2003 (10) TMI 30 - HC - Income Tax

Challenge in this writ petition is to the legality of the order dated March 30 1993 passed by the appropriate authority under section 269UD(1) directing preemptive purchase of the building - petitioner is one of the persons entitled to receive a part of the apparent consideration from the Central Government as ordained in section 269UG(1) - There is no dispute in regard to the payment of earnest money by the petitioner to the vendor and therefore the said amount had to be tendered to the petitioner as per the provisions of section 269UG(1) since this amount was never tendered to the petitioner there is a clear non-compliance with the requirements of section 269UG(1) and consequently the provisions of section 269UH are attracted Impugned order is not justified

Summary

Issues:
Challenge to the legality of the order for preemptive purchase under section 269UD(1) of the Income-tax Act, 1961.
Claim for refund of earnest money paid by the petitioner.
Interpretation of the expression "person or persons entitled thereto" under section 269UG(1) of the Act.

Analysis:
The judgment concerns a writ petition challenging the order for preemptive purchase of a property in New Delhi. The petitioner had entered into an agreement with the vendor for the purchase of the property, but the appropriate authority found the consideration to be low compared to the market value and ordered the purchase by the Central Government. The petitioner sought a refund of the earnest money paid to the vendor, claiming that the failure to tender the amount abrogated the purchase order under section 269UH(1) of the Act. The court allowed the petitioner to raise this new plea and considered the interpretation of the relevant provisions of the Act.

The central issue revolved around whether a vendee who paid earnest money to the vendor could be considered a "person entitled to" receive the apparent consideration from the Central Government as per section 269UG(1) of the Act. The court referred to the decision in Asgar S. Patel v. Union of India, emphasizing that the term "entitled" should be given its ordinary meaning and that the vendee could be entitled to the consideration. The court also discussed the Supreme Court decision in Prima Realty, which supported the view that a vendee who paid earnest money was entitled to receive part of the consideration.

The court held that the petitioner, who had paid earnest money to the vendor, was indeed entitled to receive a part of the apparent consideration from the Central Government under section 269UG(1) of the Act. Since the amount was not tendered to the petitioner as required by law, there was a clear non-compliance with the provisions of the Act. The court concluded that the order for preemptive purchase stood abrogated, and the property would revest in the vendor as per section 269UH(1) of the Act. The judgment cited authoritative pronouncements of the apex court to support this conclusion and rejected the previous majority view of the court in a similar case.

Ultimately, the court accepted the petitioner's plea and disposed of the application and the main writ petition accordingly. The judgment highlighted the importance of complying with the statutory provisions regarding preemptive purchase and the entitlement of the vendee to receive consideration in such cases.