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TMI Blog1995 (12) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... rder passed by the appropriate authority stood abrogated on the ground that the transferors have been paid an amount in excess of their share vis-a-vis transferees and correspondingly the transferees have been paid less to that extent, although the tender made by the Central Government as a whole was in consonance with the purchase order passed by the appropriate authority. In this connection, it is clarified that there is no dispute between the parties that the Central Government tendered the entire amount of consideration as per the purchase order of the appropriate authority. (c) Whether the purchase order passed by the appropriate authority could be said to be perverse on the ground that it is based on irrelevant factors and/or incomparable instances. Before coming to the facts of this petition, as a prelude, we wish to point out that in Bombay, developers enter into agreements not only to purchase lands, flats and plots but on account of acute demand even floor space index and the rights connected thereto are purchased by developers. Purchase of floor space index entails complex nature of transactions. Moreover, various parties are involved in transactions which further comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was retained by Dr. Rao for construction of a new bungalow by the petitioners/transferees/developers at the cost of Rs. 30,00,000. In other words, the petitioners purchased rights in the F.S.I. to the extent of 9,515 square feet for a sum of Rs. 3.60 crores. Under the said agreement, vide clause 5, it was further provided that the petitioners as developers shall provide temporary accommodation to Dr. Rao in a nearby locality in property admeasuring 2,500 square feet till the developers constructed a new bungalow at the cost of Rs. 30,00,000 as stated hereinabove. The total consideration under the development agreement agreed to be paid by the transferees to the transferors was Rs. 3.60 crores out of which Rs. 3 crores 30 lakhs was to be paid in the form of money whereas Rs. 30 lakhs was to be paid as consideration in the form of bungalow to be constructed for Dr. Rao. Under the said agreement, the transferees paid Rs. 60 lakhs as an earnest money to the seven co-owners and a further sum of Rs. 6 lakhs was paid as an earnest money to Dr. Rao. This was at the time of execution of the agreement. Under the agreement, it was further stipulated that within one year of the agreement, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of the new bungalow the developers were entitled to utilise the balance 9,515 square feet F.S.I. by constructing bungalows. In other words, once Dr. Rao is put in possession of the new bungalow the developers were entitled to develop the balance area by constructing new bungalows. They were entitled to sell the same. Under, clause 2(b) of the agreement, the developers have specifically undertaken to utilise the F.S.L only for the construction of bungalows and not for construction of apartments/flats. Under clause 5 of the agreement, the developers have agreed to provide to Dr. Rao temporary alternative accommodation being a vacant bungalow admeasuring 2,500 square feet (carpet area) in Chembur area in order to enable Dr. Rao to shift to the temporary accommodation and in order to enable the developers to construct a new bungalow as stated hereinabove. Under the agreement, the petitioners so far have paid as follows : S. No. Amount Date of payment (in rupees) 1. 66,00,000 January 13, 1995 2. 82,50,000 May 31, 1995 3. 1,65,00,000 August 31, 1995 4. 16,50,000 On conveyance On January 30, 1995, Form No. 37-I under the Income-tax Act was filed. Annexure " E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... que drawn by the Central Government for Rs. 60 lakhs, the name of the petitioners/transferees/developers is shown as " Prime Reality Ltd." It is the case of the petitioners, therefore, that on May 31, 1995, on account of the above mistake in the name of the payee, no legal tender was effected and, therefore, the purchase order stood abrogated. It is also contended on behalf of the petitioners that they were entitled to receive Rs. 66,00,000 and not Rs. 60,00,000 and, therefore, the purchase order stood abrogated. At this stage, it may be clarified that although the petitioners received short payment of Rs. 6 lakhs in terms of the agreement, the heirs of Dr. Rao received proportionately certain amount in excess. It is also clarified that there is no dispute inter se between the parties. Dr. Chandrachud, appearing on behalf of the transferors, has clarified the position that the excess amount, if any, will be paid by them to the petitioners. The fact remains that the Central Government effected legal tender for Rs. 3,58,84,384 as ordered by the appropriate authority. Although the petitioners received the cheque on June 1, 1995, for Rs. 60,00,000 drawn in favour of Prime Reality Ltd., ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect the tender in favour of the transferees/petitioners. It is contended on behalf of the petitioners that similarly the cheques in favour of the transferors were also posted on May 31, 1995. They were received after the due date by the transferors and in the circumstances the purchase order stood abrogated because the Government did not effect the legal tender within the stipulated time. We do not find any merit in the said contention. Under section 269UG, the Central Government is duty bound to tender the amount of consideration payable in accordance with section 269UF to the person or persons entitled thereto within one month from the end of the month in which the immovable property comes to the Central Government under section 269UE. The important words in section 269UG