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High Court Of Calcutta
Susanta Chatterji
KELVIN JUTE COMPANY LIMITED - Appellant
Versus
APPROPRIATE AUTHORITY - Respondent
Matter 3364 Of 1989
Decided On : 05/18/1990
INCOME TAX - Restrictions on transfer of immovable property - Appropriate Authority's power to purchase property - Implied power to determine transferor's immediate right to transfer - Scope and limitations.
Fact of the Case:
Kelvin Jute Company Limited, a sick industrial unit, entered into an agreement to sell its land at 3, Burdwan Road, Calcutta, for Rs. 65 lacs. The company had obtained a 'no objection' certificate from the Competent Authority under the Urban Land (Ceiling and Regulation) Act, 1976, for construction of a building on the land. The company filed Form No. 37-1 under Chapter XXC of the Income Tax Act, 1961, seeking the Appropriate Authority's approval for the transfer. The Appropriate Authority rejected the application, holding that the statement in Form No. 37-1 was premature and invalid as the exemption granted under the Urban Land (Ceiling and Regulation) Act could be withdrawn, and the provisions of sections 6 to 14 of the Act would come into play.
Finding of the Court:
The Court held that the Appropriate Authority's orders were not justified. The Court found that the transferor company had a saleable right and title to the property, and it was for the Appropriate Authority to either purchase the property under section 269ud of the Income Tax Act or issue a 'no objection' certificate if it was not inclined to purchase.
Issues: 1. Whether the Appropriate Authority has implied power to determine the transferor's immediate right to transfer property under Chapter XXC of the Income Tax Act, 1961. 2. Whether the Appropriate Authority's rejection of the transfer application was justified in the circumstances of the case.
Ratio Decidendi: 1. The Court held that the Appropriate Authority has implied power to determine the transferor's immediate right to transfer property under Chapter XXC of the Income Tax Act, 1961. This power is incidental to the Authority's function of purchasing immovable properties in certain cases of transfer. 2. The Court found that the Appropriate Authority's rejection of the transfer application was not justified. The Court held that the Authority's apprehension that the property might be vested subsequently upon fulfilment of certain unknown evasions was vague, indefinite, and invalid. The Court also held that the Authority could not keep the matter in a cold storage by observing that the stage was premature to act upon Form No. 37-1.
Final Decision: The Court allowed the writ petition and quashed the Appropriate Authority's impugned orders. The Court issued a writ of certiorari quashing the impugned orders and a writ of mandamus commanding the Appropriate Authority to consider the Form No. 37-1 afresh in accordance with law within 60 days from the date of communication of the order and to take effective steps either under section 269ud of the Income Tax Act or to issue a 'no objection' certificate if there was no inclination to exercise the right of purchase.
( 1 ) THE present writ petition has been filed by the Kelvin Jute Company Limited, a Public Limited Company and one of its Shareholder challenging the orders issued by the Appropriate Authority constituted under section 269ud of the Income-tax Act dated November 25,1988 and May 2,1989 and to refrain from giving any effect to or taking any steps in terms thereof or thereunder and to issue to the petitioners (No Objection Certificate) in respect of the transfer of the land. It is stated that the petitioner no. 1 Company is the owner of the land situated at no. 3, Burdwan Road, Calcutta containing an Area 19 Cottahs 13 Chittacks 5 Sq. Ft. and on the said premises there are several buildings, dwelling houses, tenants, tiled roof structures and shops which have been let out to several monthly tenants and the remaining portion of the said premises has been mortgaged by the Company with the State Bank of India for securing loans and advances for the purposes of its business. The petitioner no. 1 Company is stated to be a sick industrial unit within the meaning of the Sick Industrial Companies (Special Provisions) Act of 1985. It is claimed that the Industrial Reconstruction Bank of India prepared a rehabilitation scheme for the revival of the Company which was modified by the Board of Industrial and Financial Reconstruction. The draft scheme envisaged the huge cost of modernization and the means of finance proposed in the said scheme included inter alia a sum of Rs. 17 lacs. to be realised on the sale of the aforesaid premises and a portion of the property at Titagarh. The petitioners have stated in details in the writ petition that the aforesaid scheme further stipulated that the State Bank of India would give a necessary permission for sale of the said premises and the portion of the property at Titagarh and for utilization of the sale proceeds towards meeting a part of the cost of the said scheme. It is asserted that the scheme further provided that the State of West Bengal will also. give necessary permission for sale of the said properties and utilization of the sale proceeds towards meeting a part of the cost of the aforesaid scheme. The petitioners claim further that the draft scheme as formulated by the Board of Industrial and Financial Reconstruction has since been finalised in its meeting held on July 13,1989 and the petitioner no. 1 Company is required to give effect to the same with effect from September 1,1989. It is also placed on record that on September 1,1989 the petitioner Company entered into an agreement for sale with Messrs. Granito Ceramics Private Limited having office at no. 19, R. N. Mukherjee Road, Calcutta whereby the Company agreed to sell to the transferee the said premises free from all encumbrances but subject to the monthly tenancies and for a lumpsum price of Rs. 65 lacs which was appropriated towards the consideration at the time of completion of the sale. The transferee proposed to demolish the existing tenaments on the said premises and constructed a new building thereon. On September 29, 1988 the petitioner Company is alleged to have received a 1etter dated September 8/9, 1988 from the respondent no. 3 the Assistant Engineer (Technical) having office at no. 54, Rafi Ahmed Kidwai Road, Calcutta that the said respondent would inspect the said premises on September 23,1988. On November 28,1988 the petitioner no. 1 Company received the order dated November 25,1988 passed by the respondent no. 1 in respect of the said Form No. 37-1 filed on September 5,1988. The petitioners alleged that in the said purported order it was made clear that the proposed transfer was null and void under section 5 (3) of the Urban Land (Ceiling and Regulations) Act, 1976. The exemption under section 20 of the 1976 Act did not seem to have obtained and even if the exemption applied for and such exemption would be given only for paying the excess vacant land to industrial purpose and not for purpose of sa
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