2007 (8) TMI 271 - HC - Income Tax

Supreme Court rules on discounting consideration: Value from agreement date, transfer fee refund ordered

The Supreme Court ruled in favor of the petitioner in a case challenging the discounting of apparent consideration and retention of transfer fee amount by ... Provisions of section 269UA(6) of the Income-tax Act, 1961 challenged as violative of article 14 of the Constitution - what is the date that has to be considered for the purpose of discounting? Whether it was open to the appropriate authority to have retained a sum of ₹ 14,251 towards vendor's liability of transfer fees? Held that:- View taken by this court is no longer good law and for the purpose of considering the discounted price what has to be taken is the date of the agreement. In the instant case, what is sought to be deducted is the proportionate amount of transfer fee to be paid to the society. In so far as 'apparent consideration' is concerned what can be deducted are only the amount as statutorily provided under the section in the Chapter and no other amounts. The amount of transfer fee not being statutory, therefore, could not have been deducted. The result would be that on the order being- passed the property vested in the Government free from all encumbrances. The question of the Government paying any transfer fees or for that matter stamp duty or registration fees would not arise. This would be yet another reason to hold that the Government could not have retained any amount towards the transfer fees. Once that be the case the petition in so far as the deduction will have to be allowed. Thus the petition is allowed to the extent that the retention of sum of ₹ 14,251 was without the authority of law. The respondents are, therefore, directed to refund the said amount in favour of the petitioner with simple interest at the rate of 8 per cent. per annum from the date of retention till payment. Appeal partly allowed. Issues Involved:Challenge to discounting of apparent consideration by respondents, challenge to retention of transfer fee amount by respondents.Analysis:*Challenge to Discounting of Apparent Consideration:*The petitioner challenged the action of respondents in discounting the amount of apparent consideration by Rs. 40,291. The Tribunal noted that the payment was deferred, leading to the discount calculation. The court referred to previous judgments to determine the date for discounting, concluding that the date of the agreement should be considered. The Supreme Court clarified that the discounted value must be calculated from the agreement date. This rendered the previous view obsolete. Therefore, the discounted price should be determined based on the agreement date.*Challenge to Retention of Transfer Fee Amount:*The respondents retained Rs. 14,251 towards the vendor's liability for transfer fees. The court referred to a previous case where deductions from apparent consideration were discussed. It was noted that only deductions specified in the definition clause were permissible. The court emphasized that unascertained amounts could not be deducted. The judgment was further supported by a Division Bench ruling. The court concluded that the transfer fee was not statutory and, therefore, could not be deducted. The property vested in the Government free from encumbrances, eliminating the need for transfer fees. Consequently, the retention of the transfer fee amount was deemed unauthorized.*Judgment:*The court allowed the petition, directing the respondents to refund Rs. 14,251 to the petitioner with interest. The respondents were instructed to make the payment within eight weeks. The rule was made absolute partly, with no order as to costs.