Case Note & Summary
The petitioners, Pandharinath Bhikaji Telge and Dattaram Bhikaji Telge, were owners of a property in Chembur, Mumbai. They entered into an agreement to sell the property to M/s Sunkrish Developers. The Appropriate Authority, Mumbai, issued orders under section 269UD(1) of the Income Tax Act, 1961, for preemptive purchase of the property by the Central Government, on the ground that the difference between the fair market value and the apparent consideration exceeded 15%. The petitioners challenged these orders by way of writ petitions. The court examined the valuation reports and found that the difference between the fair market value and the apparent consideration was less than 15%. The court also noted that the Appropriate Authority had not provided an opportunity of hearing to the parties before passing the orders. The court held that the condition for preemptive purchase under section 269UD(1) was not satisfied, and the orders were liable to be quashed. The court allowed the writ petitions and set aside the impugned orders.
Headnote
A) Income Tax - Preemptive Purchase - Section 269UD(1) Income Tax Act, 1961 - Condition for Preemptive Purchase - The Appropriate Authority can order preemptive purchase only if the difference between the fair market value and the apparent consideration exceeds 15% of the apparent consideration - In the present case, the difference was less than 15%, hence the orders were quashed (Paras 1-10).
B) Income Tax - Valuation - Comparable Sales Method - Section 269UC Income Tax Act, 1961 - Fair Market Value Determination - The fair market value must be determined based on comparable sale instances of similar properties in the same locality - The Authority's valuation based on dissimilar properties was not sustainable (Paras 11-15).
C) Income Tax - Natural Justice - Hearing Before Preemptive Purchase - Section 269UD Income Tax Act, 1961 - Opportunity of Hearing - The Appropriate Authority must provide an opportunity of hearing to the parties before passing an order under section 269UD(1) - Failure to do so vitiates the order (Paras 16-20).
Issue of Consideration
Whether the Appropriate Authority correctly invoked section 269UD(1) of the Income Tax Act, 1961 for preemptive purchase of property when the difference between fair market value and apparent consideration was less than 15%
Final Decision
The writ petitions are allowed. The impugned orders dated 23rd October, 2009 passed by the Appropriate Authority under section 269UD(1) of the Income Tax Act, 1961 are quashed and set aside.
Law Points
- Preemptive purchase under section 269UD(1) requires difference between fair market value and apparent consideration to exceed 15%
- valuation must be based on comparable sales
- opportunity of hearing must be given before passing order
Case Details
2011 LawText (BOM) (12) 84
Writ Petition No. 2134 of 2010, Writ Petition No. 2135 of 2010, Writ Petition No. 2191 of 2010, Writ Petition No. 2192 of 2010
J.P. Devadhar, A.A. Sayed
Mr. J.D. Mistri, Sr. Advocate with Aasifa Khan i/by Mannandir & Co. for the Petitioner in all petitions; Mr. Abhay Ahuja with Ms. Suchitra Kamble for the Respondent Nos. 1 and 2 in all petitions
Pandharinath Bhikaji Telge, Dattaram Bhikaji Telge, M/s Sunkrish Developers
The Appropriate Authority, Union of India, M/s Sunkrish Developers (in some petitions)
Subscribe to unlock Case Details (Citation, Judge, Date & more)
Subscribe Now
Nature of Litigation
Writ petitions challenging orders of preemptive purchase under Chapter XXC of the Income Tax Act, 1961
Remedy Sought
Quashing of orders dated 23rd October, 2009 passed by the Appropriate Authority under section 269UD(1) of the Income Tax Act, 1961
Filing Reason
The Appropriate Authority ordered preemptive purchase of property on the ground that the difference between fair market value and apparent consideration exceeded 15%
Previous Decisions
Orders dated 23rd October, 2009 by the Appropriate Authority, Mumbai
Issues
Whether the difference between fair market value and apparent consideration exceeded 15% as required under section 269UD(1) of the Income Tax Act, 1961
Whether the Appropriate Authority provided an opportunity of hearing before passing the preemptive purchase orders
Submissions/Arguments
The petitioners argued that the difference between fair market value and apparent consideration was less than 15%
The petitioners argued that no opportunity of hearing was given before passing the orders
Ratio Decidendi
The condition for preemptive purchase under section 269UD(1) of the Income Tax Act, 1961 is that the difference between the fair market value and the apparent consideration must exceed 15% of the apparent consideration. In the present case, the difference was less than 15%, and therefore the orders were not sustainable. Additionally, the Appropriate Authority failed to provide an opportunity of hearing, which is a requirement of natural justice.
Judgment Excerpts
By the said orders, it was held that the difference between the fair market value and apparent consideration in respect of the subject property is more than 15%, and therefore, it was a fit case of preemptive purchase by the Central Government under section 269 UD (1) of the IT Act.
The court found that the difference was less than 15% and quashed the orders.
Procedural History
The Appropriate Authority passed orders on 23rd October, 2009 under section 269UD(1) of the Income Tax Act, 1961 for preemptive purchase of property. The petitioners filed writ petitions in the High Court of Bombay challenging these orders. The court reserved judgment on 2nd August, 2011 and pronounced on 23rd December, 2011.
Acts & Sections
- Income Tax Act, 1961: 269UD(1), 269UC
