SABARI TRUST Vs. APPROPRIATE AUTHORITY

JUDGEMENT

(1.) ALL these petitions are disposed of by this common order since the controversy involved is common. The petitioners are aggrieved by the order passed by the appropriate authority of the Income-tax Department for pre-emptive purchase of the property in dispute.

(2.) FOR the sake of convenience, the facts of Sabari Trust Ltd., are taken into consideration. Sabari Trust Ltd., is constituted under the Indian Trusts Act and owns land bearing Nos. 25 to 34 situated at Kolar Road (old Madras Road), Indiranagar, Bangalore-38. It entered into a development agreement with Srinivasa Builders on January 24, 1990, for development of the property by construction of multi-storeyed residential apartments. 35 per cent. of the super built area was to remain with the trust and Srinivasa Builders who were to construct and develop the property were entitled for 65 per cent. of the super built area in lieu of the cost of construction. The supplementary agreement dated January 25, 1990, was also entered into between the parties providing the manner in which 35 per cent, of the constructed area was to be handed over to the Trust. On July 20, 1995, the land owner and the developer referred to above entered into an agreement with Mr. N. Malik and Mrs. Meena Malik to sell the undivided share of the land and flat No. 442; situated at fourth floor measuring approximately 2,700 sq. feet along with two car parking spaces for a consideration of Rs. 40,45,000. It is stated that the undivided share of the property comes to 1047.14 sq. feet. A statement in FORm No. 37-1 as required under Chapter XX-C of the Income-tax Act was filed along with a copy of the agreement dated July 20, 1995. Show-cause notice was issued for pre-emptive purchase. On the ground that the consideration of the flat would be Rs. 31,75,393 after deducting the car parking which was notionally valued at Rs. 2 lakhs, the net value was assessed at Rs. 29,75,393 at the rate of Rs. 1,424 per sq., feet. Compared to other flats in Bangalore the consideration was stated to be grossly understated. Apartment No. 302, third floor of Raheja Mansion, situated at Milton Street, Cooke Town, was sold at the rate of Rs. 2,241 per sq. ft. of super built area and flat No. 310 of Raheja Residency situated at Koramangala was sold at Rs. 2,158 per sq. ft. of super built area. Apartment No. B-2, situated in Defence Colony, Indiranagar, was sold at Rs. 2,686 per sq. ft. These examples were shown in the show-cause notice for comparison.

(3.) IN the order of the appropriate authority dated October 30, 1995, it is stated that Srinivasa Builders and Sabari Trust have been shown as transferors and Sri N. Malik and Mrs. Meena Malik are shown as transferees who have entered into an agreement of sale of schedule property, all piece and parcel of land together with building standing thereon for a total consideration of Rs. 40,45,000. Discount value was taken at Rs. 39,86,596. The property was inspected on October 9, 1995. The valuation report of the engineering wing was taken into consideration and it was observed that the apparent consideration is less than 15 per cent. of the market value. The rate per sq, feet was arrived at Rs. 1,402 for super built area and the flat was constructed with very good specifications. The flats were considered comparable to the instances cited in the notice. It was observed that the consideration declared under the agreement for sale is less than the fair market value by 15 per cent. or more and therefore drawn the presumption of undervaluation with a view to evade tax.