Partly allowed

Hill County Home Owners Welfare Association, v. The Chief Commissioner of Income Tax

Telangana HC5 Dec 2012WP/9227/2010

Case brief

AI extract

What is this about?

The Supreme Court declared that properties where full consideration, registered sale deeds, and possession were delivered are free from income tax attachment. It held that attachment does not apply where possession was delivered despite unregistered deeds, citing deemed transfer. Orders on partially paid units require escrow arrangements.

What did the court decide?

Declaration that registered and transferred properties, and those with possession delivered but unregistered, are free from attachment; interim directions for escrow on partial payments.

Hill County Home Owners Welfare Association, Vs The Chief… — Income Tax | Telangana HC (2012)

¶1

HONOURABLE SRI JUSTICE GODA RAGHURAM AND

¶2

HONOURABLE SRI JUSTICE M.S.RAMACHANDRA RAO

¶3

W.P.No.9227 of 2010, W.P.No.10769 of 2012, W.P.M.P.No.14396 of 2012 in W.P.No.11412 of 2012 & W.P.M.P.No.30269 of 2012 in W.P.No.23700 of 2012

¶4

COMMON ORDER:

¶5

(Common Order of the Court)

¶6

The petitioner in W.P.No.9227 of 2010 is an association registered under the A.P.Societies Registration Act, 2001 under the name and style “Hill County Home Owners’ Welfare Association” comprising 431 members who assert to be owners and purchasers of independent residential bungalows/villas and residential flats constructed by M/s. Maytas Properties Limited (for short “MPL).

¶7

Respondents 6 to 19 companies in this Writ Petition (for short ‘land owning companies’) are group companies of M/s Satyam Computer Services and MPL. These 14 companies were owners of various extents of land totaling Ac.98.16 gts. in Sy. Nos.192/p, 193/p, 194/p, 195/p, 196/p, 197/p, 201/p and 282/p of Batchupalli village, Qutubullapur Mandal, Ranga Reddy District. Out of the above extent, in Ac.85.36 gts. which is contiguous in nature, MPL entered into a development agreement-cum-GPA dated 30-12-2005 with the 14 land owning companies to develop the said lands by constructing a town ship by name “Hill County” consisting of villas/apartments.

¶8

Thereafter sanction for a layout for implementation of the said project in terms of the development agreement was obtained from the Hyderabad Urban Development Authority under letter No.5876/MP2/PLG/H/2005 dated 21-03-2006. Pursuant to the sanctioned layout, MPL divided the land into plots, common areas, roads etc. and commenced construction of villas and apartments over portions of the above area .

¶9

The land owning companies and MPL, while the construction was in progress, offered to sell the villas/apartments/plots to prospective purchasers in respect of their shares as mentioned in the development agreement. Thereafter negotiations took place and several villas/apartments were sold/agreed to be sold along with proportionate undivided share in land. Some plots were also sold by MPL to persons like the petitioner in W.P. 23700 of 2012. In some cases MPL received full sale consideration from the purchasers, executed regd.sale deeds and also delivered possession. In some cases full consideration was received and possession was delivered but sale deeds were not registered. In other cases only part consideration was received after execution of agreements of sale and it is stated that in all a sum of

¶10

Rs.60.00 crores (approximately) is payable towards balance sale consideration. Some villas/apartments/plots remain unsold.

¶11

The details of the villas/apartments in the Maytas Hill County Project as on April 2010 are as under:

¶12

Type of Unit	Built/under construction	Sold	Registered	Unregistered	Unsold	Total Cost on completion Rs. In crores	Amount already collected from purchasers Rs. In crores
Bungalows/villas	326	272	169	103	54	319.83	276.46
Apartments	840	586	200	386	254	427.37	355.48
Total	1166	858	369	489	308	747.20	631.94

¶13

Members of the petitioner association came to know that 14 provisional attachment orders dated 10-06-2009/07-12-2009 were passed by the Assistant Commissioner of Income Tax, Central Circle-I, Hyderabad against the land owning companies under Section 281-B of the Income Tax Act, 1961 on the ground that they had not paid self assessment taxes due and that it is necessary to protect the interest of the Revenue by resorting to provisional attachment of their assets i.e. the various extents of land in the above survey numbers individually owned by them. It was also alleged therein that the 14 land owning companies are group companies of M/s.Satyam Computer Services Limited; that the ex-Chairman of the said company Sri B.Ramalinga Raju had confessed in January 2009 that he had fudged the books of accounts of the said company and that the financial statements of the company do not reflect the true and correct picture of the statement of affairs of the said company; that it is suspected that he had diverted funds from the said company into several other companies such as the land owning companies and acquired agricultural lands and therefore it is necessary to provisionally attach their assets as there is a possibility of the Revenue raising substantial demands in future consequent on finalization of assessments in their cases.

