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Issues: (i) Whether the demand of unearned increase could be sustained on the basis of the merger of a foreign holding company and the transfer of shares in the petitioner company. (ii) Whether the petitioner was entitled to refund of the amount earlier directed to be dropped and whether interest was payable on the refundable amounts.
Issue (i): Whether the demand of unearned increase could be sustained on the basis of the merger of a foreign holding company and the transfer of shares in the petitioner company.
Analysis: Unearned increase under the lease deed could be levied where the industrial plot itself was sold, transferred, assigned, or possession was parted with. The transfer of shares in a company does not amount to transfer of the company's assets, because a company is a separate legal entity distinct from its shareholders. The transaction in question was a dilution and transfer of shareholding in the petitioner's parent structure, and no material was shown to justify lifting the corporate veil. Applying the principle that the transaction must be viewed as it is, the Court held that the legal form could not be disregarded to treat a share transfer as a transfer of the subject property.
Conclusion: The demand of unearned increase on this basis was unsustainable and was set aside, in favour of the petitioner.
Issue (ii): Whether the petitioner was entitled to refund of the amount earlier directed to be dropped and whether interest was payable on the refundable amounts.
Analysis: The amount of Rs. 3,94,57,027/- had already been recorded by the respondent as liable to be dropped and refunded. The Court accepted that this amount was refundable. As regards interest, the Court declined to grant any further interest, noting that the petitioner had already paid substantial sums, including interest elements, and the claimed interest was not considered appropriate on the facts.
Conclusion: Refund of the dropped amount was directed, but the claim for interest was rejected, in favour of the petitioner in part.
Final Conclusion: The impugned demand notices were quashed, the respondent was directed to compute and refund the admissible amount, and the conveyance deed was to be executed without awaiting the refund calculation.
Ratio Decidendi: A transfer of shares in a company, without transfer of the company's assets or a legally sustainable basis to lift the corporate veil, does not amount to a transfer of the leased property so as to attract unearned increase.
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