Mukund L. Vora vs Union Of India (Uoi) And Ors.
2004 Latest Caselaw 81 Bom

JUDGMENT

V.C. Daga, J.

1. The petitioner is challenging an order dated 18th February 1994 passed by the Appropriate Authority, respondent No. 2 herein, under Sub-section (1) of Section 269UD of the Income- tax Act ('the Act' for short). The Appropriate Authority ordered purchase of the petitioner's property by the Central Government, for apparent consideration of Rs. 3,62,25,050/-. The petitioner has not challenged acquisition of the said property. The challenge in the petition is restricted to the impugned order to the extent of withholding a sum of Rs. 5,00,000/- on account of transfer fees allegedly payable to the co-operative housing society and secondly; the act of invoking concept of discounting envisaged under Section 269UA(b) of the Act and thereby reducing the amount of apparent consideration from Rs. 3,70,00,000/- to Rs. 3,62,25,50/-.

Factual matrix:

2. Undisputed factual matrix giving rise to the present petition is that under an agreement dated 24th November 1993, the petitioner agreed to sell his property; being residential Flat No. 241, Urvashi, L. Jagmohandas Road, Bombay - 400006, along with car parking space (hereinafter referred to as 'the suit premises' for short), for a consideration of Rs. 3,70,00,000/-. It was, inter alia; agreed between the parties that out of the aforesaid amount of consideration Rs.3,70,00,000/-, a sum of Rs. 35,00,000/- would be paid by the vendee to the petitioner and balance amount of Rs. 3,35,00,000/- shall be paid within 48 hours after receipt of 'no objection certificate' from the Income-tax Department and/or from the Housing Society or 15th March 1994 whichever is later. The transfer charges of the society were to be borne by the vendor and vendee in the ratio of 50 : 50.

3. In pursuance of the aforesaid agreement petitioner and the said purchasers, furnished to the respondents the statement of transfer of immovable property as required by law under Section 269UC of the Act in Form No. 37-I as prescribed. The petitioner and said purchasers were served with the show cause notice dated 31st January, 1994, under Section 269UD of the Act, calling upon them to show cause as to why an order should not be made directing Central Government to purchase the said premises under Section 269UD of the Act.

4. By a letter dated 7th February, 1994, the common Advocate of the petitioner as well as the said purchasers sought for details of sale instances relied upon by the Competent Authority in the show cause notice. However, there was no reply to the said letter. By another letter dated 12th February, 1994 addressed by the common Advocate for the petitioner as well as the said purchasers detailed reply to the show cause notice was submitted. In the said reply, it was contended that the discounting method adopted by the respondents was unconstitutional and in any event erroneous. It was further contended that the retention of the amount in the sum of Rs. 5,00,000/- towards the transfer fees allegedly payable to the society was illegal muchless highly excessive since the transfer fee was only Rs. 25,000/- out of which the petitioner's share was to the extent of Rs. 12,500/- only being 50% of the transfer charges. The petitioners and the said purchasers were, subsequently, granted a hearing on 18th February, 1994. The respondent No. 2 passed an order rejecting all the contentions raised and advanced on behalf of the petitioner and the said purchasers and the acquisition was confirmed for the apparent consideration of Rs. 3,62,25,050/-.

5. On 23rd February, 1994, the petitioner was served with another notice calling upon him to hand over possession of the said premises and the relevant documents with respect to title thereof. Pursuant to the said notice, the petitioner handed over possession of the said premises to the respondents and has accepted the apparent consideration under protest.

6. Being aggrieved by the impugned order dated 18th February 1994, passed by respondent No. 2 the petitioner has invoked writ jurisdiction of this Court under Article 226 of the Constitution of India.

7. On being noticed, the respondents appeared and filed their counter affidavit and submitted that the constitutional validity of the provisions of Chapter XX-C of the Act having been upheld by the Supreme Court in the case of C.B. Gautam v. Union of India reported in 199 ITR 530, the constitutional challenge to the provisions of the Act does not survive. He further contended that the issue with respect to discounting of value had also been upheld by this Court as well as the Apex Court in series of judgments. He relied upon decision of this Court in the case of Vimaladevi G. Maheshwari v. S.K. Laul, (1994)208 ITR 734 and tried to support the method of discounting and application thereof to the present case.

