TMI Blog1997 (3) TMI 58X X X X Extracts X X X X X X X X Extracts X X X X ..... September 28, 1965, that the owner had decided to develop the property by demolishing the existing bungalow and the land which was very old and build a conglomeration of flats on the land ; that the offer made by the party of the second part for development of the land had been accepted by the owner ; that the owner had secured eviction of the tenants who were in occupation of the building only with the intervention of the party of the second part ; that the party of the second part had agreed to develop the property even in the absence of the original of the parent document being available, that the parties had earlier entered into an agreement on December 23, 1989, and had also filed Form No. 37-I before the Appropriate Authority, the Income-tax Department, Chennai, which form was rejected by the authority on March 9, 1990, that thereafter, the parties agreed to enter into this agreement in supersession of the earlier agreement ; that the owner had retained for himself a portion only of the said conglomeration together with the proportionate undivided share in the land amounting to 12 per cent. and sell the balance undivided 88 per cent. share in the land ; that the owner had dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 8,00,000 (rupees eight lakhs only) paid by cheques as advance. (b) Rs. 12,63,489 (rupees twelve lakhs sixty-three thousand four hundred eighty-nine only) to be paid within 15 days from the date of receipt of no objection certificate by both the parties." The payment of consideration was set out in clause 4 of the agreement which reads as under : "The party of the first part herein agrees to sell 88 per cent., of the undivided share and interest in the Schedule A property which share is set out in Schedule C hereunder to the party of the second part/ promoter/and/or to its nominee or nominees either in parts or fully under one or more deeds. The apparent consideration in relation to this agreement is Rs. 30,81,700 (rupees thirty lakhs eighty-one thousand and seven hundred only) consisting of ; (a) Rs. 10,18,211 (rupees ten lakhs eighteen thousand two hundred and eleven only) representing the value of 2,740 sq. ft. of built up area (rupees 525 per sq. ft. less 153.39 sq. ft. for proportionate undivided share of land) to be exchanged for part of the apparent consideration ; and (b) Rs. 20,63,489 (rupees twenty lakhs sixty-three thousand four hundred and eighty-nine only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransferee is required to construct for the petitioners 2,740 sq. ft. of built-up space in a building to be put up on the entire plot including the undivided 12 per cent. retained by the owner. The agreed value of this extent of 2,740 sq. ft. has also been recorded in the agreement of Rs. 10,18,211. The apparent consideration as set out in Form No. 37-I filed by the parties has been stated as Rs. 30,81,700. Counsel submitted that this was not an agreement for sale as part of the consideration is not money, and "price" referred to in the definition of "sale" in section 54 of the Transfer of Property Act is only money consideration as held by the apex court in the case of CIT v. Motors and General Stores (P.) Ltd. [1967] 66 ITR 692. Counsel contended that this was also not an exchange as 2,740 sq. ft. built-up space is yet to be constructed. "Exchange" is defined in section 118 of the Transfer of Property Act as under : "When two persons mutually transfer the ownership of one thing for the ownership of another, neither thing nor both things being money only, the transaction is called an 'exchange'. A transfer of property in completion of an exchange can be made only in manner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceeding the amount prescribed under section 269UC, subject to the exemption provided for in section 269UO, viz., transfer to a relative on account of natural love and affection. The fact that a part of the consideration for the transfer of the undivided share in the immovable property is to be by way of construction to be put up on the land transferred as also on the land retained, does not take away such an arrangement from the purview of Chapter XX-C of the Act. All arrangements involving the divestment of rights in immovable property in favour of another for a consideration, the amount of which exceeds the limit prescribed are meant to be covered by Chapter XX-C unless specifically exempted. There is no exemption provided for development even when such agreement is in respect of transfer of the rights in immovable property for a consideration. Learned counsel referred to two judgments rendered by two learned single judges of the Calcutta High Court as also to a judgment rendered by a Division Bench of the Patna High Court in support of their submission that a development agreement is not covered by Chapter XX-C. In the case of Hari Krishna Kanoi v. Appropriate Authority [1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e order under section 269UD(1) is itself bad as it purports to acquire property which is not exactly the subject-matter of the agreement and then that property is sought to be vested in the Central Government under section 269UE(6) of the Act." The court did not invalidate the order for pre-emptive purchase on the ground that the statutory provisions are inapplicable to development agreements. The decision rested on the ground that the order impugned therein sought to acquire property which was not the subject-matter of the agreement. The conclusion was reached by the court even though