2018 (9) TMI 1923 - HC - Income Tax

Court dismisses petition challenging government's property acquisition, upholds compensation validity. Costs imposed on petitioners.

The court dismissed the petition challenging the Central Government's acquisition of the property, ruling that the petitioners had no valid claim to ... Vesting of property in the Central Government upon acquisition under Chapter XXA/Section 269-F(6) of the Income tax Act - right to compensation payable to the legal heirs of the person from whom property was acquired - deposit of compensation under Section 269 K(3) and court's jurisdiction to determine entitlement - effect of amendment/repeal of Chapter XXA (w.e.f. 30.09.1986) on acquisitions concluded before that date - competence of a particular department (CPWD versus Income Tax Department) to tender or pay compensation and its legal consequence - finality of earlier civil and appellate judgments as barring collateral re opening of titleVesting of property in the Central Government upon acquisition under Chapter XXA/Section 269-F(6) of the Income tax Act - finality of earlier civil and appellate judgments as barring collateral re opening of title - Whether the property stood vested in the Central Government on account of acquisition and, consequent thereto, whether the petitioners have any title or right to the suit property. - HELD THAT: - The Court accepted the finding that the property was acquired by order dated 17.02.1978 under Section 269 F(6) and that the acquisition became final by dismissal of appeals and writ petition up to this Court (finality noted as on 11.03.1983). The civil suit and successive appeals filed by the petitioners seeking declaration and injunction were dismissed, and RSA No.1538 of 2005 was upheld by this Court on 16.09.2008. Those final judgments preclude re opening title in these proceedings. Accordingly, a sale deed executed in 1991 by a person who had ceased to be owner on the date of acquisition cannot vest title in the petitioners, and their claim to be owners in possession is foreclosed by the earlier final orders. [Paras 8, 14, 15, 19]The property had vested in the Central Government on acquisition and the petitioners have no title, right or interest in the suit property.Right to compensation payable to the legal heirs of the person from whom property was acquired - deposit of compensation under Section 269 K(3) and court's jurisdiction to determine entitlement - Whether the deposited compensation is payable to the petitioners or exclusively to the legal heirs of the acquired owner, and whether the court proceedings under Section 269 K determine entitlement. - HELD THAT: - The Court endorsed the view that, since acquisition had become final and the property vested in the Central Government, entitlement to compensation lies with the legal heirs of the original owner from whom the property was acquired. The Income Tax Department's application under Section 269 K(3) to deposit the cheque in Court was properly entertained, and where dispute as to entitlement arises the statute contemplates deposit and reference to the Court for decision. The impugned order correctly held that the cheque is payable to the legal heirs and that the petitioners, lacking title, have no right to the deposited amount. [Paras 9, 19]The compensation deposited is payable to the legal heirs of the acquired owner; the petitioners have no right to that amount.Competence of a particular department (CPWD versus Income Tax Department) to tender or pay compensation and its legal consequence - deposit of compensation under Section 269 K(3) and court's jurisdiction to determine entitlement - Whether deposit of compensation by the Income Tax Department (as opposed to CPWD) vitiates the deposit or entitles the petitioners to recovery of the property or compensation. - HELD THAT: - The Court found it unnecessary to treat the question of which department physically paid or tendered the compensation as determinative of the recipients' right. Even if CPWD had administrative responsibility to arrange payment, that is an internal matter of the Union; payment made on behalf of the Union of India does not prejudice entitlement. Thus competence or source of funds within government departments does not invalidate the deposit nor affect the legal entitlement of the legal heirs. [Paras 7, 18]The department by which the compensation was deposited (CPWD or Income Tax Department) is immaterial; the deposit on behalf of the Union of India is effective and does not confer rights on the petitioners.Effect of amendment/repeal of Chapter XXA (w.e.f. 30.09.1986) on acquisitions concluded before that date - finality of earlier civil and appellate judgments as barring collateral re opening of title - Whether the amendment to Chapter XXA effective 30.09.1986 (as relied on in M. Mathew Thomas) renders the earlier acquisition ineffective