¶14

The petitioners in W.P.9227/2010 challenge the 14 provisional attachment orders/proceedings issued on 10-06-2009 attaching the properties of the land owning companies upto 9.12.2009 and the subsequent 14 proceedings attaching the properties of the land owning companies upto 9.6.2010 and contend that the said action of the Assistant Commissioner of Income Tax, Central Circle-I, Hyderabad is arbitrary and illegal as the Income Tax authorities had failed to notice that the members of the petitioner-association are the absolute owners and bonafide purchasers of the properties purchased by them under sale deeds and agreements of sale; that the said properties cannot be attached for any reason for satisfaction of the tax due by the land owning companies; that in respect of the units for which full

¶15

sale consideration was paid by some of the members, the sale deeds could not be registered in view of attachment orders issued by the Asst.Commissioner of Income Tax, Central Circle-1, Hyderabad; that many of these units are mortgaged to financial institutions; that the land owning companies have no interest therein; and in any event, attachment of the land on which the residential bungalows/villas/apartments were sold by the MPL to the members of the petitioner-association is unsustainable in law.

¶16

Subsequently, proceedings (14 in number) dated 22-12-2011 and 05-01-2012 were issued under Section 281-B of the I.T. Act, 1961 by the Deputy Commissioner of Income Tax, Central Circle-8, Hyderabad and the Deputy Commissioner of Income Tax, Central Circle-9, Hyderabad at the instance of the Commissioner of Income Tax (Central), Hyderabad and the Additional Commissioner of Income Tax, Central Range-3, Hyderabad extending the period of attachment to 21-06-2012 and 04-072012 on the ground that Income tax proceedings against the land owning companies for 2009-10 assessment year are pending; that interests of the Revenue have to be protected; and assessees prevented from disposing off the properties .

¶17

These notices are challenged by the petitioner-association in W.P.No.9227 of 2010 by filing W.P.No.10769 of 2012 reiterating the grounds raised by it in W.P.No.9227 of 2010. W.P.M.P.No.13626 of 2012 is filed seeking stay of the said notices and W.P.M.P.No.13627 of 2012 is filed for a direction to the District Registrar, Ranga Reddy District, Moosapet, Hyderabad and the Sub-Registrar, Qutubullapur, Ranga Reddy District to register the bungalows/villas and apartments situated in Maytas Hill County in the above land.

¶18

It appears that the land owning companies filed their return of income on 30-092008 for the assessment year 2008-2009 but had not paid any “self assessment tax” on the admitted income. After processing the returns of income, the Income Tax department is said to have crystallized the demand payable by the land owning companies and served demand notices on the assessees.

¶19

In the meantime Union of India through the Government Nominee Director approached the Company Law Board against MPL and all it’s promoter directors and all members u/s.388B(1)(a)/397/298 r/w 401/402/403/406/408 of the Companies Act,1956 in order to prevent further frauds and serious irregularities. The petitioner association got impleaded in the said C.P. for induction of a new investor to take over the management of MPL with all its assets and liabilities. By order 13-01-2011, the Company Law Board in C.P.4/2009 inducted the I.L. & F.S. group to protect the interests of all stake holders, particularly members of the petitioner-association. This

¶20

induction was ordered to facilitate completions of the Hill County Project which had come to a stand still from January 2009, so that bonafide purchasers would not be jeopardized.

¶21

The new management of MPL, paid a portion of the dues to the Income Tax Department and requested the Assistant Commissioner of Income Tax, Central Circle-I, Hyderabad to raise the attachment and lift the ban on registration of the properties of members of the petitioner-association and also requested for waiver of penalty.

¶22

The Income Tax Department through the Assessing Officer referred the above property to the Tax Recovery Officer u/s.222 of the Act in January 2010.

¶23

The proceedings issued in 2010 pursuant to which the Tax Recovery Officer demanded tax from the assesses, the consequent attachment orders and the proclamation of sale in regard to the 14 group companies are challenged in W.P.No.11412/2012 by the petitioner in W.P.No.9227 of 2010. They also filed W.P.M.P.No.14396 of 2012 to raise orders of attachment issued on 29-06-2010 and 04-01-2011 and for a direction to the District Registrar, Ranga Reddy and the SubRegistrar, Qutubullapur to register bungalows/villas/apartments in the above land to the purchasers.

