Allahabad High Court
Manik Chand Sethia vs Union Of India (Uoi) And Ors. on 27 August, 1996
Equivalent citations: (1997)143CTR(ALL)428, [1997]226ITR411(ALL), [1997]92TAXMAN524(ALL)
JUDGMENT M.C. Agarwal, J.
1. By this petition under Article 226 of the Constitution of India, the petitioner challenges an order dated August 30, 1994, passed by the Appropriate Authority, Lucknow, under Section 269UD of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), ordering the purchase of plot No. B-70, Sector 14, NOIDA, for a consideration of Rs. 14,57,149.
2. We have heard Sri Ravi Kant, learned counsel for the petitioner, and Sri Shekhar Srivastava, learned standing counsel for respondents Nos. 1 and 2. No one appeared for the landlord (lessee), respondent No. 3.
3. Smt. Krishna Kalra, respondent No. 3, acquired the aforesaid plot, measuring 406.25 sq. mtrs., from the New Okhla Industrial Development Authority (hereinafter referred to as "NOIDA") on a lease of 99 years for a premium of Rs. 73,937.50, by lease deed dated October 29, 1981. She entered into an agreement with the petitioner on May 7, 1994, to sell her rights in the said plot for a consideration of Rs. 14,90,000. A sum of Rs. 1,60,000 was paid by way of earnest money and the balance was to be paid at the time of the execution of the sale deed that was to be executed on or, before August 30, 1994. According to the terms of the agreement to sell, all transfer charges to be charged by NOIDA were to be paid by the purchaser, that is, the petitioner. The transfer charges payable to NOIDA were 25 per cent. of the difference between the premium paid by the original lessee and the sale consideration. The petitioner and respondent No. 3 jointly filed a return in Form No. 37-I before the appropriate authority and the appropriate authority by the impugned order, decided to purchase the said property for the Union of India. That order is challenged in the present writ petition.
4. In a lengthy petition, several grounds, including the one about the constitutional validity of the provisions contained in Chapter XX-C of the Act have been set up. The constitutional validity of the provisions of preemptive purchase was upheld by the Supreme Court in C.B. Gautam v. Union of India [1993] 199 ITR 530. Learned counsel for the petitioner, therefore, restricted his arguments to the determination of the fair market value of the land.
5. The appropriate authority has adopted a sale in respect of plot No. A-8, Sector 14, NOIDA, as an exemplar. That was a plot measuring 450 sq. mtrs. with a 2 1/2-storeyed building built thereon along with a basement and that was sold for a consideration of Rs. 44,00,000 by a sale deed dated February 28,1994. The Valuation Officer of the Department had estimated the value of the building situate over that plot at Rs. 24,78,500 and that of the land at Rs. 19,21,500 and thus estimated the sale consideration of the land in that transaction at Rs. 4,057 per sq. mtr. To this, he added Rs. 101.43 for estimated appreciation in value on account of the time lag between February 28, 1994, and May 7, 1994, and Rs. 207.93 per sq. mtr. for the locational advantage inasmuch as the plot in question was open on two sides while the exemplar plot was open on one side only. Thus, according to the report of the Valuation Officer, the fair market value of the disputed plot of land was Rs. 4,370 per sq. mtr. while according to the sale consideration agreed between the parties, it was Rs. 3,667.69 per sq. mtr.
6. Learned counsel for the petitioner contended that the determination of the fair market value of the property by the appropriate authority is untenable because of the following reasons :
(i) The provisions in the lease deed and the agreement to sell between the parties have not been taken into account for determining the fair market value.
(ii) The sale instance of plot No. A-8 aforesaid was not a proper exemplar because that was a sale of a built-up property for a composite consideration of Rs. 44,00,000 and the determination of the value of the land of that plot has been done in an arbitrary manner.
(iii) The situational advantages of plot No. A-8 have not been considered.
(iv) The circle rate fixed by the District Collector for purposes of levy of stamp duty has not been taken into account, and
(v) The determination of the apparent consideration at Rs. 14,57,149 as against Rs. 14,90,000 by discounting the value is improper.
7. All these contentions have been controverted by the respondents, who, in their counter-affidavit, have stated that the valuation has been done according to the standard practice.
