) of Section 269UA of the Act as the doing of anything which has the effect of transferring, or enabling the enjoyment of, such property. Thus the question whether the collaboration agreement constitutes transfer of property must be answered with reference to clauses (d) and (f) which defines immovable property and transfer. It is clear from the agreement that the transfer of rights of Vidarbha Engineering in its land does not amount to any sale, exchange or lease of such land, since, only possessory rights have been granted to Unitech to construct the building on the land. Nor is there any clause in the agreement expressly transferring 22% of the building to Vidarbha after it is constructed by Unitech. Clause 4.6 only mentio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. Description of property Land bearing Plot No. 34, 35, 36, Ind. Area Scheme NIT. Dahipura and Untkhana, Rambag Rd. Nagpur Land at Sur. No. 19 Sheet No. 32, Ward No. 10, Hanuman Nagar, Nagpur. 4. Consideration: Apparent 1,00,40,000/- 19,50,000/- 5. Land Area 2024.22 sq. ft. 736 sq. mtrs. 6. F.S.I. available 56473 sq. ft. 6877 sq ft. 7. Rates per sq. ft. of FSI apparent ₹ 184/- ₹ 283/- 7. It is obvious from the table that the authority took the price the consideration for the land to be ₹ 1,00,40,000/- (rupees one crore forty thousand) which is the consideration stated by the appellant in the statement as a consideration for the transfer of subject property i.e. plot nos. 34, 35 and 36 admeasuring 2595.152 sq. mtrs. = 27,934 sq ft. It is however, difficult to imagine how or why the authority has considered the consideration to be for 56 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t giving any finding on the specific objections raised. It rejected the sale instance relied on by the appellants of a property in the same locality on the ground that that property does not have road on the three sides like the property under consideration; there is a nallah carrying waste water near that property and it has a frontage of only 12.5 mtrs. It took into account the consideration of ₹ 1,00,40,000/- and deducted from it an amount of ₹ 24,09,600/- being discount calculated at the rate of 8% per annum since the consideration had been deferred for a period of three years. It therefore determined the consideration for purchase of the subject property at ₹ 76,30,400/-. 11. The authority fell into a gross and an obvious error while conducting this entire exercise of holding that the consideration for the subject property was understated in holding that Vidarbha Engineering has transferred property to the extent of 78% to Unitech. There is no warrant for this finding since Vidarbha Engineering was never to be the owner of the entire built up area. It only had a share of 22% in it. Unitech, which had built from its own funds, was to retain 78% share in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad to the conclusion that there has been undervaluation of property with the motive of evading tax. In Vimal Agarwal case (supra), this Court has reiterated that right of pre-emptive purchase under section 269UD is not a right of pre-emption simpliciter but is a right which can be exercised only in the cases where there is significant undervaluation in agreement of sale with a view to evade tax. The onus of establishing that undervaluation is with a view to evade tax is on the Revenue. No such finding is to be found in the impugned order . It is not possible to agree with this view in its entirety. Undoubtedly one of the objects of the provision is to prevent evasion of taxes by showing an undervaluation which is more than 15% of the true value of the property and which in turn carries an implication that some portion of the value is not shown in the agreement or the deed but passes by way of unaccounted money. But it is not possible to say that it must be alleged in the show cause notice or a finding must be rendered in the order that there is evasion of taxes as a sine qua non for its validity. Nor is it possible to hold that the onus of establishing undervaluation with a vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... result would be utterly unwarranted. The very fact that an imputation of tax evasion arises where an order for compulsory purchase is made and such an imputation casts a slur on the parties to the agreement to sell lead to the conclusion that before such an imputation can be made against the parties concerned, they must be given an opportunity to show cause that the undervaluation in the agreement for sale was not with a view to evade tax. Although Chapter XX-C does not contain any express provision for the affected parties being given an opportunity to be heard before an order for purchase is made under Section 269-UD, not to read the requirement of such an opportunity would be to give too literal and strict an interpretation to the provisions of Chapter XX-C and in the words of Judge Learned Hand of the United States of America to make a fortress out of the dictionary . Again, there is no express provision in Chapter XX-C barring the giving of a show-cause notice or reasonable opportunity to show cause nor is there anything in the language of Chapter XX-C which could lead to such an implication. The observance of principles of natural justice is the pragmatic requirement of fai ..... X X X X Extracts X X X X X X X X Extracts X X X X
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