¶24

The petitioner in W.P.No.23700 of 2012 purchased plot No.86 of extent 478 sq. yds. along with 3055 sft. (to be built up area) in the layout obtained by MPL, under a registered sale deed dated 12-10-2007 and got registered an agreement of construction on the same day after paying full consideration of Rs.96,68,173/-. She contends that she was also put in possession of the said plot. She claims to have obtained a loan by mortgaging the property to the ICICI Bank, S.R.Nagar Branch. She contends that she had negotiated with a purchaser to sell the said land but the Sub-Registrar, Qutubullapur refused to receive the sale deed and register the same in view of the order of attachment dated 25-06-2012 of the Deputy Commissioner, Income Tax, Central Circle-IX, Hyderabad, attaching the properties of the 14 group companies who had sold the property to the petitioner. She adopts the contentions of the petitioner association (in the three writ petitions 9227/2010, 10769/2012 and 11412/2012) and contends that once a sale deed is executed in her favour, there cannot be attachment of the said property subsequently and the said attachment is null and void. She contends that the Sub-Registrar, Qutubullapur is bound to receive and register the sale deed executed by her in respect of the above property.

¶25

The Income tax authorities assert that these companies are defaulters, that therefore their properties are again attached u/s.281B of the Act and recovery

¶26

proceedings were also initiated by the Tax Recovery OIfficer, Central Circle, Hyderabad on receipt of tax recovery certificates from the assessing officers as per S.222 of the Act. The Income Tax returns filed these companies for 2009-10 and 2010-11 are said to be under scrutiny and are said to have been referred to a special audit u/s.142(2A) of the Act and the Revenue contends that there is a likelihood for a substantial demand to be raised for these years based on the findings of the Special Audit Report.

¶27

It is also stated by the Revenue that assessments of MPL for A.Y.2006-07 and 2007-08 were reopened u/s.147 r/w s.148 and the assessment for the A.Y.2008-09 is pending finalization. It is also stated that for the A.Y.2006-07,2007-08 and 2008-09 the books of accounts and the financial statements connected therewith have been referred to Special Audit u/s.142 (2 A) of the Act on 16.12.2011.

¶28

It is asserted that having regard to the fact that a substantial amount of income tax dues are pending to be paid over to the Department by the land owning companies, it would be prejudicial to the interest of Revenue to lift the attachment made by the Department, of the properties belonging to the land owning companies.

¶29

On 02-11-2012, this Court passed the following order in the above writ petitions:

¶30

“At the request of the respondents 1 and 2 the matter is adjourned by three weeks and no further adjournment is allowed, to inform this Court by an affidavit or otherwise as to which of the properties belonging to respondents 7 to 21 (which are under development agreement with the Maytas Properties Limited which is also known as Maytas Hill County) are subject to allotment by the orders of attachment dated 10-06-2009 passed under relevant provisions of the Income Tax Act, 1961 clearly specifying whether properties whose transfer in favour of Members of the writ petitioner society effected by registered sale deeds are also included within the reach of the attachment orders or otherwise; whether plots/villas/apartments in respect of which substantial or whole of the consideration has been received but registration of the alienation has not been effected are included; and the status of flats/villas/apartments which are not subject to any transaction/development at all.”

¶31

Thereafter a detailed counter affidavit has been filed by the Additional Commissioner of Income Tax (Central Range-3), Hyderabad.

¶32

It is also informed to the Court that on 23-11-2012 proposals for settlement were being discussed by the department with MPL and its 14 group companies and that the following is the gist of the proposals:

¶33

In view of this Court’s directions, Revenue has filed an additional counter affidavit dt.21.11.2012 giving details as sought by this Court. It is also mentioned that MPL and the land owning companies are discussing a detailed proposal with the Income Tax Department for making efforts to liquidate the tax in arrears in lieu of release of attachment of the villas/apartments/land which are sold but not registered and also those sold as on date. Broad outline of the proposals under consideration by the Department were also enclosed.

¶34

Heard Sri B.Adinarayana Rao, Senior Counsel for the petitioners in W.P.No.9227 of 2010, 10769 of 2012, 11412 of 2012 and Sri Peri Prabhakar, counsel for the petitioner in W.P.No.23700 of 2012, Sri J.V.Prasad, Standing Counsel for the Income Tax Department and Sri S.Ravi, Senior Counsel for MPL.