8. We may begin from the last contention. The agreement to sell is dated May 7, 1994, and the sale deed was to be executed on or before August 30, 1994. The apparent consideration has been defined in Section 269UA(b) of the Act which provides that where the whole or any part of the consideration for such transfer is payable on any date or dates falling after the date of such agreement for transfer, the value of the consideration payable after such date shall be deemed to be the discounted value of such consideration, as on the date of such agreement for transfer, determined by adopting such rate of interest as may be prescribed in this behalf. Fifteen per cent. is the rate of interest prescribed for the purpose of discounting under this section and it is in accordance with this provision of law that the discounting for determining the apparent consideration has been done. The discounting is thus in accordance with the statutory provisions the validity of which is now not open to question. This point, therefore, has no force and fails.
9. As regards the circle rate fixed by the Collector for the purposes of stamp duty, the same loses its relevance because the sale price agreed between the parties according to the apparent consideration mentioned in the agreement to sell was Rs. 3,667.69 per sq. mtr. as against Rs. 2,400 per sq. mtr. fixed by the Collector. The difference being substantial, the petitioner's reliance on the said rate fixed by the Collector for purposes of charging stamp duty is misconceived.
10. Further, in Daya Engineering Works v. Union of India (Writ Petition No. 4240 of 1993, decided by the Lucknow Bench of this court on July 15, 1993) it has been held that the circle rate has no relevance for determining the fair market value of the property for the purposes of Section 269UD(1) of the Act. This point too, therefore, fails.
11. The case of the petitioner and its vendor before the appropriate authority was that while plot No. A-8 was situate along the main road, the plot in question was situate in the interior area and its location was, therefore, inferior. The learned appropriate authority that consisted of two Commissioners of Income-tax and a chief engineer has held that the locational advantages of the two plots are similar. This is a finding of fact and on being taken through the impugned order, a copy of which is annexed to the writ petition, no ground has been made out for our interference in this finding of fact.
12. The important point that was strenuously argued between the parties, however, is whether the sale transaction of plot No. A-8, Sector 14, NOIDA, could be properly used as an exemplar for determining the fair market value of the plot in question, that is, plot No. B-70. The contention of learned counsel for the petitioner is that that was not a vacant plot like the plot in question and had a basement and a 2 1/2-storeyed building thereon that was sold for a composite consideration of Rs, 44,00,000 and that the value of the construction having not been properly determined, the sale consideration for the land of plot No. B-70 could not be determined.
13. It is admitted that plot No. A-8 was a built-up property. The petitioner has filed a certified copy of the sale deed of plot No. A-8 with supplementary affidavit which mentions that the built-up area was about 6,500 sq. ft. The consideration was a composite sum of Rs. 44,00,000 and the transferor had already obtained the permission for the transfer of the property from NOIDA in favour of the transferee. The appropriate authority in its impugned order has not mentioned how the Valuation Officer determined the sale consideration of the land of plot No. A-8. No details in this regard have been mentioned and no copy of the valuer's report has been annexed to the counter-affidavit. On the other hand, the petitioner with his rejoinder affidavit has filed what he describes as the copy of the valuation report supplied to him. This so-called valuation report merely contains a chart mentioning three properties, namely, C-51, A-8 and C-54 of sector 14, NOIDA. In respect of plot No. A-8, this chart mentions the value of the building at Rs. 24,78,500 and that of the land at Rs. 19,21,500. There are no details about the nature of the building and the type of materials used and one wonders how the total consideration of Rs. 44,00,000 could be bifurcated in two sums aforesaid.
14. Learned counsel for the petitioner also contended that the appropriate authority did not collect any exemplar in respect of smaller plots in which the total sale consideration was less than Rs. 10,00,000 and that such examplars could have rendered good help in estimating the value of a little larger plot, like the present one.
15. It is true that even sale transactions of less than Rs. 10,00,000 could be of use when a sale transaction of a vacant plot of a similar area was not available, but since the petitioner has not cited any such sale instance, either before the appropriate authority or even in the present petition, we are unable to find any force in this contention.
16. However, the first point, as stated above, has substantial force and learned standing counsel, Sri Shekhar Srivastava, could not show us any rational basis on which the composite sale consideration of Rs. 44,00,000 has been bifurcated to determine the sale price of the land of plot No. A-8. He took shelter under a judgment of the Bombay High Court in Writ Petition No. 514 of 1993--Smt Vimla Devi G. Maheshwari v. S.K. Laul [1994] 208 ITR 734, decided on March 10, 1993, holding that in a writ petition, the High Court does not act as a court of appeal over the order of the appropriate authority and unless its findings are perverse or show a total non-application of mind to the relevant facts, it would not be proper to interfere with the order of the appropriate authority, We see that the appropriate authority has perfunctorily and without any rational application of mind adopted an assumed land rate of plot No. A-8 as the basis of its conclusion without seeing whether the Valuation Officer had properly determined the value of the building existing on that plot. Therefore, and for the reason to be mentioned hereafter, its conclusion, that the fair market value of the property exceeds the apparent sale consideration, can appropriately be described as perverse, that is, a finding which no rational person would arrive at.