8. So far as retention of the amount of Rs. 5,00,000/-, by the appropriate authority; from the apparent consideration being 50% share of transfer fee payable by the vendor is concerned, reliance is placed on the affidavit filed by the respondents dated 16th October 2003, wherein the contention raised by the petitioner has been fairly accepted by the respondents except for entitlement of the petitioner to claim interest thereon.

With the aforesaid pleadings on record, Mohan Jaykar was heard on behalf of the petitioner whereas; Shri R. Asokan advanced his submissions on behalf of the respondents. Submissions :

9. Shri Jaykar for the petitioner at the outset, made it clear that the petitioner- transferor is not challenging the validity of the provisions of Chapter XX-C of the Act save and except action of the respondents to the extent it has reduced apparent consideration payable by the transferee and retention of sum of Rs. 5 lacs on account of transfer fees allegedly payable to the housing society. He further submitted that in view of the stand taken by the department and their willingness to refund Rs. 5 lacs, it is not necessary to dwell upon the said issue though raised in this petition.

10. Shri Jaykar confining himself to the issue of application of the concept of discounting and calculation thereof, pressed into service an agreement dated 24th November, 1993 which provides for payment of consideration as under:

   (i) Rs. 35,00,000/-    Paid as earnest money.
(ii)Rs. 3,35,00,000/-     Payable on completion of transaction i.e. within 48
                   hours after receipt of no objection certificate from,
            the Income-tax department or from the society on
            or before 15th March 1994 whichever is later,
Rs. 3,70,00,000/-      Total consideration. 
 

11. The Competent Authority made adjustment in accordance with provisions of Section 269UF(1) read with Section 269UA(b) and held that out of total consideration the payment of Rs. 3,35,00,000/- was to be deferred by 111 days from the date of agreement and, therefore, the amount of apparent consideration payable to the petitioner was liable to be reduced @ 8% p.a. The Competent Authority, thus worked out apparent consideration payable to the petitioner in the sum of Rs. 3,62,25,050/-.

12. Shri Jaykar did not dispute that the authorities are entitled to apply the provisions of discounting if the payment is not to be made on the date of agreement but on any other future date. In other words, learned Counsel submits that whether or not the concept of discounting is applicable needs to be decided with reference to the date of actual payment depending upon the facts of each case. The deduction is permissible only with reference to the period commencing from the date of payment prescribed under the agreement. He further explains that if payment under the agreement is to be received subsequent to the date of actual payment made by the Income-Tax Department, then principle of discounting is not applicable because, in his submission, discounting is primarily a rebate for early payment. It is applicable only in the event of early payment since it is in the nature of discount.

13. The learned Counsel for the petitioner in order to elaborate and further explain his submission, based on the provisions of the Act urged that as per the scheme of Chapter XX-C of the Act, an agreement is required to be lodged with the Appropriate Authority within a period of 15 days from the date of its entering into; under Rule 48-L and on such tender the Appropriate Authority is required to determine whether no objection certificate should be granted or purchase order should be passed before the expiry of three months from the date of receipt of form No. 37-I. In case the Authority decides to pass purchase order, then the payment of purchase price is required to be made within a period of one month from the end of month in which the property vests in the transferor and that is the date of order of purchase. Shri Jaykar submitted that where the payment of purchase price under the agreement is deferred, the principle of discounting would certainly apply but it is not open for the Competent Authority to discount the value for the period commencing from the date prescribed under the agreement.

14. Turning to the facts of the case in hand, Shri Jaykar urged that under the agreement, petitioner was entitled to receive a sum of Rs. 3,35,00,000/- on or before 15th March, 1994 or within 48 hours of receipt of no objection from the Income-tax Department or the society whichever is later. But as per the scheme of Chapter XX-C he will be paid consideration after 15th March 1994 as such in this case petitioner would be paid 15 days after the date mentioned in the agreement as such in his submission, the concept of discount would not get attracted in the facts of this case. However, by the impugned order, the petitioner was to be paid a sum of Rs. 3,62,25,025/- on or before 31st March, 1994. Thus, according to the petitioner, taking into account the factum of payment subsequent to the date of payment mentioned in the agreement, the concept of discounting invoked by the respondents could not have been invoked by the respondents in the facts and circumstances of the present case. The petitioner thus contends that on plain reading of the provisions he was paid reduced amount of consideration erroneously applying the concept of discounting.