are " consideration ... shall be tendered to the persons entitled thereto ". In the present case, Rs. 60 lakhs was tendered to the petitioners by speed post on May 31, 1995, which cannot be disputed. The last date was May 31, 1995. In view of the above expression under section 269UG, namely, that the consideration shall be " tendered ", it is clear that in the present case, consideration was tendered to all the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agreements entered into between the parties on the basis of which the impugned purchase order is passed are complicated in nature, particularly with regard to the apportionment of consideration between the persons entitled to receive it under the agreement. We have to construe, therefore, section 269UG also taking into account the reality of the situation. In the present case, the facts indicate that the tender was effected in time. Although the impugned purchase order was made by the appropriate authority on April 26, 1995, the letter of apportionment was given by the co-sharers belonging to the Swamy family only on May 25, 1995. Further, the Government was informed even by the transferees regarding the above error in the spelling of the name of the payee only on June 19, 1995, and immediately a corrected cheque was handed over to the transferees on June 22, 1995. In the above circumstances, it is not possible to accept the contention of the petitioners herein, both in law and on the facts of the present case, that the impugned purchase order dated April 26, 1995, stood abrogated because legal tender was not effected as required under section 269UG. It is not in dispute that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 10.93 per cent. (iv) Miss Venuturupalli Rajeshwari 10.94 per cent. (v) Mrs. Devaguptu Savitridevi 10.95 per cent. (vi) Mrs. Voleti Manikyamba 10.93 per cent. (vii) Mrs. Kalipatanapu Suryarekha 10.93 per cent. (viii) Dr. Venuturupalli Sunder Jagannadha Rao 23,45 per cent. Thereafter, Dr. Rao died on April 13, 1995. The purchase order was made on April 26, 1995, after the demise of Dr. Rao. The Central Government addressed letters to the heirs of Dr. Rao from time to time to hand over the possession of the property and also documents (including probate, will of Dr. Rao). This was during the period between April 26, 1995, and May 31, 1995. It is only on May 25, 1995, that the heirs of Dr. Rao addressed a letter to the Deputy Commissioner of Income-tax stating that as per the purchase order the discounted value of consideration amount of Rs. 3,30,00,000 was Rs. 3,28,84,384. According to the heirs, the discounted value, therefore, of Rs. 3 crores works out to Rs. 2,98,94,895, leaving a balance of Rs. 60 lakhs to be paid to the transferees. In the circumstances, the transferors received Rs. 2,98,94,895 (consisting of Rs. 6 lakhs in excess which was payable to the transferees). In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... endered or if there is any dispute as to the title to receive the amount of consideration, then the Central Government shall deposit the amount with the appropriate authority. Therefore, under section 269UG(3) if the person entitled to the amount of consideration does not consent to receive it, then the amount shall be deposited by the Central Government with the appropriate authority. By way of the proviso to section 269UG(3) it is further provided that the liability of any person who receives the whole or part of the consideration for immovable property vested in the Central Government to the person entitled thereto will not be obliterated by virtue of the amount being deposited under section 269UG(3). In other words, if, as in the present case, one of the branches of the family of the transferors receive the amount in excess, then the liability of that branch to pay the other branch in terms of the agreement is not obliterated by virtue of section 269UG. This proviso also indicates that the Legislature was aware of the fact that the disputes may arise inter se between the parties in which event the Central Government is duty bound to deposit money with the appropriate authority. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated. Mr. Doctor next contended that in the present case the impugned purchase order dated April 26, 1995, is perverse. Mr. Doctor contended that the sale instances on which the impugned purchase order is based are incomparable sale instances. It is contended on behalf of the petitioners that relevant sale instances on which the petitioners placed reliance have not been taken into account. It is also contended on behalf of the petitioners that extraneous factors are taken into account. It is contended on behalf of the petitioners that under the development agreement the builders/transferees had agreed to construct a bungalow at the minimum cost of Rs. 30,00,000 after demolishing the existing bungalow ; that under the agreement, on receipt of possession of the property from Dr. Rao within 12 months the petitioners were required to construct a new bungalow and only after putting Mr. Rao in possession of the completed new bungalow the developers were entitled to develop the remaining F.S.I. of 9,515 square feet by constructing bungalows and selling the same to third parties ; that the builders were not entitled to develop the property in any other way except by way of construction of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvested as also various embargoes on the right of the developers to develop the property which would depreciate the fair market value and which would bring the market value within the 15 per cent. margin have not been taken into account by the appropriate authority. Before coming to the above argument on the merits, it would be relevant to note that under Chapter XX-C of the Income-tax Act, valuations in respect of