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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.