in the body of the judgment, the court had expressed the view that it is difficult to see how the development agreement before it, could be termed as a sale of 60 per cent. of the land of the owner as well as of the construction portion of the building. The court after having observed thus, also observed that no doubt in the ultimate analsysis, the agreement has the effect of transferring or enabling enjoyment of the property in question to the developer. The court had also found after considering the definitions of "immovable property" and "transfer" that : "... agreement will squarely fall un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ggregate value for determining the conclusion that there has been under-valuation. It must, therefore, be held that notwithstanding the description of the document as a development agreement, the subject-matter of the transfer being an undivided share in the land, and the consideration being partly in money and partly in a "thing" which was not in existence that thing being a flat which the transferee was required to construct, the provisions of Chapter XX-C of the Act are attracted and the petitioners had rightly filed Form No. 37-I. The impugned order cannot be set aside on the ground that the order is one made without jurisdiction. On the merits of the impugned order, it was contended by counsel that the order is based on irrelevant considerations, that relevant considerations have been omitted, and that the order has taken into account facts regarding which the petitioners were not called upon to answer in the show-cause notice. There is no dispute about the fact that in the show-cause notice issued to the parties, it had been stated that the apparent consideration of Rs. 30,52,891 is less than the fair market value of the property by more than 15 per cent. for the reason ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proposed construction being commenced on the land subject to the necessary licence and permission being obtained. The size of the two plots, that of the petitioner's plot and of the adjoining land at No. 52, Gandhi Nagar, Adayar, are certainly comparable. The plot of the petitioners measures about 5.4 grounds while the adjoining plot measures about 6.3 grounds. Both are situated on the same road, First Main Road, Gandhi Nagar. The FSI available for the two plots under applicable regulations is one and the same, namely, 1.5, though, in fact, the building put up on the adjoining plot by its owner, namely, "Malar Hospitals" now has an FSI of 2.5 which appears to have been obtained by way of special permission after the purchase of the plot. The petitioners had apparently realised the fact that the apparent consideration in their agreement is less than the market value and had sought to provide justification for the sale at a lower price by stating that there was a tenant in the property whose eviction was secured with the good offices of the proposed transferee and that the title deeds of the property were lost and despite such loss, the transferee had come forward to develop the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re vacant possession of a Central Government body as affording justification for the difference of Rs. 4 lakhs per ground. As regards the alleged urgent need of the owner for funds, no material was produced to substantiate the alleged urgent need. No compelling circumstance necessitating the acceptance of a lower price by the owner was disclosed. No fault can be found with the authority for not accepting such unsubstantiated assertion of urgent need for funds. The owner had apparently purchased the property as an investment, as it is the case of the owner that he purchased the property in 1965 and thereafter for 20 years or more the Animal Welfare Board was his tenant. As regards the FSI, it is not in dispute that under the applicable regulations, the FSI is 1.5. The fact that after purchasing the plot, the purchaser of the adjoining plot was able to get special sanction for the FSI of 2.5 cannot be regarded as a material factor which had affected the price at which the plot had been purchased by that purchaser. Even if one were to accept that the FSI that the purchaser of the adjoining plot was able to secure subsequent to purchase and the purpose for which the plot was put to u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rsuant to an agreement dated September 7, 1989, at the rate of Rs. 8.42 lakhs per ground. The authority has not relied upon these transactions to reach the conclusion that there has been under-valuation. As noted by the authority, the other two transactions if looked into only support the conclusion already reached by it after comparing this plot with the adjacent one which had been sold nine months earlier. Interestingly, the owner, along with the writ petition, has produced a certificate from a valuer which certificate is dated March 6, 1993, and in which after recording at the outset that the certificate is given at the request of the owner regarding the fair market value of the property as in April, 1989, it is stated thus : ". . . We have taken two sales which have been taken place in 1989 and 1990 in and around the locality. One land rate is at Rs. 8,62,000 per ground and the other land rate is at Rs. 10,39,000 per ground..." This valuation report has been referred to only to underscore the fact that even the transactions referred to by the authority towards the end of its order in relation to the property at No. 47, 1st Main Road, though not mentioned in the show-caus ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
