2001 (1) TMI 38 - HC - Income Tax

Court Applies Income-tax Act Retroactively to Transaction, Upholds Market Value Determination

The court held that Chapter XX-C of the Income-tax Act applied to the transaction, even though the agreement was entered before its enforcement. The court ... Agreement for transfer - transfer of immovable property - definition clause 'unless the context otherwise requires' - application of the Transfer of Property Act to test completion of transfer - part performance (section 53A) does not confer title - statutory bar and requirements of section 269UC (agreement in prescribed form) - voidness of transfers contravening section 269UC - supervisory jurisdiction under Article 226 limited to perversity/no evidence/ignoring relevant materialAgreement for transfer - transfer of immovable property - application of the Transfer of Property Act to test completion of transfer - statutory bar and requirements of section 269UC (agreement in prescribed form) - Whether the provisions of Chapter XX-C applied to the agreement dated July 29, 1987, i.e., whether a completed 'transfer' had occurred prior to the date on which Chapter XX-C was extended to Bangalore (October 1, 1987). - HELD THAT: - The court held that insofar as Chapter XX-C did not operate in the Bangalore metropolitan area on July 29, 1987, the meaning of 'transfer' must be tested by the general law of transfer (Transfer of Property Act). Under sections 54 and related provisions of the Transfer of Property Act a sale of immovable property of value above the statutory threshold is completed only by a registered instrument; mere agreement and delivery of possession under an agreement not in the prescribed form does not effectuate title. Section 269UC requires the agreement for transfer to be reduced to a statement in the prescribed form and furnished to the Appropriate Authority; the scheme of Chapter XX-C makes that statement integral to the statutory notion of an effective 'agreement for transfer'. To read the petitioners' informal agreement and alleged delivery of possession as amounting to a completed transfer would render section 269UC otiose and defeat the statutory scheme. In the present case the agreement of July 29, 1987, was not in the prescribed form (Form No. 37-I could not have been filed before the chapter applied) and the material before the court indicated that possession had not, in fact, been effectively delivered; clauses of the agreement and the particulars in the Form filed on October 30, 1987, pointed to continued vendor occupation. Applying these principles and relevant authorities, the court rejected the petitioners' contention that Chapter XX-C did not apply and held there was no completed transfer prior to October 1, 1987.The contention that the provisions of Chapter XX-C did not apply because the transfer was completed on July 29, 1987, is rejected; no completed transfer occurred prior to the chapter's operation and Chapter XX-C applied.Voidness of transfers contravening section 269UC - part performance (section 53A) does not confer title - supervisory jurisdiction under Article 226 limited to perversity/no evidence/ignoring relevant material - Whether the Appropriate Authority's valuation finding (market value and deficiency exceeding 15%) was vitiated by failure to consider relevant material or by consideration of irrelevant material such as to warrant interference under Article 226. - HELD THAT: - The court examined the record of the Appropriate Authority and found that relevant materials and the petitioners' illustrations were considered and discussed; the authority explained the basis for arriving at an estimated market rate on the relevant date. The finding on valuation was a factual conclusion based on appreciation of evidence. Absent a case that the authority ignored material, relied on extraneous material, or reached a conclusion on no evidence or a conclusion no reasonable person could reach, the High Court will not usurp the fact-finding function. Applying settled principles limiting supervisory jurisdiction, the court held there was no ground to interfere with the authority's valuation finding.The Appropriate Authority's valuation finding is sustainable on the record and does not merit interference under Article 226.Final Conclusion: Both writ petitions are dismissed: the challenge that Chapter XX-C did not apply because the transfer was completed before its operation is rejected, and the factual valuation determination by the Appropriate Authority is upheld; parties to bear their own costs. Issues Involved:1. Applicability of Chapter XX-C of the Income-tax Act to the transaction.2. Validity of the order passed by the Appropriate Authority u/s 269UD(1).3. Determination of market value by the Appropriate Authority.Summary:1. Applicability of Chapter XX-C of the Income-tax Act:The petitioners contended that the agreement for transfer was entered into on July 29, 1987, before Chapter XX-C was enforced in Bangalore on October 1, 1987. They argued that possession was handed over on the date of the agreement, making the transaction a completed transfer before the applicability of Chapter XX-C. The court held that the definition of 'transfer' in section 269UA(f) should be interpreted in the context of the general law of transfer, as the provisions of Chapter XX-C were not in force at the time of the agreement. The court found that mere delivery of possession under an agreement did not amount to a completed transfer under the Transfer of Property Act, which requires a registered instrument for transfers of immovable property worth more than one hundred rupees. Therefore, the provisions of Chapter XX-C applied to the transaction, and the order passed by the authorities was within jurisdiction.2. Validity of the order passed by the Appropriate Authority u/s 269UD(1):The petitioners argued that the order dated February 25, 1993, for compulsory purchase was illegal and void as the transaction was completed before Chapter XX-C came into force. The court rejected this contention, stating that the transaction was not completed under the general law of transfer, and the agreement in the prescribed form was submitted on October 30, 1987. Thus, the Appropriate Authority had jurisdiction to consider the matter and pass the order u/s 269UD(1).3. Determination of market value by the Appropriate Authority:The petitioners contended that the market value determined by the Appropriate Authority was erroneous and based on irrelevant material. The court found that the authority had considered the relevant material and illustrations provided by the petitioners and arrived at a finding based on the appreciation of evidence. The court held that the jurisdiction under article 226 of the Constitution is not that of a court of fact or the first appellate court and cannot interfere with the finding of fact unless it is based on no evidence or is perverse. Therefore, the court dismissed the petitions, upholding the order of the Appropriate Authority.Conclusion:Both writ petitions were dismissed as devoid of merit, and the court upheld the order of the Appropriate Authority for compulsory purchase of the property under section 269UD(1) of the Income-tax Act.