9911796707
TMI Blog1995 (12) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... payee in the cheque drawn by the Central Government in favour of the transferees for refund of earnest money. (b) Whether the purchase order passed by the appropriate authority stood abrogated on the ground that the transferors have been paid an amount in excess of their share vis-a-vis transferees and correspondingly the transferees have been paid less to that extent, although the tender made by the Central Government as a whole was in consonance with the purchase order passed by the appropriate authority. In this connection, it is clarified that there is no dispute between the parties that the Central Government tendered the entire amount of consideration as per the purchase order of the appropriate authority. (c) Whether the purchase order passed by the appropriate authority could be said to be perverse on the ground that it is based on irrelevant factors and/or incomparable instances. Before coming to the facts of this petition, as a prelude, we wish to point out that in Bombay, developers enter into agreements not only to purchase lands, flats and plots but on account of acute demand even floor space index and the rights connected thereto are purchased by developers. Purcha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t agreement dated January 13, 1995, the transferors transferred the entire F.S.I. of 11,515 square feet except 2,000 square feet of F.S.I. 2,000 square feet was retained by Dr. Rao for construction of a new bungalow by the petitioners/transferees/developers at the cost of ₹ 30,00,000. In other words, the petitioners purchased rights in the F.S.I. to the extent of 9,515 square feet for a sum of ₹ 3.60 crores. Under the said agreement, vide clause 5, it was further provided that the petitioners as developers shall provide temporary accommodation to Dr. Rao in a nearby locality in property admeasuring 2,500 square feet till the developers constructed a new bungalow at the cost of ₹ 30,00,000 as stated hereinabove. The total consideration under the development agreement agreed to be paid by the transferees to the transferors was ₹ 3.60 crores out of which ₹ 3 crores 30 lakhs was to be paid in the form of money whereas ₹ 30 lakhs was to be paid as consideration in the form of bungalow to be constructed for Dr. Rao. Under the said agreement, the transferees paid ₹ 60 lakhs as an earnest money to the seven co-owners and a further sum of ₹ 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ungalow was required to be completed by the petitioners within 12 months of Dr. Rao handing over vacant possession of the old bungalow to the developers in order to enable the developers to construct a new bungalow and only on completion of the new bungalow the developers were entitled to utilise the balance 9,515 square feet F.S.I. by constructing bungalows. In other words, once Dr. Rao is put in possession of the new bungalow the developers were entitled to develop the balance area by constructing new bungalows. They were entitled to sell the same. Under, clause 2(b) of the agreement, the developers have specifically undertaken to utilise the F.S.L only for the construction of bungalows and not for construction of apartments/flats. Under clause 5 of the agreement, the developers have agreed to provide to Dr. Rao temporary alternative accommodation being a vacant bungalow admeasuring 2,500 square feet (carpet area) in Chembur area in order to enable Dr. Rao to shift to the temporary accommodation and in order to enable the developers to construct a new bungalow as stated hereinabove. Under the agreement, the petitioners so far have paid as follows : S. No. Amount Date of paymen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt on May 31, 1995, was to the tune of ₹ 3,58,84,384 as per the particulars given in paragraph 15 of the writ petition. However, it may be mentioned that the name of the petitioners' firm is " Prima Realty ". By mistake, in the cheque drawn by the Central Government for ₹ 60 lakhs, the name of the petitioners/transferees/developers is shown as " Prime Reality Ltd." It is the case of the petitioners, therefore, that on May 31, 1995, on account of the above mistake in the name of the payee, no legal tender was effected and, therefore, the purchase order stood abrogated. It is also contended on behalf of the petitioners that they were entitled to receive ₹ 66,00,000 and not ₹ 60,00,000 and, therefore, the purchase order stood abrogated. At this stage, it may be clarified that although the petitioners received short payment of ₹ 6 lakhs in terms of the agreement, the heirs of Dr. Rao received proportionately certain amount in excess. It is also clarified that there is no dispute inter se between the parties. Dr. Chandrachud, appearing on behalf of the transferors, has clarified the position that the excess amount, if any, will be p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for ₹ 60 lakhs was posted by the Government on May 31, 1995. It was received by the transferees/petitioners on June 1, 1995. The last date for effecting tender was May 31, 1995, which is not in dispute. In the circumstances, it is contended on behalf of the petitioners that the Government did not effect the tender in favour of the transferees/petitioners. It is contended on behalf of the petitioners that similarly the cheques in favour of the transferors were also posted on May 31, 1995. They were received after the due date by the transferors and in the circumstances the purchase order stood abrogated because the Government did not effect the legal tender within the stipulated time. We do not find any merit in the said contention. Under section 269UG, the Central Government is duty bound to tender the amount of consideration