EMAAR MGF LAND LTD Vs. TAX RECOVERY OFFICER

JUDGEMENT

(1.) The petitioner, in these proceedings under Article 226 of the Constitution of India, is aggrieved by an order under Section 226(3)(x) of the Income Tax Act, 1961 ("the Act") of the Tax Recovery Officer, Hyderabad- the first respondent here ("TRO, Hyderabad"), against it, requiring it to pay Rs. 32,82,79,787/-, alleged to be due from the fourth respondent M/s Emaar Hills Township Pvt.Ltd., Hyderabad ("EHTPL"), the assessee-in-default in this case.

(2.) EHTPL is a Special Purpose Vehicle (SPV) constituted by agreement between Andhra Pradesh Industrial Infrastructure Corporation Ltd. ("APIIC"), holding 74% and Emaar Properties, PJSC Dubai ("Emaar, Dubai"), holding 26%,for the purpose of establishing an integrated project comprising golf course, convention centre-cum-exhibition complex, residential and commercial complexes, hotels, etc. This was done pursuant to a collaboration agreement entered into between the two parties on 19 August 2003 in furtherance of an MoU between APIIC and Emaar-Dubai entered into in November 2002.The petitioner in this case, Emaar MGF Land Ltd. ("EMGF"), engaged in the business of construction/land development for industrial projects and residential townships, entered into a development agreement on 03-11-2006 with the fourth respondent, EHTPL, for the development 258.36 acres of land owned by EHTPL. Subsequently, on 25-07-2007, the earlier agreement of November 2006 was cancelled and a new development agreement-cum-GPA was entered into between EHTPL and EMGF, with an addendum dated 23- 7-2008. EMGF was to receive consideration of 75% of the gross revenue derived from sale of buildings constructed on EHTPL's land and 25% was to remain EHTPL's share. The second respondent is the Tax Recovery Officer, Delhi ("TRO, Delhi"), having jurisdiction to recover the tax demand due from the petitioner; the third respondent is the administrative body in charge of the second respondent.

(3.) Three years after the execution of the July 2007 agreement, the Government of Andhra Pradesh, on the recommendation of APIIC, by a notification dated 08-10- 2010, prohibited the registration of documents in the integrated project being developed by EMGF. APIIC then issued notice, dated 29-10-2010 to EHTPL requiring it to terminate the July 2007 development agreement-cum-GPA claiming that the same was entered into without APIIC's approval. The same day, APIIC also issued a notice to Emaar, Dubai to terminate the collaboration agreement. The move to terminate the agreement with Emaar led to a series of litigation in the Andhra Pradesh High Court at the instance of Emaar, Dubai as well as the Association of Allottees of Properties in the integrated project, and appeal proceedings in respect of some of the matters are pending. Resultantly, registration of the properties in the integrated project has come to a stand-still. APIIC also filed a civil suit against EHTPL and EMGF seeking rendition of accounts and a permanent injunction on the transfer of properties to third parties, in which status quo was ordered on 15-12-2010. In respect of revision proceedings moved at the instance of the petitioner to reject the plaint in the original suit, a further stay was granted on 16-12-2010 by the Andhra Pradesh High Court. Finally, public interest litigation was taken up by the said High Court, in which the CBI was directed to conduct inquiry into allegations of irregularity in the development agreement of July 2007.