Clearance certificate under tax law cannot be refused on disputed title; enquiry remains limited to tax-liability conditions.

Section 230A of the Income-tax Act confines the Income-tax Officer's enquiry to whether the transferor has cleared, or properly provided for, existing tax liabilities so that registration will not prejudice recovery. The provision does not authorise adjudication of disputed title or the validity of the proposed transfer. Where the conveyance identified the trust as vendor and the materials supported its beneficial ownership, refusal of a clearance certificate on the footing that the property was not in the trust's name was impermissible. The clearance certificate was therefore directed to be issued, as the statutory power could not be expanded into a title investigation.

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Issues: Whether, while considering an application for a clearance certificate under section 230A of the Income-tax Act, 1961, the Income-tax Officer could refuse the certificate on the ground that the transferor's title to the property was disputed and whether the refusal was legally justified.

Analysis: Section 230A is intended only to prevent registration of a document unless the transferor has no existing tax liabilities or has made satisfactory provision for them and unless registration will not prejudice recovery of such liabilities. The provision does not empower the Income-tax Officer to adjudicate title or validity of the transfer. The officer's enquiry is confined to whether the person seeking the certificate is the transferor under the proposed document and whether the statutory tax-related conditions are satisfied. On the facts, the proposed conveyance named the trust as vendor, the trustees and firms were confirming parties, and the materials produced supported the trust's claim to beneficial ownership. Refusal on the ground that the property did not stand in the trust's name therefore rested on an impermissible title enquiry.

Conclusion: The refusal to issue the certificate under section 230A was unjustified and the direction to issue the clearance certificate was upheld, in favour of the assessee.

Final Conclusion: The appeal failed because the statutory power under section 230A could not be expanded into an adjudication of title, and the Income-tax Officer was bound to confine himself to the tax-liability conditions prescribed by the provision.

Ratio Decidendi: In proceedings for a certificate under section 230A of the Income-tax Act, 1961, the Income-tax Officer cannot refuse the certificate by entering into the title of the property; the enquiry is limited to existing tax liabilities and their recovery consequences.

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