2011 (10) TMI 487 - HC - Income Tax

Right to allotment of flats - Applicability of Chapter XXC OR Chapter XX-A to agreement entered in year 1980 - original agreement entered in year 1979 between competent builder and land owner to construct a multistory building - petitioner got allotment of flat in said building in year 1980 - Held that - Competent Builders were acting as an agent of a disclosed principal. In present case the buyers and the seller have not changed. The buyers are the flat-buyers like the petitioner and the seller in law is Smt. Satyawati Dhawan. The only change which has occurred is that one builder has stepped into the shoes of another. When the builder has changed that does not necessarily mean that the right of the original buyers stood extinguished. The right to allotment of flats continued to exist and therefore the letters of allotment which were issued on October 10 1990 were merely continuation of the earlier letters. However letters did change some of the terms and conditions of the earlier allotment but it is not possible for us to come to the conclusion that these letters of allotment of October 10 1990 amounted to novation of the contract - Decided in favor of petitioner

Summary

Issues:
Challenge to order under Chapter XXC of the Income Tax Act, 1961; Applicability of Chapter XXC to the transaction in question.

Analysis:
The petitioner, a company, challenged the order passed by the Appropriate Authority under Chapter XXC of the Income Tax Act, 1961, regarding the purchase of immovable property. The petitioner contended that the order was non-speaking and Chapter XXC did not apply to the transaction with the respondent parties. The Court acknowledged the lack of reasoning in the order but focused on the applicability of Chapter XXC. The respondent parties failed to justify the purchase with comparable cases or under-valuation evidence.

The history of the transaction revealed that the petitioner was an original allottee in a building project initiated in 1979. Disputes among builders led to a tripartite agreement in 1990, with the respondent No. 4 taking over construction rights. The petitioner received a fresh allotment letter in October 1990, detailing the terms and conditions agreed upon previously.

The crux of the matter was the applicability of Chapter XXC, introduced in 1986, to the transaction initiated in 1980. The Revenue-respondents argued that the subsequent tripartite agreement in 1990 brought the transaction under Chapter XXC. The Court referred to a previous case with similar circumstances and highlighted the importance of ownership in property transactions. It emphasized that changes in builders did not extinguish the rights of original buyers, and the subsequent agreements did not alter the fundamental nature of the transaction.

Based on the precedent and legal analysis, the Court concluded that Chapter XXC was not applicable to the case at hand. It held that the provisions of Chapter XXA were more relevant. Consequently, the Court allowed the writ petition, quashing the order dated December 20, 1990. The petitioner, already in possession of the property, required no further orders.