CA R.V. Shah

Preliminary:

Title of Chapter XX-C comprises of 16 sections, Section 269U to Section 269 UP. The title of Chapter XX-C is indicative of the nature of power and proceedings. The nature of power is penal and the proceedings are quasi criminal. The satisfaction of the component authority is exclusively a subjective satisfaction based on objective facts. Sections 269U to 269V were inserted by Finance Act, 1986 with effect from 1st October, 1986 vide Notification No. SO480(E), dated 7th August, 1988, i.e., assessment year 1986-87.

Section 269UA contains various definitions such as:

1. Apparent consideration
2. Appropriate authority
3. Immoveable Property
4. Person interested, and
5. Transfer

1. Agreement for transfer means an agreement for the transfer of any immovable property, whether registered under Registration Act, 1908 or not?
2. Apparent consideration:

In relation to any immovable property in respect of which an agreement for transfer is made for immovable property means:

1. If it is to be transferred by of sale, the consideration for such transfer as specified in the agreement of transfer would be an apparent consideration.

   The ordinary meaning of the word “sale” is a transaction entered into voluntarily between two persons known as buyer and the seller by which the buyer acquires the property of the Seller for an agreed consideration known as price – Calcutta Electric Supply Corporation Ltd. 19 ITR 406 (Cal.). The term “Sale” means the transfer of property for a price CIT v. Devas Cine Corporation 68 ITR 240 (SC). Thus, the money consideration is an essential ingredients of a transaction of sale. Hon’ble Supreme Court in Jagdish Sugar Mills Ltd. v. CIT 161 ITR 209 (SC) has held that the sale would include an auction sale.

2. If the immovable property is to be transferred by way of exchange:
   1. In a case where the consideration for transfer consists exchange of one property for another, the price that such property would ordinarily fetch on sale in the open market on the date on which the agreement for transfer is made and such sum.

The meaning of the word “Exchange” necessarily presupposes existence of two different properties owned by different persons. As a result, the ownership of one property is transferred to the owner of the other property and vice versa CIT v. Rasiklal Maneklal (HUF) 95 ITR 656 (Bom.)

The immoveable property is to be transferred by way of lease:

1. In a case where the consideration for the transfer consists of premium only, the amount of premium as specified in the agreement for transfer would be an apparent consideration.
2. In a case where the consideration for the transfer consists of rent only, the aggregate of moneys, if any, payable by way of rent and the amounts for the service of things forming part of or constituting the rent as specified in the agreement for transfer would constitute apparent consideration.
3. In a case where the consideration for transfer consists of premium, the moneys (if any) payable by way of rent and the amount for the service or things forming part of or constituting the rent, as specified in the instrument of transfer would constitute apparent consideration.

A lease is a division of bundle of rights. The full “bundle of rights” inherent in property with freehold tenure may further be divided by a lease or leases so as to create two or more interest in the property like lessor’s interest, lessee’s interest, sub-lessee’s interest etc.

Discounted value of consideration: Where the whole or any part of the consideration for such transfer is payable on any date or dates falling after the date of such agreement for transfer, the value of the consideration payable after such date shall be deemed to be “discounted value” of such consideration, as on the date of

such agreement for transfer, determined by adopting such rate of interest, i.e., 8% per annum vide Rule 48I.

Section 269UA(2): Any immoveable property in respect of which an agreement for transfer is made of immovable property means:

1. Where the consideration for transfer consists of a sum of money only, then such sum (i.e., case of sale);
2. Where the consideration for the transfer consists of a thing or things only, the price that such thing or things would ordinarily fetch on sale in the open market on the date on which the agreement for transfer is made, and such sum (i.e., case of exchange);
3. Where the consideration for the transfer consists of a thing or things and a sum of money, the aggregate of the price that such thing or things would ordinarily fetch on sale in the open market on the date on which agreement for transfer is made and such sum (i.e., in case of lease).

   Where the whole or any part of the consideration for such transfer is payable on any date or dates falling after the date of such agreement for transfer, the value of the consideration payable after such date shall be deemed to be the “discounted value” of such consideration, as on the date of such agreement for transfer determined by adopting discounted rate of 8% under rule 48-I.

4. “Immoveable Property”: The term “immoveable property” has been defined in sub-section (2)(d) of Section 269UA. It means (i) any land or any building or a part of the building and includes, where any land or any building or part of the building is to be transferred together with any machinery, plant, furniture, fittings or other things, such machinery, plant, furniture, fittings or other things also. (ii) Any right in or with respect to any land or any building or part of the building (whether or not including any machinery, plant, furniture, fittings or other things therein) which has been constructed or which is to be constructed, accruing or arising from any transaction (whether by way of becoming a member of, or acquiring shares in a cooperative society, company or other association of persons or by way of any agreement or any arrangement of whatever nature), not being a transaction by way of sale, exchange or lease of such land, building or part of a building.

The definition of immoveable property is exhaustive.

It means (i) any land or building or any part of a building to be transferred together with any machinery, plant, furniture, fittings or other things. (ii) Any right in respect of or with respect to land, building or part of the building which has been constructed or which is to be constructed or by becoming a member of or acquiring shares in a cooperative societies or association of persons or by way of any agreement or any arrangement of whatsoever nature.

“Person Interested”: Section 269UA(2)(e) defines the term persons interested in relation to any immoveable property and includes all persons claiming or entitled to claim and an interest in the consideration payable on account of the vesting of the property in the Central Government.

