TMI Blog1977 (3) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... t the registering authority made a report of the requisite particulars to the competent authority, viz., the IAC of Income-tax. The competent authority obtained a valuation report from the department's valuer on December 3, 1973. According to the valuer, the "fair market price" as contemplated by cl. (d) of s. 269A of the I.T. Act was Rs. 6,82,500. Prima facie being satisfied that the "apparent consideration" is very much less and the fair market value is much more than 15% above the apparent consideration, the competent authority recorded reasons for having reason to believe that the property appears to have been transferred with the requisite intention under cls. (a) and (b) of sub-s. (1) of s. 269C. Thus, a notice was issued on December 4, 1973, under s. 269D of the I.T. Act. This notice was served upon Ganesh Builders, the vendors, on December 20, 1973, and upon Paras Builders, the purchasers, on December 25, 1973. Both of them showed cause to the notice under their separate representations. Considerable correspondence ensued between the IAC and the present respondents. During the course of this correspondence, Paras Builders relied upon the report of their valuer, one Ja ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ree items, the competent authority said that it disagreed with the figures which were estimated as cast by the respondents' valuer, Mr. Tipnis. It appears that the competent authority also rejected the estimates given by the department's valuer in this behalf. The competent authority arrived at its own figures in respect of these three items of expenditure. A fourth item for which credit was claimed was the stamp duty, brokerage and solicitors' fees, etc. In other words, expenses incidental to the document of conveyance were claimed under three separate specific heads. In this behalf the competent authority found that they could not be added up to the permissible expenses as this item does not form part of price but was incidental to the conveyance. It may specifically now be noted that the amounts permitted to be deducted were Rs. 45,000 for road construction, Rs. 60,000 as value of encroachment and Rs. 50,000 as value of filling up. These three items totalled up to Rs. 1,55,000. Taking the market value of 4,550 sq. yards at Rs. 150 per sq. yard and after deducting these expenses, the competent authority found that the difference between the two was quite large. The competent a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Tribunal under s.269G is permitted, within sixty days of the date on which he is served with notice of such order under that section, to prefer an appeal against such order to the High Court on any question of law. The proviso to sub-s. (1) enables the High Court to condone the delay by extending the period of limitation in filing the appeal. Sub-s. (2) requires that such an appeal shall be heard by a Bench of not less than two judges and the provisions of s. 259 shall apply in relation to any such appeal, as they apply in relation to a case referred to the High Court under s. 256. Sub-s. (3) says that the costs of the appeal shall be in the discretion of the High Court. It is, therefore, clear that the scope of such appeal is limited and only questions of law can be raised for the consideration of the High Court. Mr. Joshi for the appellants has raised two points for our consideration as points of law. He concedes that the two authorities below have already considered and found that the evidence of comparable prices of sales in the vicinity at about the time of the present transaction was unhelpful to find out whether Rs. 65 per sq. yard as such is a fair market value or not. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an origin in the misunderstanding rather than the actual calculations as have been made by the authorities below. We will point out here that the appellate authority has not given clear findings on all the questions of facts involved in this litigation, except one, viz., that the fair market value was to be calculated at Rs. 140 per sq. yard as proposed by the respondents' valuer, Mr. Tipnis. That was the price of developed land from which certain deductions were to be made. On other questions of fact involved, without giving positive findings, the Tribunal disposed of the appeals by accepting the figures and findings of the trial court and without either concurring with them or revising or setting aside them. To those figures the appellate authority merely added the stamp duty, brokerage charges and solicitors' fees at Rs. 30,000. Having accepted the competent authority's calculations in this manner, the Tribunal itself proceeds to point out that these deductions are to be made from the gross value of 3,750 sq. yards at the rate of Rs. 140 per sq. yard. This being the manner in which calculations are made in paragraph 12 of the judgment, the learned counsel for the appellants felt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t authority as well as the appellate authority have taken into consideration the 801 sq. yards which have been covered by the road and thereafter valued the plots. We may first consider how the competent authority has dealt with this subject. In the order which appears at pages 24 to 26 of the second paper book supplied to us the subject is dealt with under the figure (v)(d) with the caption "expenses on road construction estimated at Rs. 95,000 to Rs. 1,00,000". The two rival points of view in that behalf were considered by the competent authority. The valuer of the department points out that this being a big plot larger than 3,000 sq. yards, normally 15 to 20% of it would have been consumed for laying down roads, electrical connections, etc. Instead they are required to prepare a road which will be ultimately maintained by the municipality and against which an additional F.S.I. of 7,209 sq. feet is made available to the buildings. Since this additional advantage covers the loss, it is not necessary to delete this area from calculations. The respondents pointed out that not only they have to lose this land but have to incur an additional expenditure of Rs. 90,000 in constructin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellate authority has adopted the figure of the competent authority, we are unable to accept Mr. Joshi's argument that the appellate authority has excluded 801 sq. yards from consideration and that we ought to add the value of 801 sq. yards at Rs. 140 per sq. yard for the calculations made by the appellate authority. The second point of law thus does not remain a point of law in view of the factual calculations noted by us. That point, therefore, does not arise and must be rejected. We are, however, in agreement with Mr. Joshi that the authorities under Chap. XX-A of the I.T. Act have to find out the value of the property in the condition in which it was sold on a particular date and that would be always the price of the entire property as it is and in the condition in which it was. However, since this is actually done in this case, it is only a misunderstanding developed by the superficial reading of a certain part of the judgment of the appellate authority that has helped the department to raise that question. In our view, that question does not arise in this case and, therefore, no additions in the price are required to be made on account of the so-called point of law. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned by the Act will have to be found out in each case. In a case like the one which we are dealing with, where the actual price paid for the property in the conditions in which it was, is not being compared with similar properties round about but an artificial method of taking price of developed land in the locality subject to certain deductions is being followed, we are of the view that the approach in allowing certain deductions which are mere estimates on many occasions, should ordinarily be liberal. However, saying that original estimates should be examined in a generous manner is entirely different from saying that all the items claimed should be permitted to be deducted. It is precisely here that we are required to consider whether the stamp duty, brokerage and solicitor's fees can be deducted as permissible items of deduction. Mr. Joshi on behalf of the department has no objection to permit the deductions under the heads "Construction of road", "Removal of encroachment" and "Filling of the plot" where it is necessary. These are ordinarily incidences of development of any plot and expenses incurred in that behalf must normally be deducted before finding out the value of ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the piece of land. After bearing those expenses in mind and after calculating how developed land is available round about at the time of his purchase, the buyer will make an offer and, when accepted, that offer will become the price of the land. If the buyer will think of the expenses of development which are being permitted, in the case of the three other items in this case, why should not the stamp duty and other incidental expenses be added in the same manner? We find it rather difficult to accept this kind of approach in the matter of determining the fair market price. The definition in cl. (d) of s. 269A of the I.T. Act in terms lays down that the fair market value in relation to any immovable property transferred, means the price that the immovable property would ordinarily fetch on sale in the open market. The concept is that the price offered in the open market should represent the fair market value. The central theme being price offered, let us understand how that word is used by the legislature in some other context when sale of immovable property was defined in the Transfer of Property Act. Under s. 269A of the I.T. Act, the relevant consideration is the price of tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respondents argues, that the buyer was considering the possible expenses of development including perhaps his own share of the expenses of the conveyance and legal advice, etc. Having provided for all this, the offer still made is Rs. 65 per sq. yard and that represents the price which is not now subjected to further reduction. When undeveloped land is thus sought to be purchased by a buyer at a particular price, we have no doubt that that would be the price and no reduction can be made either for conveyance charges or otherwise. In the same way let us consider that the property now stands developed. It is a question of fact answered by the appellate authority that for a developed property in that locality the price offered would be Rs. 140 per sq. yard. When a buyer, therefore, goes to the market, the price at Rs. 140 per sq. yard is the ruling price which he must offer and when he becomes willing to buy at that rate he knows that the documents require expenses which in law he must fully bear, unless there is a contract to the contrary where the expenses are to be shared. Bearing this in mind his offer of Rs. 140 per sq. yard thus becomes the price and is not now subjected to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hin the domain of facts depending upon the evidence led and appreciated. The department's valuer's report in that behalf has not been accepted even by the competent authority. The competent authority made its own assessment and arrived at the three figures. The road construction expenses are estimated at Rs. 70,000 and by the process, which we have already described above, the figure was brought down to Rs. 45,000. In this behalf, the respondents have claimed before the competent authority expenses of Rs. 95,000 and they have also produced some evidence in justification of those expenses. In the same way in the matter of encroachment the competent authority allowed an amount of Rs. 60,000, which is its own estimate. The respondents are claiming Rs. 77,750. On the third item of the filling expenses though the department's valuer did not imagine beyond Rs. 33,000 the competent authority allowed Rs. 50,000. The respondents' valuer estimated the cost of filling up at Rs. 1,50,000 and the respondents claim to have spent Rs. 66,000 already till then in filling up a part of the plot and not the whole. On all these three items, what should be really allowed to be deducted was a matter for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penditure permitted is about Rs. 30,000 or more under any or all the three heads of expenses referred to above, the difference between the apparent consideration and the fair market value would again fall below 15% and the respondents' case might be taken out of the provisions of Chap. XX-A. There is a further duty upon the appellate authority to decide whether acquisition should be permitted even if a difference between the apparent consideration and the market value exceeds 15%. That situation might arise if, after deducting the expenses as the appellate authority would be now inclined to allow after hearing both the sides, it still brings about a difference of more than 15%, then it is necessary to decide whether the acquisition should be permitted. Besides the difference in the apparent consideration and the fair market value, conditions required by cls. (a) and (b) of sub-s. (2) of s. 269C are also to be satisfied. We find in the Tribunal's order certain observations towards the end of paragraph 14 where they seem to say something in favour of the respondents. In the present case, the contract of sale was on 9th October, 1972, whereas the execution of the documents was o ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
