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TMI Blog1994 (1) TMI 29X X X X Extracts X X X X X X X X Extracts X X X X ..... he Hindu or Indian Express and also in the issues of either Dhina Thanthi or Dhina Malar, about the sale of the property, and, accordingly, the petitioner advertised in the issue of Indian Express dated July 24, 1990, and in the issue of Dhina Malar dated July 23, 1990. When the matter was finally taken up, Maruthamuthu J., passed an order on the following lines: "(a) that LP. LP AN. Annamalai, and or his nominees (including Chakiat Agencies Pvt. Ltd.) having office at Raja Rajeswari Towers, 29/30, Dr. Radhakrishnan Salai, Mylapore, Madras-4, the third party/purchaser shall be and is hereby allowed to pay Rs. 61 lakhs (rupees sixty-one lakhs only) to M. Ct. M. Higher Secondary School/Trust for the sale of the property more fully set out in the schedule hereto, free of all encumbrances; (b) That the purchaser mentioned above shall pay to the trust, viz., Sir M. Ct. M. Higher Secondary School, the plaintiff herein, within three days from this date in the following manner : (i) Rs. 3 lakhs (rupees three lakhs) as earnest money; and (ii) Rs. 4,50,000 (rupees four lakhs and fifty thousand only) towards advance. (c) That the said purchaser shall in addition furnish within sev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ----------------------------------------- Rs. 1. LP. LP. AN. Annamalai 55% 33,55,000 (Petitioner in Writ Petition No. 3116/1991) 2. Chakiat Agencies 15% 9,15,000 (Petitioner in Writ Petition No. 2949/1991) 3. Lp. Alaghappa Chettiar 7.5% 4,57,500 (Petitioner in Writ Petition No. 3961/1991) 4. Lp. A. Valliammy Achi 7.5% 4,57,500 (Petitioner in Writ Petition No. 3117/1991) 5. L. Thevanai Achi 7.5% 4,57,500 (Petitioner in Writ Petition No. 3963/1991) 6. Vr. V. Visalakshi Achi 7.5% 4,57,500 (Petitioner in Writ Petition No. 3962/1991) ------------------------- 61,00,000 ----------------------------------------------------------------------------------------------------------------------------------------------- It is common ground that in respect of all these transactions, application under Form No. 37-I was made by the petitioner in Writ Petition No. 16812 of 1991 jointly along with the prospective purchasers for permission for the proposed sales. By the impugned order, the appropriate authority ordered the purchase of the property by the Central Government for the discounted consideration of Rs. 59,79,448. Aggrieved by that, these writ petitions are fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after notice to the transferor and transferee. I, therefore, submit that as directed by the Supreme Court in Gautam's case [1993] 199 ITR 530 and supplemental directions given by the Supreme Court in 199 ITR 562 in respect of the petitioner's case, the period of two months referred to in section 269UD(1) shall be reckoned with reference to the date of disposal of the writ petition by this court and this court may also be pleased to grant the other consequential directions as laid down by the Supreme Court in Gautam's case [1993] 199 ITR 530." Again, in the counter-affidavit filed in Writ Petition No. 16812 of 1991, respondents Nos. 1 and 2 have stated, inter alia, as follows: (R-2 has filed the counter-affidavit on behalf of R-1). " . . I submit that there are reasons to hold that there is a substantial undervaluation of the apparent consideration and I crave leave of this court to peruse the reasons for the issue of the impugned order which would establish that there is a substantial undervaluation of the property." From the statements made in the counter-affidavits, it will be seen that the Revenue is agreeable for this court setting aside the impugned order and for remand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te authority is put up for sale, the reserve price is required to be fixed at a minimum of 15 per cent. above the purchase price shown as the apparent consideration under the agreement between the parties. Thus, it is pointed out by the Board that the right of pre-emptive purchase has to be exercised only if the fair market value is found to be at least 15 per cent. more than the apparent consideration. The instruction further provides that, in coming to the conclusion as aforestated, a reasonable margin of probable errors in estimation needs to be kept in view particularly as the law does not provide for any opportunity of being heard. The contents of the affidavit filed by one H. K. Sarangi, Under Secretary, Central Board of Direct Taxes, Department of Revenue, is also to the effect that the provisions of the said Chapter ought to be resorted to only in cases of undervaluation of immovable properties in agreements of sale to the extent of 15 per cent. or more. The said H. K. Sarangi has further pointed out that, right from the time when the provisions of the said Chapter were brought into force, they are being applied in such manner that the rights and interests of third parties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hase price when sold at public auctions which would clearly suggest that in the relevant agreements for sale the apparent consideration was significantly understated." The contention of learned counsel was to the effect that when the court has ordered the sale after inviting offers from the intending purchasers, there is no justification for invoking section 269UD(1) of the Income-tax Act, which would amount to doubting the action of the court. On that ground, learned counsel wants this court to issue a direction to the appropriate authority not to invoke the provisions of section 269UD(1) of the Income-tax Act. On the other hand, Mr. N. V. Balasubramanian, learned counsel appearing for the Revenue, submitted that the very fact that the court has granted permission subject to the clearance by the Income-tax Department will show that the appropriate authority's option to purchase the property is not taken away. He also submitted that the order passed by the court on originating summons is different from the scope of enquiry conducted by the appropriate authority under Chapter XX-C of the Act and, therefore, merely on the ground that the court has permitted the sale, the appropri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t he should at least have the benefit of the amount in a bank so that it will earn interest. To provide for such a contingency, I suggested to counsel that the Income-tax Department can be directed to pay the amount, in the event of the writ petition ultimately being dismissed, with interest at the current bank rates and counsel agreed to this proposition provided the Department pays interest on the entire amount including the advance paid by the purchaser (writ petitioners). Accordingly, I direct that there will be an absolute stay of the impugned orders. The statement of Mrs. Nalini Chidambaram, counsel appearing for the Income-tax Department, that the Department will pay interest on the entire sale consideration including the advance amount is recorded. The interest shall be at the rate of 18 per cent. per annum. No further directions are necessary." In view of the above order, the Department is certainly liable to pay interest as directed above, in the event of the writ petitions being dismissed. Learned counsel further submitted that in the event of the appropriate authority deciding to order purchase of the property by the Central Government, there must be a direction to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d into by him but is unable to get the purchase price by reason of the said order and the stay order or orders passed by a court, interest at an appropriate rate can, if equity so requires, be paid to him." Mr. N. V. Balasubramanian, learned counsel appearing for the Revenue, however, submitted that inasmuch as the owner of the property (petitioner in Writ Petition No. 16812 of 1991) has challenged the order of the appropriate authority, he is not entitled to ask for the payment of interest. I do not think learned counsel appearing for the Revenue is right in his contention, in view of the consent given by learned counsel for the Revenue on an earlier occasion while Kanakaraj J., passed the order in WMP No. 4536 of 1991 in WP. No. 2949 of 1991 (extracted above). I hold that in the event of the appropriate authority deciding to order purchase of the property by the Central Government, once again, pursuant to this order of remand, the Central Government must pay interest at the rate of 18 per cent. per annum on the sale consideration from February 13, 1991, till date of payment to the owner of the property (petitioner in WP. No. 16812 of 1991). On the other hand, in the event o ..... 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