so as to revive title of the original owner and thereby favor the petitioners. - HELD THAT: - The Court distinguished the Mathew Thomas decision: in that case proceedings were pending before the High Court when the amendment took effect, so the benefit of the amendment applied to pending proceedings. Here, the acquisition and challenges had become final well before 30.09.1986 (appeal dismissed in 1981 and writ dismissed in 1983) and RSA No.1538 of 2005 was later decided against the petitioners. The amendment therefore does not affect an acquisition concluded and finally adjudicated prior to 30.09.1986. The petitioners' reliance on Mathew Thomas was rejected and cannot justify reopening final orders. [Paras 11, 14, 15]The amendment to Chapter XXA effective 30.09.1986 does not affect an acquisition which had become final before that date; Mathew Thomas is inapplicable and does not revive the petitioners' title.Final Conclusion: The petition is dismissed. The impugned order upholding deposit of compensation for determination by the Court and recognizing entitlement of the legal heirs is affirmed; the petitioners have no title to the property or right to the deposited amount. Costs of Rs.25,000 are imposed on the petitioners. Issues Involved:1. Legality of the acquisition of the property by the Central Government.2. Right of the petitioners to claim ownership and compensation for the property.3. Competence of the Department of Income Tax to deposit compensation.4. Applicability of Chapter XXA of the Income Tax Act post its repeal in 1986.5. Physical possession of the property by the Income Tax Department.6. Right of legal heirs to receive compensation.Detailed Analysis:1. Legality of the acquisition of the property by the Central Government:The property in question was acquired by the Central Government under Section 269-F(6) of the Income Tax Act, 1961, via an order dated 17.02.1978. This acquisition was challenged by the then-owner, Manak Chand Khanna, but his appeal was dismissed by the Income Tax Appellate Tribunal on 05.10.1981, and the dismissal was upheld by the High Court. The acquisition order thus became final.2. Right of the petitioners to claim ownership and compensation for the property:The petitioners claimed ownership of half the property based on a sale deed executed in their favor in 1991 by the general attorney of Manak Chand Khanna. However, since the property was acquired by the government in 1978, Manak Chand Khanna was no longer the owner and had no right to sell it. The petitioners' civil suit seeking a declaration of ownership and injunction was dismissed by the Additional Civil Judge in 2000, and this dismissal was upheld by the Additional District Judge in 2005 and by the High Court in 2008 (RSA no.1538 of 2005). Consequently, the petitioners had no title, right, or interest in the property and no right to be heard in the proceedings under Section 269-I of the Act.3. Competence of the Department of Income Tax to deposit compensation:The petitioners argued that the Central Public Works Department (CPWD) was the competent authority to deposit the compensation. However, the court held that whether the compensation was deposited by the Income Tax Department or CPWD was immaterial, as the property vested in the Union of India. The compensation was deposited on behalf of the Union of India, satisfying the legal requirement.4. Applicability of Chapter XXA of the Income Tax Act post its repeal in 1986:The petitioners contended that since Chapter XXA was repealed in 1986, the property should revert to the original owner. However, the court noted that the acquisition had become final before the repeal, and the amendment did not affect proceedings that had already been concluded. The judgment in 'M. Mathew Thomas and others Vs. Commissioners of Income Tax' was not applicable as the acquisition had attained finality long before the repeal.5. Physical possession of the property by the Income Tax Department:The petitioners claimed that the Income Tax Department had not taken physical possession of the property. The court found this issue irrelevant, as the petitioners' suit for a declaration of ownership was dismissed. Any occupation by the petitioners was deemed illegal, as the property had vested in the government, and an order for taking possession was passed in 1989.6. Right of legal heirs to receive compensation:The court held that only the legal heirs of Manak Chand Khanna were entitled to the compensation deposited by the Income Tax Department. The petitioners had no right to this compensation, as they had no valid claim to the property.Conclusion:The petition was dismissed, and the court imposed a cost of Rs. 25,000/- on the petitioners for continuously litigating the matter despite losing in previous rounds. The legal heirs of Manak Chand Khanna were recognized as the rightful claimants to the compensation.