payable in accordance with section 269UF to the person or persons entitled thereto within one month from the end of the month in which the immovable property comes to the Central Government under section 269UE. The important words in section 269UG are " consideration ... shall be tendered to the persons entitled thereto ". In the present case, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne 1, 1995. Thereafter, objection was raised by the petitioners/transferees on June 19, 1995. Immediately, the cheque was corrected and on June 22, 1995, the corrected cheque was handed over to the petitioners for ₹ 60 lakhs. The above facts indicate that a clerical mistake crept in in writing the name of the payee. As stated in the prelude, in several cases the agreements entered into between the parties on the basis of which the impugned purchase order is passed are complicated in nature, particularly with regard to the apportionment of consideration between the persons entitled to receive it under the agreement. We have to construe, therefore, section 269UG also taking into account the reality of the situation. In the present case, the facts indicate that the tender was effected in time. Although the impugned purchase order was made by the appropriate authority on April 26, 1995, the letter of apportionment was given by the co-sharers belonging to the Swamy family only on May 25, 1995. Further, the Government was informed even by the transferees regarding the above error in the spelling of the name of the payee only on June 19, 1995, and immediately a corrected cheque was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts are required to be briefly mentioned. The agreement dated January 13, 1995, as regards the apportionment refers to the family arrangement of 1992. Under the said family arrangement of 1992, the shares are indicated as hereinbelow : (i) Mrs. Venuturapalli Venkataratnamma 10.94 per cent. (ii) Mr. Venuturapalli Kalyan Satyanarayan 10.94 per cent. (iii) Mr. Venuturupalli Ramakrishna Venkat Rao 10.93 per cent. (iv) Miss Venuturupalli Rajeshwari 10.94 per cent. (v) Mrs. Devaguptu Savitridevi 10.95 per cent. (vi) Mrs. Voleti Manikyamba 10.93 per cent. (vii) Mrs. Kalipatanapu Suryarekha 10.93 per cent. (viii) Dr. Venuturupalli Sunder Jagannadha Rao 23,45 per cent. Thereafter, Dr. Rao died on April 13, 1995. The purchase order was made on April 26, 1995, after the demise of Dr. Rao. The Central Government addressed letters to the heirs of Dr. Rao from time to time to hand over the possession of the property and also documents (including probate, will of Dr. Rao). This was during the period between April 26, 1995, and May 31, 1995. It is only on May 25, 1995, that the heirs of Dr. Rao addressed a letter to the Deputy Commissioner of Income-tax stating that as per the purchase or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Government. Under section 269UG(2), it is further provided that if any dispute arises as to the amount of apportionment of consideration amongst the persons entitled to receive the said amount, the Central Government shall deposit with the appropriate authority the said consideration required to be tendered under section 269UG(1). It is further provided that if the person entitled to the amount of consideration does not consent to receive the amount tendered or if there is any dispute as to the title to receive the amount of consideration, then the Central Government shall deposit the amount with the appropriate authority. Therefore, under section 269UG(3) if the person entitled to the amount of consideration does not consent to receive it, then the amount shall be deposited by the Central Government with the appropriate authority. By way of the proviso to section 269UG(3) it is further provided that the liability of any person who receives the whole or part of the consideration for immovable property vested in the Central Government to the person entitled thereto will not be obliterated by virtue of the amount being deposited under section 269UG(3). In other words, if, as in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he entire amount of ₹ 3,58,84,384 has been tendered by the Central Government. In the circumstances, merely because one of the persons entitled to receive the amount has received less amount of ₹ 6 lakhs, the same will not abrogate the purchase order. Further, the Swamy family has not made any grievance. The transferors have not made a grievance. The transferors have also agreed to return ₹ 6 lakhs to the builders. In the circumstances, the purchase order is not abrogated. Mr. Doctor next contended that in the present case the impugned purchase order dated April 26, 1995, is perverse. Mr. Doctor contended that the sale instances on which the impugned purchase order is based are incomparable sale instances. It is contended on behalf of the petitioners that relevant sale instances on which the petitioners placed reliance have not been taken into account. It is also contended on behalf of the petitioners that extraneous factors are taken into account. It is contended on behalf of the petitioners that under the development agreement the builders/transferees had agreed to construct a bungalow at the minimum cost of ₹ 30,00,000 after demolishing the existing bung ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ehalf of the petitioners is on the merits of the impugned purchase order. This argument can be divided into two parts. Firstly, whether the correct valuation principles have been taken into account by the appropriate authority or not. As a limb of the same argument, it may be stated that according to the petitioners incomparable sale instances were taken into account and, therefore, the impugned order is liable to be set aside. The second part