15. Per contra, Shri Asokan, learned Counsel for the Revenue, on the other hand, contended that the authority is entitled to determine discounting value with reference to the date of agreement and tried to refute the contentions of the petitioner-transferor that relevant date should be date of payment and urged that the same cannot be accepted- In his submission, this issue is no longer res integra in view of the Division Bench decision of this Court in the case of Vimala Devi G. Maheshwari (supra) and subsequent judgment of this Court in the case of Miss Kamala Khushaldas Tekchandani v. O.D. Mohindra, 240 ITR 796. He, thus contends that the concept of discounting was rightly applied and the amount of apparent consideration was correctly determined by the Competent Authority. Hence this petition is liable to be dismissed.

16. In rejoinder, Shri Jaykar, while reiterating his earlier submissions, submitted that the cases of Vimladevi Maheshwari and Miss Kamla Khushaldas Tekchandani (cited supra) have no application to the facts of the case in hand.

According to him, the submissions canvassed by him in this case are concluded by another judgment of the Division Bench of this Court in the case of Shrichand Raheja v. S.C. Prasad, (1995)213 ITR 33. He further submitted that the Division Bench in the case of Shrichand Raheja (supra) had occasion to consider the case of Vimala Devi Maheshwari (supra) and after consideration thereof it was observed that the question as to which should be the relevant date for determining discounting value was neither agitated nor decided by the Division Bench in that case. He thus reiterated that the facts of the case in hand are squarely covered by the law laid down by this Court in the case of Shrichand Raheja (supra). In his submission, it is unnecessary to actually consider as to whether or not discounting value is to be determined with reference to the date of payment or with reference to the date of agreement. In his submission, the issue sought to be canvassed by Mr. Asokan does not arise on the facts of this case and, therefore, the case of Vimladevi Mahehwari (supra) relied upon by Shri Asokan has no bearing. He also tried to distinguish the case of Kamlabai Khushaldas (cited supra) and submitted that it is not applicable to the case in question. He, thus, submitted that the impugned order is liable to be quashed and set aside and the matter be remitted back to the Appropriate Authority to ascertain the price payable to the transferor/petitioner. Statutory Provisions:

17. Before embarking upon the rival submissions, we may notice the statutory provisions of Chapter XX-C of the Act.

18. Sub-section (1) of Section 269UF of the Act provides that where an order of purchase is made, the Central Government shall pay by way of consideration for such purchase an amount equal to the amount of apparent consideration. The expression "apparent consideration" is defined under Section 269 UA(b) of the Act and the relevant portion reads as follows : "(b) 'apparent consideration' --

(1) in relation to any immovable property in respect of which an agreement for transfer is made, being immovable property of the nature referred to in Sub-clause (i) of clause (d), means --

(i) if the immovable property is to be transferred by way of sale, the consideration for such transfer as specified in the agreement for transfer:

(ii)..................

(iii)..................

and 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 such rate of interest as may be prescribed in this behalf."

The entire controversy revolves round the proper reading of expression as set out hereinabove. For sake of convenience, it would be advantageous to dissect the latter part of the expression and then it will read as follows:

"(a) and where the whole or any part of the consideration for such transfer is payable on any date or dates failing after the date of such agreement;

(b) the value of the consideration payable after such date shall be deemed to be the discounted value of such consideration;

(c) as on the date of such agreement for transfer, determined by adopting such rate or interest as may be prescribed in this behalf."

The plain reading of definition of "apparent consideration" makes it clear that where the consideration for transfer is payable subsequent to the date of the agreement, then the value of the consideration payable after the date of the agreement is to be discounted. Consideration:

19. Having heard the parties at length, it is not in dispute that principle of discounting is well known and regularly applied in accounting. In plain words, "discount" means present value of payment due in future. The word "discount" in the Oxford English Dictionary means an abatement or deduction from the amount or from the gross reckoning or value of anything and is used in commerce to mean as a deduction made for payment before it is due. The word "discount" has no technical or universal meaning and perhaps its most common meaning is that it is equivalent to the payment of interest in advance.

