Prospective operation of Chapter XX-C bars retrospective use against a pre-October 1986 transfer; section 269UD(1) order fell.

Chapter XX-C of the Income-tax Act, 1961 was held not to operate retrospectively against an agreement for transfer executed on 7 March 1986. The Court followed the earlier view that Chapter XX-C and Rule 48L are prospective in effect, so a transfer completed before 1 October 1986 remains outside that regime. As the transaction fell under the earlier applicable chapter, the order made under section 269UD(1) lacked legal foundation and was set aside.

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Issues: Whether Chapter XX-C of the Income-tax Act, 1961 applied to an agreement for transfer executed before 1 October 1986 and, if not, whether the order made under section 269UD(1) could be sustained.

Analysis: The agreement for sale was executed on 7 March 1986 and the transfer had effectively taken place under the earlier statutory regime. The controlling question was whether Chapter XX-C and the corresponding procedural requirement could operate retrospectively so as to govern a pre-1 October 1986 transaction. The Court followed the earlier decision holding that Chapter XX-C and Rule 48L were prospective in operation and that a transfer completed before the commencement of that chapter remained outside its scope. Since the transaction was covered by the earlier chapter applicable to such agreements, the impugned order under section 269UD(1) lacked legal foundation.

Conclusion: The challenge succeeded and the impugned order was set aside; the petitioner succeeded on the applicability issue.

Ratio Decidendi: Chapter XX-C of the Income-tax Act, 1961 does not apply retrospectively to an agreement for transfer completed before its commencement, and an order made under section 269UD(1) cannot be sustained where the transaction falls outside that chapter.

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