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CASE NO.:

Appeal (civil) 1158 1998

PETITIONER:

RAMESH BHAI J. PATEL ETC. ETC.

Vs.

RESPONDENT:

UNION OF INDIA

DATE OF JUDGMENT: 06/12/2000

BENCH:

Y.K.Sabhaewal, S.P.Bharucha,, S.N.Hegde

JUDGMENT:

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J U D G M E N T

BHARUCHA, J.

These are appeals against the judgment and order of a

Division Bench of the High Court of Gujarat, delivered on

writ petitions. The controversy before us relates to the

correct interpretation of Section 269UA(b) of the Income Tax

Act, 1961. Section 269UA falls within Chapter XX-C of the

Act, which deals with the purchase by the Central Government

of immovable properties in certain cases of transfer.

Section 269UA is the definition section for the purposes of

the Chapter. Clause (b) thereof defines apparent

consideration. So far as is relevant, `apparent

consideration means:

(1) in relation to any immovable property in respect

of which an agreement for transfer is made, being immovable

property of the nature referred to in sub-clause (i) of

clause (d), means, ----

(i) if the immovable property is to be transferred by

way of sale, the consideration for such transfer as

specified in the agreement or transfer;

(ii) xxxxx

(iii) xxxxx

and where the whole or any part of the consideration

for such transfer is payable on any date or dates falling

after the date of such agreement for transfer, the value of

the consideration payable after such date shall be deemed to

be the discounted value of such consideration, as on the

date of such agreement for transfer, determined by adopting

such rate of interest as may be prescribed in this behalf;

..

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The rate of interest in this behalf is prescribed by

Rule 48(i) of the Income Tax Rules and it is eight per cent

per annum.

The contention on behalf of the appellants (assessees)

was that there can be no discount of the price mentioned in

the agreement of transfer and, if there can, the discount

must relate to the period between the date of payment of the

purchase price by the Central Government and the date of the

last payment under the agreement. No argument was, however,

advanced in respect of the first contention. The only

argument was based on the premise that the discount is made

because the transferor is compensated by payment earlier

than scheduled under the agreement; and that such

compensation is for the period that is saved, that is,

between the date of payment by the Central Government and

the last date of payment under the agreement.

It is relevant, before we proceed, to point out that

Section 269UG provides that the amount of the consideration

payable on purchase by the Central Government must be

tendered to the person entitled thereto within a period of

one month from the end of the month in which the immovable

property vests in the Central Government. Section 269UH

states that if the Central Government fails to tender such

payment within such time, the order of purchase by the

Central Government of the immovable property shall stand

abrogated and the immovable property shall stand re-vested

in the transferor.

On a plain reading of Section 269UA(b), there is no

interlinking of the apparent consideration to be determined

thereunder with the payment to be made by the Central

Government on purchase under Chapter XX-C. Section 269UA(b)

prescribes how the apparent consideration under the

agreement, that is, the consideration for the agreement, is

to be determined, and it states that if the consideration

under the agreement is payable on any date or dates falling

after the date of the agreement, the value of the

consideration that is payable after the date of the

agreement shall be deemed to be the discounted value of such

consideration as on the date of the agreement. In other

words, the apparent consideration in such case will not be

the consideration that is stated in the agreement but it

shall be the amount thereof less a discount to be calculated

in the manner set out in the definition. The period of such

discount shall be the period between the date of the

agreement and the date or dates on which the consideration

or part thereof is payable.

To put it differently, because, under the agreement,

the transferor gives the transferee time to pay the

consideration, the consideration is assumed to comprehend

some element of interest for such delayed payment, and this

is ascertained and deducted to arrive at the real

consideration for the agreement, or the apparent

consideration. The period of the delay necessarily starts

on the date of the agreement.

Our attention was drawn by learned counsel for the

appellants to the judgment of a Division Bench of the High

Court at Bombay in Shrichand Raheja & Anr. vs. S.C.

Prasad, (Appropriate Authority) & Ors. [213 I.T.R. 33].

It was argued by learned counsel for the Revenue before that

High Court that, for the purpose of discounting, the

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relevant date is the date of the agreement and not the date

of the payment by the Central Government and, in support of

his submission, he relied upon the expression as on the

date of such agreement for transfer in Section 269UA(b).

The High Court did not agree because, in its view, the plain

reading of the definition of apparent consideration made it

clear that the value of the consideration payable after the

date of the agreement was the discounted value and the

definition did not prescribe that the discounted value

should be ascertained with reference to the date of the

agreement. In its view, the expression as on the date of

such agreement for transfer referred to the consideration

payable on that date and was not indicative of the

commencement of the period to ascertain the discounted

value.

We are unable to agree. The High Court appears to

have overlooked the purpose of Chapter XX-C and the

definition of apparent consideration thereunder. The

purpose is to determine whether immovable property has been

sought to be transferred at an under-valuation. To

determine whether there has been an under-valuation, the

true consideration for the transfer has to be determined

and, necessarily, it has to be determined as on the date of

the agreement for transfer. That this is so is clear from

the latter part of clause (b), which we have quoted; the

phrase the discounted value of such consideration as on the

date of such agreement for transfer therein indicates the

point of time from which the period for discounting must be

calculated. For these reasons, the appeals are dismissed

with costs.