Partly allowed

Raj Nair v. S.K.Tiwari and Ors.

Bombay HC7 Aug 2007WP/646/1993

Case brief

AI extract

What is this about?

The petitioner challenged the Appropriate Authority's discounting of consideration and retention of transfer fees under Chapter XX-C of the Income-tax Act. The court directed the return of retained fees.

What did the court decide?

The retention of Rs.14,251/- for transfer fees was quashed and directed to be refunded with simple interest at 8% per annum.

What the court decided

AI extract

¶1

 (-1-)

¶2

MGN

¶3

 IN THE HIGH COURT OF JUDICATURE AT BOMBAY

¶4

 ORDINARY ORIGINAL CIVIL JURISDICTION

¶5

 WRIT PETITION NO.646 OF 1993

¶6

 Raj Nair, residing at Flat )
 21-22, 2nd Floor, Heena, 1st )
 Road, Khar (W), Bombay-400 052 )..Petitioner

¶7

 Versus
 1. S.K. Laul )
 2. S.C. Tiwari, )
 3.C.M. Betgeri, )
 All memebrs of Appropriate )
 Authority constituted under )
 Chapter XX-C of the Income-tax)
 Act, 1961 having their office )
 at Mittal Court, A-Wing, 3rd )
 Floor, Nariman Point, )
 Bombay-400 021. )
 4.Union of India )
 Mr.A.K. Jasani i/b. Niranjan Jagtap & Co., for the
 petitioner.

¶8

 Mr. R. Ashokan, for the respondents.

¶9

CORAM: F.I.REBELLO&
J.P.DEVADHAR,JJ.
DATED: 7TH AUGUST, 2007
JUDGMENT: (PER F.I. REBELLO, J.)

¶10

 . The petitioner was the owner of the flat and
 by Agreement entered into on 30th June, 1992 agreed
 to sell the said property namely Flat No.2, Shyam
 Sadan, 93, Ghod Bunder Road, S.V. Road, Khar
 (West), Bombay-400 052 admeasuring 870 sq. ft.
 carpet area. The Respondent Nos. 1 to 3 served
 notice under Section 269UD(1) of the Income-tax Act.
 The petitioner is not challenging the action of
 respondent Nos. 1 to 3 in purchasing the property.

Raj Nair Vs S.K.Tiwari and Ors. — Pension and Retirement Benefits | Bombay HC (2007)

¶12

 The petitioner, however, challenges the action of
 Respondent No.s 1 to 3 of discounting the amount of
 apparent consideration by a sum of Rs.40,291/- and
 further action of retaining a sum of Rs.14,251/-
 towards the liability of the Vendor for payment of
 transfer fees to be paid to the society. Though
 there was a challenge to the provisions of Section
 269UA(6) as violative of Article 14 of the
 Constitution that has not been pursued, considering
 subsequent judgments.

¶16

 2. The respondents had passed an order under
 sub-section (1) of Section 269UD dated 27th August,
 1992. The Tribunal noted that by the Agreement of
 30th June, 1992, Rs.2,35,111/- was paid as earnest
 money and a sum of Rs.21,15,000/- was to be paid
 within a period of 30 days from the receipt of
 N.O.C. under Section 269UN (3) of the Income-tax
 Act 1961. The Members of the Appropriate Authority
 observed that as that payment was deferred for three
 months, in terms of provisions of Section 269UA(b)

¶21

 (15) held that the vendor is to bear 50% transfer
 fee payable for transfer of the shares and worked
 out the sum of Rs.14,251/- and retained the said
 amount in the account of the Appropriate Authority
 towards vender’s liability for payment of transfer
 fees.

¶23

 3. The 1st question that has to be considered
 is what is the date that has to be considered for
 the purpose of discounting. In our opinion that
 issue is no longer res integra. A learned Division
 Bench of this Court in Shrichand Raheja and Anr.
 vs. S.C. Prasad (Appropriate Authority) & Others,
 213 ITR 33 had taken a view that discounting of
 value is to be determined for the period commencing
 from the date on which the balance consideration was
 payable under the agreement between the parties and
 that it was not open to the Appropriate Authority as

¶25

 contended by the Revenue to ascertain the discounted
 value from the date of the Agreement. This issue
 came up for consideration before the Supreme Court
 in Ramesh Bhai J. Patel vs. Union of India, 247
 ITR 182. The Supreme Court considered the judgment
 in Shrichand Raheja & Anr. (supra) and observed as
 under:-

¶26

 "We are unable to agree. The High Court
 appears to have overlooked the purpose of
 Chapter XX-C and the definition of "apparent
 consideration" thereunder. The purpose is
 to determine whether immovable property has
 been sought to be transferred at an
 undervaluation. To determine whether there
 has been an undervaluation, the true
 consideration for the transfer has to be
 determined and, necessarily, it has to be
 determined as on the date of the agreement
 for transfer. That this is so is clear from
 the latter part of clause (b), which we have
 quoted; the phrase "the discounted value of
 such consideration as on the date of such
 agreement for transfer’ therein indicates
 the point of time from which the period for
 discounting must be calculated."