“Transfer”: (i) Transfer in relation to immovable property is by way of sale or exchange or lease for a term of not less than twelve years; and (ii) includes allowing the possession of such property to be taken or retained in part performance of a contract referred to in Section 53A of the Transfer of Property Act, 1882. (iii) Transfer in relation to immovable property

means doing of anything by way of admitting a member, or of by way of transfer of shares in a co-operative society or company or other association of persons by way of agreement or arrangement or in any other manner which has the effect of transferring or enabling the enjoyment of such property.

Nature of powers:

The nature of power is penal and proceedings are quasi criminal. CIT v. Vimlaben Bhagwandas Patel & CIT v. Kamlaben Kanjibhai Patel [1979] 1 Taxmann 183 (Guj.). The satisfaction of the competent authority is absolutely a subjective satisfaction based on objective facts. Conditions precedent required is to be satisfied before the Competent Authority can exercise his satisfaction of initiating proceedings. For initiation of proceedings, two conditions have to be satisfied by the Competent Authority. Appropriate notice has to be published in the gazette must be observed and the principles of natural justice has to be observed by the Competent Authority in the course of inquiry for acquisition. Competent Authority in the context of acquisition proceedings under Chapter XXC has to follow the best method of valuation to arrive at fair market value. It is desirable that Competent Authority must resort to checks and counter checks by applying two or all the methods, namely, opinion of experts, principles of natural justice, price paid within a reasonable time in bonafide transactions of purchase of land acquired or of adjacent lands and number of years purchase of actual or immediately prospective profits of land acquired.

Restriction on transfer of immovable property:

There cannot be any transfer of immovable property in such area and value exceeding five lakh rupees provided in Rule 48K of the Income-tax rule, 1962 shall be effected except after an agreement for transfer is entered into between persons who intends transferring the immovable property atleast four months (prior to 1-6-1993, it was three months) before the intended date of transfer. The agreement shall be reduced to writing in the form of a statement by each of the parties to such transfer or by any of the parties to such transfer acting on behalf of himself and on behalf of the other parties.

The agreement shall be recorded in writing in the form a statement by each of the parties to such transfer or by any of the parties to such transfer.

Section 269UC(3) provides that every statement shall contain the following:

1. It shall be in the prescribed form 37-I under Rule 48 Lacs.
2. It shall set forth such particulars as may be prescribed; and
3. It shall be verified in the prescribed manner.

The said statement shall be furnished to the appropriate authority in such manner and within such time as may be prescribed by each of the parties to such transactions acting on behalf of the other parties.

Section 269UC(4) provides that above referred statement furnished to the appropriate authority is found to be defective, then the said authority shall intimate the defect to the parties concerned and give them the opportunity to rectify the defect within a period of fifteen days (15) from the date of intimation or within such further period the appropriate authority on an application made may extend further period as may be allowed and the defect is not rectified within the period fifteen days (15) or the further period so allowed, then such statement shall be deemed never to have been furnished.

Purchase of Immoveable Property by Central Government:

Section 269UD provides that the appropriate

authority may make an order for the purchase by the Central Government of such immovable property at an amount equal to the amount of apparent consideration.

It further provides that no such order shall be made in respect of any immovable property after the expiration of two months from the end of the month in which the statement in respect of such property is received by the appropriate authority under Section 269UC.

Second Proviso to Section 269UD provides that statement referred in Section 269UC is received on or after 1st June, 1993, no order shall be made for purchase of such immovable property after expiration of three months.

Section 269UD(1A) provides that the appropriate authority shall give a reasonable opportunity of being heard to the transferor, the person in occupation of the property, the transferee and to every other person in occupation of the immovable property and every other person whom the appropriate knows to be interested in the purpose.

Vesting of Property in the Central Government:

Section 269UE provides that where an order is made under Section 269UD(1), by the appropriate authority under Section 269UA(d) (i), such property shall on the date of such order, vest in the Central Government in terms of the agreement for transfer.

It further provides that where the appropriate authority, after giving reasonable opportunity of being heard to the Transferor, transferee or other interested persons in the said property, is of the opinion that any encumberance on the property, or the leasehold interest specified in the above agreement for transfer with a view to defeat the provisions of Chapter XX-C the appropriate authority may declare by an order that such encumbrance or leasehold interest is void and thereupon the said property shall vest in the Central Government.

Section 269UE(7) provides that where any rights in any immovable property, being rights in or with respect to, any land or building or a part of the building which has been constructed or which is to be constructed have been vested in the Central Government shall have the effect as if the reference to immovable property therein with reference to such land or building or part thereof as the case may be.

Payment of consideration for purchase of immoveable property by the Central Government:

Where an order for purchase of any immovable property is made, the Central Government shall pay by way of consideration for such purchase an amount equal to the amount of such apparent consideration.

Payment or deposit of consideration: Section 269UG provides that the amount of consideration shall be tendered to the person or persons entitled thereto, within a period of one month from the end of the month in which the immoveable property vests in the Central Government under Section 269UE.

Immunity to Transferor against claims of Transferee for transfer:

Section 269UM provides that when order for the purchase of immovable property by the Central Government is made no claim by the Transferee shall lie against the Transferor by reason of such transfer being not in accordance with the agreement for the transfer of immovable property entered into between the Transferor and the Transferee.

Order of an appropriate authority to be final and conclusive:

Section 269UN provides that any order made under Section 269UD or 269UF shall be final and conclusive and shall not be called in question in any proceedings under the Act or under any other law for the time being in force.

Chapter XX-C shall not apply to certain transfers:

Section 269UO provides that at this Chapter shall not apply to or in relation to any immovable property where the Agreement for such transfer is made to his relative on account of natural love and affection.