17. The last point urged on behalf of the petitioner was that while determining the fair market value of the property in question, the provisions of the lease deed and the agreement between the parties that are relevant for determining the fair market value have not been looked into. He pointed out that according to the lease deed executed between the owner of the land, namely, NOIDA, and the original lessee, respondent No. 3, there are restrictions on the transfer of the leasehold rights. Clause (i) of the lease deed provides that in case of transfer other than by way of mortgage, 25 per cent. of the unearned increase in the value of the demised building, that is, the difference between the premium paid and the market value of the demised premises at the time of the transfer shall be paid by the lessee to the lessor at the time of the transfer. Thus, the lessee, respondent No. 3, was, before the transfer of the property in favour of the petitioner, to pay the difference that came to about Rs. 3,55,000.
18. Clause 9 of the agreement to sell between the petitioner and respondent No. 3 provided that the transfer charges that shall be charged by the NOIDA in respect of the transfer of the said property shall be paid by the vendee, namely, the petitioner. This was over and above the consideration of Rs. 14,90,000 payable to the vendor. Thus, the agreement to purchase was with an additional liability of about Rs. 3,50,000 to be paid to the owner of the land, namely, NOIDA, as a consideration for permission to transfer the leasehold rights. The appropriate authority has not taken this into account at all although the agreement to sell was before it. In the examplar, that is, the sale instance of plot No. A-8, the vendor had, as mentioned in the sale deed, already obtained the permission of NOIDA and must, therefore, have paid the transfer charges. The appropriate authority has not tried to find out whether the burden of the transfer charges in that sale instance was borne by the vendor or the vendee.
19. Sri Shekhar Srivastava, learned standing counsel, contended that this aspect of the matter is not relevant to the issue because the term "apparent consideration" has been defined in the Act and such a liability cannot be included in the "apparent consideration". The contention is correct so far as the determination of "apparent consideration" is concerned, but equally important is the other side of the same coin, that is, the fair market value which has not been defined in the Act. The fair market value of the property has to be estimated according to the settled concepts. It is common knowledge and well-settled that the fair market value of a property depends on the advantages, liabilities and obligations, etc., that the property carries with it. Twenty-five per cent. of the unearned increase was, admittedly, payable to the NOIDA as a consideration for the transfer of the land. Though the lease deed provides that it would be paid by the lessee, that is, the transferor, the lessee has a right to put a condition that apart from the net price to be paid to him, the vendee will have to bear the additional burden of the unearned increase. This is what has been done. Therefore, if a vendor sells his property with such liability, the fair market value of the land, that is, the net consideration that the vendor would get would be reduced by the amount payable to NOIDA, and, therefore, if the vendor had agreed to receive the whole of the value himself and to discharge the liability to NOIDA himself; the total sale consideration or the fair market value would be Rs. 14,90,000 plus the 25 per cent. increase, that is, Rs. 3,55,000 approximately. This comes to a total fair market value of Rs. 18,45,000 as against Rs. 17,82,000 estimated by the appropriate authority. If the appropriate authority had taken the aforesaid term of agreement into consideration, it should have determined the fair market value at Rs. 12,84,000 only while the fair market value, as agreed between the parties, was Rs. 14,90,000, that is, much higher than what should be the correct fair market value according to the appropriate authority. The sum of Rs. 12,84,000 is arrived at by deducting the sum of about Rs. 70,000 paid by respondent No. 3 as the price from Rs. 17,82,000 and deducting from the remainder 25 per cent. thereof as unearned increase. Therefore, determining the fair market value of the property, according to the terms at which the vendor wanted to sell it, it cannot be said that the fair market value of the property, that is, plot No. B-70, was, in any way, more than the apparent consideration. The finding to the contrary arrived at by the appropriate authority is, in our view, perfunctory and perverse and cannot be sustained. We hold that it was not established that the fair market value of the land was in excess of the apparent sale consideration and, therefore, the appropriate authority had no jurisdiction to order the purchase of the property in question under Section 269UD of the Act.