20 The principle of discounting is prescribed under Chapter XX-C of the Act. Even though agreement between the parties provides for transfer, the Central Government is required to pay the entire consideration within the stipulated period from the date of purchase. Broadly, the order for purchase is to be made within a period of three months from the date of receipt of Form 37-I by the Competent Authority and in case the purchase order is passed, then the Central Government has to tender the purchase price within one month therefrom. In other words, though the agreement provides for deferred payment, the transferors receive payment within the stipulated period and that may not necessarily be in consonance with the terms of the agreement. As the transferors get an advantage of payment which was due in future, in that event the transferors cannot complain if the payment is made with discount. If payment is made before the date stipulated in the agreement, then the concept of discounting as already stated hereinabove, which is primarily a rebate results in reduction of the sum payable. In other words, the amount of rebate as prescribed under the rules is subtracted from the amount payable in consideration of pre-payment or payment before the due date and if amount is subtracted then what remains is discounted value of the property. If the delayed payment is to be made i.e. after the date for payment of consideration mentioned in the agreement, then, for want of pre-payment the concept of discounting shall not be attracted. In this case on the facts, the consideration was payable under the agreement on or before 15th March, 1994, whereas payment of consideration by the department was made on 25-4-1994, obviously, after the date of payment mentioned in the agreement, in that event of discounting would not attracted. In this case, on the facts of the case, the consideration was payable under the agreement on 15th March 1994, whereas payment of balance consideration of Rs. 3,35,00,000/- was made by respondent No. 1 on 25-4-1994. Obviously, after the date of payment mentioned in the agreement. If that be so, the concept of discounting as understood could not have been invoked by the Competent Authority, As a matter of fact, petitioner would have been entitled to interest on delayed payment from the department though it is not open for him to claim such interest for want of statutory provisions under the Act. It is thus clear that on facts; the present case is squarely covered by the Division Bench of this Court in the case of Shrichand Raheja (supra). As a matter of fact, the issue as to whether discounting value should be determined with reference to the date of agreement, or payment, in our opinion, does not arise in the facts of the present case. It is, therefore, unnecessary to go into that question. The case of Vimala Devi and/or Kamladevi (both supra) have no application to the facts of this case. This case is squarely covered by the Division Bench judgment in the case of Shrichand Raheja (supra). Accordingly, it needs to be decided following the principles laid down in that case.

21. For the reasons stated hereinabove, we hold that the appropriate Authority was not entitled to determine the discounting value payable to the petitioner-transferor, applying the concept of discounting value as it does not get attracted, in the facts of the case, since payment made by the Appropriate Authority was subsequent to the date of payment prescribed in the agreement for payment. It was not open for the Appropriate Authority to estimate or calculate discounting value either from the date of agreement or from the date of payment. It is, therefore, necessary to give direction to the Appropriate Authority to pay entire balance consideration without discounting value of consideration payable to the transferor-petitioner.

22. Accordingly, the impugned order is quashed and set aside and the respondent No. 2 is directed to make within 3 months from today, the payment of Rs. 7,75,000/- to the petitioner-transferor with interest at 12% p.a. from 25th March 1994 till 31st December 2002 and thereafter w.e.f. 1-1-2003 till payment in full and final @ 10% p.a. instead of 12% p. a. together with Rs. 5,00,000/-(Rupees five lacs only), retained by the respondent No. 2; on account of transfer fees with interest thereon @ 10% p.a. from 18-2-1994 to 1041-1997 together accrued interest thereon w.e.f. 11-11-1997 i.e. from the date of investment with State Bank of India till liquidation thereof. If the amounts as directed hereinabove are not paid within the stipulated period then the entire amount due as on 23-4-2004 shall carry further interest @ 12% p.a. until payment in full and final.

23. In the result, petition is allowed in terms of this order. Rule is made absolute with no order as to costs.