¶35

After considering the above facts and the contentions raised by all the parties, we are of the view that W.P.Nos.9227 of 2010 and 10769 of 2012 have become infructuous in view of the fact that the orders of attachment under Section 281-B of

¶36

the I.T.Act impugned therein have expired by efflux of time on 22.6.2012/4.7.2012 on the expiry of the period of 6 months from the dates of issue of the said proceedings, attaching the properties provisionally. Moreover orders of assessment for 2008-09 in respect of the 14 group companies have also been passed since.

¶37

The orders of attachment and proclamation of sale in respect of the 14 group companies consequent to the passing of assessment orders have been challenged in W.P.No.11412 of 2012 by the petitioner therein.

¶38

With a view to ensure that the interests of the innocent purchasers and the Revenue are both protected, pending disposal of W.P.Nos.11412 of 2012 and 23700 of 2012, we deem it appropriate to pass the following interim order:

¶39

a) In respect of units (villas/apartments/plots) where full consideration was received by MPL, sale deeds executed in favour of purchasers and registered and possession of the plots and villas/apartments (along with undivided share of land) mentioned in the respective sale deeds has been delivered, we declare that such units and the undivided share in land transferred along with villas/apartments, covered by such registered sale deeds would be free from attachment and the attachment orders passed by the I.T. department would have no application to them. This position in law is also accepted by the Revenue.

¶40

b) In respect of units (villas/apartments/plots) where full consideration was received by MPL Limited and possession also delivered to the purchasers but sale deeds were not executed and/or registered, as there is a “deemed transfer” of the property by virtue of Section 2 (47) of the I.T.Act, we hold that attachment orders passed by the I.T. department would have no application to them and to the extent of the undivided share of land agreed to be sold along with villas/apartments, as well. The Sub-Registrar, Qutubullapur, Ranga Reddy District shall not refuse to register any sale deed presented by such purchasers, notwithstanding the orders of attachment.

¶41

c) In respect of units (villas/apartments/plots) where only a part of the consideration has been paid by purchasers, it is stated that the net receivables amount to approximately Rs.60.00 crores. This amount shall be put in an escrow account by MPL , and on receipt of the full consideration from the purchasers, MPL shall register the said properties in favour of the purchasers and deliver possession to them. The Sub-Registrar, Qutubullapur, Ranga Reddy District shall not refuse

¶42

to register any sale deed presented by MPL and such purchasers, notwithstanding orders of attachment.

¶43

d) It is open to the Income Tax authorities and MPL to negotiate regarding sharing of the percentage of the amounts in the escrow account and arrive at a settlement in regard thereto.

¶44

e) With regard to unsold lands/units also it is open to the Income Tax authorities and MPL to negotiate and arrive at a settlement in regard thereto.

¶45

f) In the absence of any settlement by negotiation between the Income Tax department, MPL and its 14 group companies as mentioned in clauses (d) and (e) above, the amounts deposited in the escrow account by MPL would be subject to further orders in these writ petitions.

¶46

W.P.M.P.No.14396 of 2012 in W.P.No.11412 of 2012 & W.P.M.P.No.30269 of 2012 in W.P.No.23700 of 2012 stand disposed off in terms of the orders herein and W.P.Nos.9227 of 2010 and 10769 of 2012 are dismissed as infructuous. No costs.

¶47

As a sequel to the dismissal of W.P.Nos.9227 of 2010 and 10769 of 2012, all W.P.M.P.s. pending in these writ petitions stand dismissed.

¶48

____________________________ JUSTICE GODA RAGHURAM

¶49

JUSTICE M.S.RAMACHANDRA RAO

¶50

Date:05-12-2012 Kvr

Hill County Home Owners Welfare Association, v. The Chief Commissioner of Income Tax

Case brief

What is this about?

What did the court decide?

Hill County Home Owners Welfare Association, v. The Chief Commissioner of Income Tax

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Statutes considered

Parties & counsel

Coram

Case details

Similar cases

M/s. Durga Wine Industries, Vijayawada, rep. by its Vs The Asst. Commissioner of Incometax, Central Circle

Dr. M. Sharath Chandra Reddy S/o Late M. Ram Reddy, Vs The Commissioner Ghmc, Tank bund, Hyderabad.

The Vivekananda Co-operative House Building Vs The Government of Andhra Pradesh, represented by its

Dasari Neelima, Vs The Sub Registrar

Hill County Home Owners Welfare Association Vs The Chief Commissioner of Income Tax

Sonia Road lines, Prop. Harinder Kour, Vs Andhra Pradesh Industrial Infrastructure Corporation Ltd.