¶32

 whether it was open to the Appropriate Authority to
 have retained a sum of Rs.14,251/- towards Vendors
 liability of transfer fees. Apparent consideration
 is defined under Section 269-2A(b). Under Section
 269 UF, the Central Government by way of
 consideration for such purchase, shall pay an amount
 equal to the amount of the apparent consideration.
 The only discount that can be made from the amount
 of of apparent consideration is as provided in the
 Chapter itself. This issue had come up for
 consideration before a learned Division Bench of the
 Gujarat High Court in Pradip Ramanlal Sheth vs.
 Union of India & Ors. 2004 ITR 866. In that case
 the petition was filed to challenge two deductions.
 The first deduction was towards discounting. The

¶34

 registration fees and stamp duty. Dealing with the
 second contention the Court first noted that the
 definition of ’apparent consideration’ does not
 contemplate any deduction or reduction from the
 amount of apparent consideration save and except
 what is provided in the definition clause. The
 learned Division Bench then noted the deduction to

¶37

 sale, which included costs such as typing, stamp and
 registration fees and legal fees to the lawyer which
 had to be borne in equal share. It was contended on
 behalf of the Revenue that if the cost of typing and
 legal fees for execution of the agreement had not
 been ascertained, atleast. Stamp duty and
 registration fees were capable of being ascertained
 on that day as they were fixed under the relevant
 provisions of the Indian Registration Act and the
 Bombay Stamp Act. The learned Bench noting the
 definition of apparent consideration, ruled out
 deduction of any unascertained amount of
 consideration as it contemplated only certain
 specified amount of consideration and that the
 amount envisaged in Clause 14 cannot be treated to
 be part, and parcel of the scheme of apparent
 consideration.

¶39

 Paper Ltd. vs. Union of India & Others, 253 ITR
 182. The question before this Court was about
 interpretation of applicability of the definition of
 apparent consideration under Section 269 UA(b) of
 the Income Tax Act, 1961. The learned Division
 Bench noted the judgment of the Gujarat High Court
 in the case of Pradip Ramanlal Sheth (supra) After

¶43

 Consequently, the appropriate authority had
 no power, authority or jurisdiction to
 subtract incidence of stamp duty and
 registration charges in this case to the
 tune of Rs.24,97,550/- on the premises that
 in future if sale takes place, the
 petitioner would have been out of pocket to
 that extent. On such premises, such a
 deduction could not have been effected by
 the appropriate authority. The said
 deduction could not have been effected by
 the appropriate authority. The said
 deduction was absolutely unwarranted as
 found hereinabove on the canvass of the
 statutory scheme of the Act.

¶44

 The learned Bench quoted with approval the
 observations in Pradip Ramanlal Sheth (supra) and
 further noted that this view was sought to be
 contested on more than two occasions in the Supreme

¶47

 5. In the instant case what is sought to be
 deducted is the proportionate amount of transfer fee
 to be paid to the Society. On behalf of the revenue
 it is sought to be contended by the learned Counsel
 that, the judgment of the Division Bench of this
 Court in Polycon Paper Ltd. (supra) pertained to
 the payment of registration and stamp duty whereas
 in our case it is transfer fees to society and as
 such that judgment is distinguishable. In our
 opinion that is not the ratio of the judgment of
 this Court or the Gujarat High Court. The ratio as
 is apparent from the judgment would be that in so
 far as "apparent consideration" is concerned what
 can be deducted are only the amount as statutorily
 provided under the Section in the Chapter and no
 other amounts. The amount of transfer fee not being
 statutory, therefore, could not have been deducted.

¶48

 . It may also be noted that on payment of the
 consideration by virtue of Section 269UE a further
 order is made under sub-section (1) of Section 269UD
 that such property shall on the date of such order
 vest in the Central Government. Earlier the Section
 contained the following words:- "Free from all

¶50

 encumbrances" by the Finance Act, 1993 w.r.e.f.
 17th November, 1992, the same was substituted by "in
 terms of the agreement for transfer" referred in
 sub-section (1) of Section 269UC. In the instant
 case as we have noted the Agreement was of 30th
 June, 1992 before the amendment by Finance Act, 1993
 which came into effect on 17th November, 1992, and
 the Section as it then stood. Therefore, the result
 would be that on the order being passed the property
 vested in the Government free from all encumbrances.
 The question of the Government paying any transfer
 fees or for that matter stamp duty or registration
 fees would not arise. This would be yet another
 reason to hold that the Government could not have
 retained any amount towards the transfer fees.

¶53

 allowed to the extent that the retention of sum of
 Rs.14,251/- was without the authority of law. The
 respondents are, therefore, directed to refund the
 said amount in favour of the petitioner with simple
 interest at the rate of 8% per annum from the date
 of retention till payment.

Raj Nair v. S.K.Tiwari and Ors.

Case brief

What is this about?

What did the court decide?

What the court decided

Issues for consideration

Cases cited

Parties & counsel

Case details

Similar cases

M. H. Patel Vs a. C. I .T. 24(2) and Ors.

Golden Plaza Sra Chs Ltd. Vs State of Maharashtra and 4 Ors.

Commissioner of Income Tax, City-Iii, Mumbai Vs M/S. Jindal Dye Intermediate Pvt. Ltd.

The Commissioner of Commissioner of Income-Tax, 3,MUMBAI. Vs M/S Yerrowda Investments Ltd.

Raj Nair v. S.K.Tiwari and Ors.

Case brief

What is this about?

What did the court decide?

What the court decided

Issues for consideration

Cases cited

Parties & counsel

Case details

Similar cases

M. H. Patel Vs a. C. I .T. 24(2) and Ors.

Golden Plaza Sra Chs Ltd. Vs State of Maharashtra and 4 Ors.

Commissioner of Income Tax, City-Iii, Mumbai Vs M/S. Jindal Dye Intermediate Pvt. Ltd.

The Commissioner of Commissioner of Income-Tax, 3,MUMBAI. Vs M/S Yerrowda Investments Ltd.

A compact analysis

Statutes considered

Coram

Commissioner of Income TAX-3 Mumbai Vs M/S. R.R. Investments and Estate Ltd.

Pawan Kumar Vs the Union of India and 4 Ors.