1970 (12) TMI 19 - HC - Income Tax

Court clarifies tax law on involuntary transfers under court orders, allows petition

The court determined that Section 230A of the Income-tax Act, 1961 does not apply to involuntary transfers under court orders. It held that the tax ... Registering transfer of immovable property - provision of section 230A of Income-tax Act. 1961, requiring certificate from Income-tax Officer for registering, are applicable only to cases of voluntary transfers Issues Involved:1. Validity of Section 230A of the Income-tax Act, 1961.2. Applicability of Section 230A to involuntary transfers.3. Objection regarding the compromise decree.4. Objection regarding the withdrawal of a previous application.Issue-wise Detailed Analysis:1. Validity of Section 230A of the Income-tax Act, 1961:The petitioner contended that Section 230A is ultra vires of the Constitution and constitutes an unreasonable restriction on the rights of the vendor and vendee, contravening Articles 19(1)(f) and 14 of the Constitution. The court analyzed the legislative history of Section 230A, noting its origin in the Payment of Taxes (Transfer of Property) Act, 1949, which aimed to prevent tax evasion by individuals leaving the country. The court observed that Section 230A applies to all citizens, lacks guidelines for granting or refusing the certificate, and does not provide an appeal mechanism, only allowing for revision by the Commissioner of Income-tax. The court acknowledged the argument that the provision imposes an onerous restriction on property transactions but refrained from deciding on the constitutionality of Section 230A, leaving it for determination in an appropriate case.2. Applicability of Section 230A to involuntary transfers:The court determined that Section 230A does not apply to involuntary transfers made under court orders. It noted that the prescribed Form 34A for obtaining the tax clearance certificate requires information within the special knowledge of the assessee and the income-tax department, which cannot be provided by a court-appointed officer executing the sale deed. The court emphasized that involuntary transfers, such as those resulting from court decrees or orders, cannot be subjected to the requirements of Section 230A. The court cited the case of Hind Estates Ltd. v. C. S. Peters, where the term 'transfer' was interpreted to apply only to voluntary conveyances, supporting the conclusion that Section 230A does not cover involuntary transfers.3. Objection regarding the compromise decree:The Commissioner of Income-tax argued that the decree was based on a compromise and thus constituted a contract between the parties, which could not circumvent the provisions of law. The court rejected this argument, stating that for execution purposes, the nature of the decree (whether based on a compromise or otherwise) is irrelevant. The court held that all decrees, once properly passed, are to be executed in the same manner, and the fact that the decree was based on a compromise does not affect its enforceability.4. Objection regarding the withdrawal of a previous application:The Commissioner of Income-tax contended that the present application was barred because the petitioner had withdrawn an earlier application (I.A. No. 507 of 1970) without liberty to file another. The court dismissed this objection, noting that the earlier application was withdrawn without a conclusive decision, and the observations made by P. S. Safeer J. were not binding. Furthermore, the court clarified that Order 23, Rule 1 of the Code of Civil Procedure, which pertains to the withdrawal of suits, does not apply to the execution of decrees. Therefore, the withdrawal of the previous application did not preclude the petitioner from filing the present application.Conclusion:The court ordered the Inspector-General of Registration and the Sub-Registrar of Registration to register the sale deed dated 3rd January 1970, executed by the Registrar of the court, without requiring a tax clearance certificate. The petition was allowed, and the parties were directed to bear their respective costs of the proceedings.