1991 (8) TMI 70 - HC - Income Tax

Court clarifies pre-emptive purchase right recording rules, tax deductions, and no objection certificates.

Vidyavathi Kapoor Trust Versus Chief Commissioner Of Income-Tax And Others

The court held that the appropriate authority must record reasons for exercising the pre-emptive purchase right but is not required to communicate these ... Business Expenditure, Remuneration Issues Involved:1. Whether the appropriate authority must record reasons in its order and communicate the same to the transferor.2. Whether the principles of natural justice would apply to an order passed by the appropriate authority.3. Whether the discounted value could be arrived at in terms of the definition, u/s 269UA(b) of the Act, of apparent consideration.4. Whether the deduction of tax liability from the consideration amount is warranted u/s 269UG(1).5. Whether the appropriate authority is different from the Chief Commissioner of Income-tax u/s 269UG(1).6. Whether the transferee is entitled to the no objection certificate if any part of the consideration is not tendered within the specified period u/s 269UH(1).7. Whether the court has the power to extend the time for payment when the consequences of non-payment are prescribed under the statute.8. Whether the transferor is liable to be non-suited on the ground of acquiescence.Summary:Point No. 1:Section 269UD(1) mandates that the appropriate authority must record reasons in writing for the exercise of the pre-emptive purchase right. However, these reasons need not be communicated to the transferor. This is to avoid arbitrariness and ensure the pre-emptive right is not exercised whimsically.Point No. 2:The principles of natural justice do not apply to an order passed by the appropriate authority u/s 269UD(1). The statute does not provide for a hearing, and no prejudice is caused to the transferor as the sale consideration remains the same, only the purchaser changes to the Central Government.Point No. 3:The definition of 'apparent consideration' u/s 269UA(b) includes the discounted value of consideration payable on any date or dates after the agreement date. The discounted value can be reasonably ascertained from the agreement for sale, and any mistake in this regard can be rectified u/s 269UJ.Point No. 4:U/s 269UG(1), the tax liability of the person entitled to the consideration can be deducted. In this case, Mohanlal Kapur, both a trustee and a beneficiary, received the consideration without demur, implying acceptance of the deduction of his tax liability.Point No. 5:The 'appropriate authority' u/s 269UG(1) proviso can be interpreted as the Central Government, which has delegated the power to the Chief Commissioner of Income-tax. This interpretation aligns with the statutory context and legislative intent.Point No. 6:If the consideration is not tendered within the specified period, the property will revest in the transferor, and a no objection certificate must be issued u/s 269UL(3). However, in this case, the consideration was tendered and accepted, so the question of issuing a no objection certificate does not arise.Point No. 7:The court does not have the power to extend the time for payment when the statute prescribes specific consequences for non-payment. The direction given by the learned single judge for payment of Rs. 2,49,851 to the appellant-transferor was incorrect as there was no such undertaking by the Revenue.Point No. 8:The appellant-transferor acquiesced in the order of the appropriate authority by accepting the consideration without protest and attorning the tenancy. This conduct disentitles the appellant from questioning the order now.Conclusion:Writ Appeal No. 1318 of 1991 is dismissed. Writ Appeal No. 1335 of 1991 is allowed, setting aside the direction of the learned single judge. Leave to appeal to the Supreme Court is granted due to the substantial questions of law involved.