VENKATA RAO C Vs. UNION OF INDIA

JUDGEMENT

(1.) THE petitioner has challenged the constitutional validity of Section 269UA of the Income-tax Act, 1961, with regard to a definition of "apparent consideration" as given under Section 269UA(b)(1)(i). Sub-clause (1) contemplates that 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. Rule 48-I has prescribed the interest at eight per cent, per annum.

(2.) THE petitioner entered into an agreement on July 20, 1989, which was for the consideration of Rs. 42 lakhs. THE time stipulated for the completion of sale transaction was 10 months from the date of the agreement to sell. THE statement in Form No. 37-1 dated July 31, 1989, was filed by the petitioner along with a copy of the agreement to sell dated July 20, 1989. By order dated September 15, 1989, it was directed that the property is fit to be purchased by the Central Government. THE possession of the property has also been taken by the respondents and has been sold by auction. In the order passed under Section 269UD(1), it was directed that the Central Government may purchase the property for Rs. 39,95,020. THE petitioner has also received the said payment vide receipt dated October 31, 1989. In the calculation of apparent consideration (discounted value) the amount of Rs. 5 lakhs which was paid on the date of agreement was taken as it is. But in respect of the remaining Rs. 37 lakhs interest for nine months (since balance consideration was payable in nine months from the date of agreement) at the rate of eight per cent, amounting to Rs. 2,04,980 was reduced. THE discounted value was taken at Rs. 34,95,020 instead of Rs. 37 lakhs. THE submission in the writ petition is that the period stipulated in the agreement of sale is only for the purpose of making provision for obtaining the permission from the Income-tax Department and, thus, the consideration could not be reduced/discounted.

(3.) I have considered over the matter. The principle of discounting has taken into consideration the benefit which the seller would get by getting the payment immediately. It is also stated that possession of the property is to be given within 15 days of the order but the payment is made subsequent to taking of possession and, therefore, at least discounting should be only from the date of actual payment by the respondent. It is only the reduced interest element which is deducted from the total consideration as the deduction is made at the rate of eight per cent, per annum. If the amount is deposited in any bank in F. D., the interest received would be much more as the rate of interest on F. D. R is more than eight per cent., depending on the period for which the F. D. receipt is purchased. The seller does not lose because by the time the payment under the agreement could have been received from the purchaser, the amount received from the Central Government would be much more than what was the total consideration under the agreement. The principle of accountancy and the business principles are to be applied in commercial transactions, The principles of discounting are based on logic and reasons also. The deeming fiction for determining value of consideration at discounted value have property been created. No provision of the Constitution is violated. The provision is neither arbitrary nor unreasonable or unjust. There could be no delay in payment of consideration as sufficient care has been taken in the provisions by fixing the time limit for various actions to be taken by the respondents. It could not be said that there is deprivation of property without payment of consideration. The time limit under the statute in making the payment is most reasonable and the actual delay from the date of agreement cannot be deducted in calculating the discounting amount as the provisions are based on public policy. As such, I do not feel that any case is made out for declaring the provisions of Section 269UA(b) unconstitutional. The writ petition having no force is accordingly dismissed.