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High Court Of Delhi
G.J.MALIK - Appellant
Versus
APPROPRIATE AUTHORITY, INCOME TAX DEPARTMENT, NEW DELHI - Respondent
Decided On : 11/27/1998
INCOME TAX - TRANSFER OF IMMOVABLE PROPERTY - STATEMENT IN FORM 37-1 - MAINTAINABILITY - PART PERFORMANCE OF AGREEMENT - TRANSFER - MEANING - SECTION 269-UA(F) OF THE INCOME-TAX ACT, 1961 - TRANSFER PROPERTY ACT, 1882, SECTION 53-A.
Fact of the Case:
The petitioner entered into an agreement to sell an immovable property for Rs. 2.60 crores. The property was a two-and-a-half storeyed house with the ground floor in possession of the vendor, the first floor in possession of a tenant, and the Barsati floor in possession of another tenant. The agreement provided that the loan amount of Rs. 65 lakhs given by the intending vendee to the intending vendor would be treated as earnest money and form part of the sale consideration. The intending vendee had also given a further sum of Rs. 1 crore by way of three cheques. The vendor undertook to deliver vacant peaceful possession of the property in his possession simultaneously with the payment of balance sale consideration of Rs. 95 lakhs at the time of registration of the sale deed or upon receiving the vacant peaceful possession from the tenants, whichever be earlier. The statement of agreement for transfer of immovable property in Form 37-1 was filed with the Appropriate Authority under Section 269uc of the Income-tax Act, 1961. The Appropriate Authority held that the statement was not maintainable and deemed never to have been filed, as the apparent consideration was substantially low and the loan amount of Rs. 65 lakhs had not been repaid by the vendor. The petitioner challenged the order of the Appropriate Authority.
Finding of the Court:
The Court held that the impugned order was not in accordance with law and could not be sustained. The Court found that the Appropriate Authority had failed to exercise jurisdiction vested in it by law wholly on irrelevant considerations. The Court also found that the Appropriate Authority had erred in relying on the decision of the Rajasthan High Court in Rajasthan Patrika Ltd. v. UOI, 223 ITR 443, as the facts of the present case were distinguishable.
Issues: 1. Whether the statement in Form 37-1 was maintainable. 2. Whether there was a transfer of the property within the meaning of Section 269-UA(f) of the Income-tax Act, 1961.
Ratio Decidendi: 1. The Court held that the Appropriate Authority has only two options on Form No. 37-1 being filed: (i) either to direct purchase of the property by the Central Government, or (ii) to issue no objection to the intending sale. The authority cannot direct filing of the application on the ground that the agreement which had been entered into by the owner with the proposed transferee had resulted in the creation of certain rights in favour of the intended vendee in accordance with the provisions of Section 53-A of the Transfer Property Act and possession of the property had been handed over in part performance. 2. The Court held that a transfer as defined in Section 269ua (f) had not taken place between the parties. The Court found that there was no material to support a finding nor a specific finding recorded that possession under the contract was taken or continued by the transferee.
Final Decision: The petition was allowed. The impugned order dated 31. 10. 96 was quashed and set aside. The requisite no objection was to be issued by the Appropriate Authority to the petitioner within a period of four weeks from the date of the order.
( 1 ) THE petitioner is aggrieved by an order dated 31. 10. 96 (Annexure R-6) passed by the Appropriate Authority, Income-tax Department, New Delhi whereby the statement in Form-37-1 filed on 31. 7. 96 in respect of proposed transfer of immovable property has been held to be not maintainable and deemed never to have been filed.
( 2 ). The immovable property forming subject matter of the proceedings is A-21, Nizamuddin (West), New Delhi. On 3rd January, 1996 the petitioner entered into an agreement to sell the said property in favour of M/s. Seraveall Resorts and Hotels (Pvt.) Ltd. for a consideration of Rs. 2. 60 crores. The building is a two-and-a-half storeyed house. The relevant recitals of the agreement are briefly enumerated in the succeeding paragraphs. 2. 1. On September 12,1995 the intending vendor had taken a loan of Rs. 65 lacs from the intending vendee and had agreed to pay back the same without interest by December 31, 1995 which the vendor failed to repay. It was agreed that the loan amount of Rs. 65 lacs shall be treated as earnest money so as to form part of the sale consideration 2. 2. Over and above the said amount of Rs. 65 lakhs the intending vendee had given a further sum of Rs. 1 crore by way of three cheques of Rs. 25 lacs, Rs. 50 lacs and Rs. 25 lakhs respectively dated 3rd January, 1996. If any of the cheques was dishonoured, the amount of earnest money was to stand forfeited to the intending vendor and the agreement was to stand cancelled. 2. 3. The first floor and the Barsati floor of the said property were occupied by the tenants. The tenant on the first floor was Mr. Peter Godwin working with United Nations Development Fund. Barsati floor was occupied with Mr. S. S. Soin as tenant. The possession of the ground floor was with the intending vendor. The vendor undertook to deliver vacant peaceful possession of the property in his possession simultaneously with the payment of balance sale consideration of Rs. 95 lakhs at the time of registration of the sale deed or upon receiving the vacant peaceful possession from the tenants, whichever be earlier.
( 3 ). As required by Section 269uc of the Income-tax Act, 1961, the statement of agreement for transfer of immovable property in Form 37-1 was filed duly signed by the petitioner and the respondent No. 2 on 24. 1. 96. The form was rejected twice on the ground of having been furnished with inaccurate particulars. It was re-filed for the third time on 31. 7. 96 accompanied by the agreement dated 3. 1. 96. This time, the Appropriate Authority formed an opinion that the apparent consideration was substantially low inasmuch as the fair market value of the property was higher by 29. 68%. A show cause notice was issued to the intending transferor and transferee on 20. 9 86. Replies were filed. It was brought to the notice of the Appropriate Authority that the tenant Shri Peter Godwin was no longer employed with the United Nations Development Funds. He was in arrears of rent for the last six months. Application for eviction was filed against Shri Godwin.
( 4 ). After hearing the parties to the agreement, the Appropriate Authority arrived at the following findings, inter alia :
"at the time of hearing, the transferor was questioned on the loan a sum of Rs. 65,00,000. 00 taken by the intending vendor on 10. 12. 1995* for his personal needs as to whether the said loan was repaid by the intending vendor by 31st December, 1995 as mentioned in Agreement to sell dated 3. 1. 1996. The vendor however informed that the loan has not been returned and also that there was no security or any other documents entered into for the said loan between the intending vendor and the vendee namely M/s. Seraveall Resorts and Hotels Pvt. Ltd. the intending vendee had duly authorised its Director to execute the present Agreement vide resolution of the Board of Directors dated 11. 9. 1995. This clearly shows that the loan given to the intending vendor by the intending vendee, as al
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