20. Learned counsel for the respondents contended that the petitioner who agreed to purchase the property in question has no right to maintain this petition and challenge the order of purchase passed by the appropriate authority under Section 269UD. He placed reliance on a judgment of the Karnataka High Court in Rajata Trust v. Chief CIT [1992] 193 ITR 220 in which it was so held. That was a judgment dated June 20, 1991, and was thus passed before the Supreme Court decided C.B. Gautam's case [1993] 199 ITR 530 in Section 269UD by the Finance Act, 1993 (sic), and proceeded on the special terms of the agreement between the parties which were to the effect that in case the Government decided to purchase the property, the buyer would get a refund of his advance and for that purpose the vendor was to authorise the Income-tax Department to refund the advance out of the sale price and in terms of that agreement, the Income-tax Department had paid and the petitioner had received back the advance. Reliance was also placed on a judgment of this court in Devesh Behari Saxena v. Deputy CIT [1994] 208 ITR 637. This is a judgment in which the judgment of the Karnataka High Court in Rajata Trust's case [1992] 193 ITR 220 was followed and neither the Supreme Court judgment in C.B. Gautam's case [1993] 199 ITR 530 nor the subsequent amendment by insertion of Sub-section (1A) was considered.
21. Section 269UA(e) defines "person interested" in relation to any immovable property to include all persons claiming, or entitled to claim, an interest in the consideration payable on account of the vesting of that property in the Central Government. This definition is not exhaustive and when we interpret this term in the light of special law as contained in Chapter XX-C of the Income-tax Act, 1961, it would be unwise to follow the general law under the Transfer of Property Act that an agreement to sell does not create an interest in the property in favour of the buyer. We are dealing with special legislation regarding compulsory purchase, of immovable property where two persons have agreed to purchase and sell the same. In the case of C.B. Gautam [1993] 199 ITR 530, the Supreme Court held that the requirement of giving an opportunity of hearing to the aggrieved parties has to be assumed in the provision of the Act, otherwise that would be open to challenge on the ground of violation of the provisions of Article 14 on the ground of non-compliance with the principles of natural justice. An order of purchase under Chapter XX-C in the generality of the cases adversely affects only the purchaser. So far as the vendor is concerned, he, in any case, receives the apparent consideration from the State. On the other hand, a purchaser who after negotiation arrives at an agreement with the vendor and usually pays a substantial amount as earnest money is left entirely to lose. The provisions of the Act do not even contain a provision that the earnest money paid by him to the vendor would be returned to him by the State and adjusted towards the sale consideration payable to the owner. Therefore, a buyer is a person who is interested in the property and Sub-section (1A) as inserted by the Finance Act, 1993, with effect from November 17, 1992, makes this all the more clear. Sub-section (1A) stands as under :
"Before making an order under Sub-section (1), the appropriate authority shall give a reasonable opportunity of being heard to the transferor, the person in occupation of the immovable property if the transferor is not in occupation of the property, the transferee and to every other person whom the appropriate authority knows to be interested in the property."
22. By this provision a purchaser has been given a right to contest the proceedings before the appropriate authority and it would be anomalous that a person who has a right to contest the proceedings before the appropriate authority has no right to challenge that order before a High Court in a writ petition. Further, the use of the words "and to every other person whom the appropriate authority knows to be interested in the property" after the word "transferee" clearly indicates that reading the definition of "person interested" with the provisions of Sub-section (1A), a transferee has to be treated as an interested and aggrieved person for the purposes of these provisions. Therefore, the contention that the present petitioner has no right to maintain the writ petition is devoid of any force and is hereby rejected.
23. Learned counsel for the petitioner contended that possession of the plot in question that has been taken over from the original lessee, namely, Smt. Krishna Kalra, be restored to her. Since we are quashing the impugned order of purchase, as a necessary consequence, respondents Nos. 1 and 2 should restore possession of the property in question to the owner and recover the amount paid by the Union of India to her for the purported purchase of the property in question. However, since the petitioner was not in possession of the property and respondent No. 3 has not come as a petitioner, it would be beyond the scope of this petition to make an order directing respondents Nos. 1 and 2 to restore possession to respondent No. 3 without the return of the sale consideration paid by the Union of India and we cannot convert this writ petition into a suit for specific performance of the agreement and adjust the equities between the parties. Once the purchase is quashed, it would be for the parties to proceed in accordance with law and we do hope that they would conduct themselves in a manner to avoid further litigation.
24. In the result, the writ petition is allowed and the impugned order dated August 30, 1994, is hereby quashed. The petitioner will get his costs of this writ petition, from respondents Nos. 1 and 2.