immovable property are akin to acquisition proceedings and not to the valuation principles which are applicable for assessing tax on the basis of valuation of the property. The principles for valuation under the Wealth-tax Act or other taxation laws are not applicable to the acquisition under Chapter XX-C of the Income-tax Act. The 15 per cent. margin covers the estimation, part of the valuation. Chapter XX-C acquisition provides for a 15 per cent. margin between the fair market value and the agreed value mentioned in the development agreement. This 15 per cent. covers the estimation part of the valuation so that no injustice is done while acquiring the property. The right of pre-emptive purchase by the Central Government is on the amount equal to the amount of apparent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... land admeasuring (1,706 square yards) 15,354 square feet except 2,000 square feet of F.S.I. in favour of the petitioners. The said 2,000 square feet of F.S.I. was required to be retained by Dr. Rao for construction of a bungalow by the petitioners for residential house. The remaining F.S.I. was available to the petitioners to construct bungalows for sale. The agreement also stipulates that the developers will not utilise the balance F.S.I. of 9,515 square feet for any other purpose except to construct the bungalows. This indicates the potentiality of the land and the future use to which the land is to be put to. In the present case, the appropriate authority placed reliance on sale instance, vide Case No. 17529. The said sale instance relates to the sale of a bungalow (Atur Park) in Chembur. The agreement of sale in respect of the (Atur Park) bungalow took place on January 30, 1995. The rate per square foot is Rs. 6,906. It was contended on behalf of the petitioners that when a flat or a bungalow is sold, the price of the flat or the bungalow is higher than the cases where F.S.I. is sold as in the present case. It was contended on behalf of the petitioners that the market value of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt the escalation, the appropriate authority came to the conclusion that in the present case the going rate of the land/F.S.I. in Chembur area in January, 1995, stood at around Rs. 5,500 per square foot. On the basis of which the fair market value in respect of the subject-matter plots would come to Rs. 5,23,32,500, whereas, in the present case, the plots have been sold for a total consideration of Rs. 3,30,00,000 plus cost of construction of a bungalow of Rs. 30,00,000 for Dr. Rao. In the circumstances, the appropriate authority came to the conclusion that the difference between the fair market price and the agreed price was more than 15 per cent. and, therefore, the acquisition took place and the purchase order came to be passed. As stated hereinabove, it is not open for this court to sit in appeal over the findings of the appropriate authority. Even if one comparable sale instance has been taken into account and if that sale instance provides cogent material then the purchase order cannot be said to be passed on extraneous factors. On the other hand, the petitioners have relied upon the sale of plot of land at Janki Niwas, Chembur. The petitioners contended that the sale of Ja ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... found it fit to reject the said sale instance. As stated hereinabove, in the present case, we have to see a large number of factors including the location of the plot, shape of the plot, proximity to the road and the railway station as also potentiality of the plot and the user to which the plot would be put to. In such matters, there cannot be a strait-jacket formula. As stated hereinabove, different methods are required to be taken into account. The contractors' method or even the cost of replacement method along with the comparable sale instances method could be simultaneously applied. If these methods are kept in mind then the appropriate authority's decision in the present case cannot be held to be based on extraneous factors. One more fact may also be noted that in the present case, even according to the petitioners, the cost of alternative accommodation is Rs. 5,500 per square foot. On this basis also, the fair market value of the subject property would come to Rs. 5,23,32,500 whereas under the agreement the consideration is Rs. 3,60,00,000 which if discounted is Rs. 3,58,84,384. In other words, the fair market value exceeds the apparent consideration by approximatel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he said contention. The show-cause notice dated April 3, 1995, given by the Deputy Commissioner of Income-tax on behalf of the appropriate authority clearly gives particulars of the sale instances on which reliance is placed by the department/appropriate authority (see page 96 of the writ petition). It, inter alia, clearly refers to the sale instance in respect of Atur Park at Chembur, Bombay, dated January 30, 1995, which indicates the land/plot rate of Rs. 6,906 per square foot. On the basis of the show-notice notices, replies were filed by the transferor. The order of the appellate authority also indicates the consideration of all the sale instances including the abovementioned sale instance in respect of Atur Park. In the circumstances, it is clear that the ratio laid down by the Division Bench of this court (Nagpur Bench) in the case of Nirmal Laxminarayan Grover v. Appropriate Authority [1997] 223 ITR 572 has been followed by the department and the appropriate authority in the present case. Further, the said judgment of the Division Bench does not take any contrary view. In the circumstances, we do not find any merit in the writ petition. The writ petition fails. Rule is dis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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