of the argument is that the relevant factors like interest on the amount invested as also various embargoes on the right of the developers to develop the property which would depreciate the fair market value and which would bring the market value within the 15 per cent. margin have not been taken into account by the appropriate authority. Before coming to the above argument on the merits, it would be relevant to note that under Chapter XX-C of the Income-tax Act, valuations in respect of immovable property are akin to acquisition proceedings and not to the valuation principles which are applicable for assessing tax on the basis of valuation of the property. The principles for valuation under the Wealth-tax Act or other taxation laws are not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... can be placed on similar sale instances. It is open to the appropriate authority to adopt any of the methods of valuation looking to the factors involved. It is also open to the appropriate authority to adopt more than one method to the land in question for the purposes of valuation. With these observations on valuation, the present case is required to be examined. As stated above, two plots in question lie in a residential zone. The total permissible F.S.I. is 11,515 square feet. The owners transferred the entire land admeasuring (1,706 square yards) 15,354 square feet except 2,000 square feet of F.S.I. in favour of the petitioners. The said 2,000 square feet of F.S.I. was required to be retained by Dr. Rao for construction of a bungalow by the petitioners for residential house. The remaining F.S.I. was available to the petitioners to construct bungalows for sale. The agreement also stipulates that the developers will not utilise the balance F.S.I. of 9,515 square feet for any other purpose except to construct the bungalows. This indicates the potentiality of the land and the future use to which the land is to be put to. In the present case, the appropriate authority placed reli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .I. rate was calculated at the rate of ₹ 5,514 per square foot. On the basis of the said calculation, the valuation officer came to the conclusion that in the case of Atur Park, the rate per square foot stood at ₹ 6,906 (approximately). The appropriate authority also took into account the other two sale instances concerning the flat and the office premises bearing Cases Nos. 16901 and 16260 and found substantial increase in the land prices in Chembur during the period September, 1994, up to January 30, 1995. Taking into account the escalation, the appropriate authority came to the conclusion that in the present case the going rate of the land/F.S.I. in Chembur area in January, 1995, stood at around ₹ 5,500 per square foot. On the basis of which the fair market value in respect of the subject-matter plots would come to ₹ 5,23,32,500, whereas, in the present case, the plots have been sold for a total consideration of ₹ 3,30,00,000 plus cost of construction of a bungalow of ₹ 30,00,000 for Dr. Rao. In the circumstances, the appropriate authority came to the conclusion that the difference between the fair market price and the agreed price was more th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... placed by the petitioners. We do not find any reason to interfere with the said findings of the appropriate authority. The petitioners have also relied upon another sale instance in Case No. 166970. In this case, the sale was of the F.S.I. in respect of a plot. The sale took place in November, 1994. The fair rate was ₹ 4,073 per square foot. As stated above, the present transaction is of January 13, 1995. As stated above, the market price index indicates the increase in the sale prices even in three months and in the circumstances the appropriate authority found it fit to reject the said sale instance. As stated hereinabove, in the present case, we have to see a large number of factors including the location of the plot, shape of the plot, proximity to the road and the railway station as also potentiality of the plot and the user to which the plot would be put to. In such matters, there cannot be a strait-jacket formula. As stated hereinabove, different methods are required to be taken into account. The contractors' method or even the cost of replacement method along with the comparable sale instances method could be simultaneously applied. If these methods are kept in m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the land is undervalued. The above principles have been reiterated in several judgments of this court. In the present case, the basic argument which is sought to be put into service today once again is that the show-cause notice did not indicate even a prima facie case of undervaluation. This is the sum and substance of the argument advanced by learned counsel for the petitioner today for which he has relied upon the above judgment of the Division Bench in the case of Nirmal Laxminarayan Grover v. Appropriate Authority [1997] 223 ITR 572 (Bom). We do not find any merit in the said contention. The show-cause notice dated April 3, 1995, given by the Deputy Commissioner of Income-tax on behalf of the appropriate authority clearly gives particulars of the sale instances on which reliance is placed by the department/appropriate authority (see page 96 of the writ petition). It, inter alia, clearly refers to the sale instance in respect of Atur Park at Chembur, Bombay, dated January 30, 1995, which indicates the land/plot rate of ₹ 6,906 per square foot. On the basis of the show-notice notices, replies were filed by the transferor. The order of the appellate authority also ind ..... X X X X Extracts X X X X X X X X Extracts X X X X
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