MUSTHAFA UMMER Vs. APPROPRIATE AUTHORITY

JUDGEMENT

(1.) Both these appeals are preferred against the judgment in O.P. 6872 of 1999. Challenge is against an order passed by the Appropriate Authority, Income Tax Department, Bangalore under S.269 UD(1) of the Income Tax Act, 1961 ordering pre - emptive purchase of immovable property situated in survey No. 882/1 of Ernakulam Village by the Central Government. A writ of mandamus was also sought to issue no - objection certificate to the petitioners for transfer of the immovable property as envisaged under S.269UL of Income Tax Act. The order was set aside by the learned Single Judge holding that the Appropriate Authority has failed to take note of the unique circumstance in which the transfer was necessitated. Learned single Judge therefore quashed the impugned orders. A direction was given to the authorities to consider the petitioners application Ext. P6 afresh and pass appropriate orders in accordance with law.

(2.) Writ Petitioners are husband and wife. They are promoters of a private limited company by name Palm Court Hotels Private Ltd., a company incorporated as a private limited company by the certificate of incorporation No. 09-8831 of 1995. Petitioners are the only share holders of the company. Main object of the company is to construct buildings for hotels and to carry on business of hotels. Petitioners who are Promoters and Directors of the company decided to set up a Three Star Category Hotel Complex at Ravipuram in Kochi in the property mentioned hereinbefore. They approached the Kerala State Industrial Development Corporation Ltd. (in short K.S.I.D.C.) for financial assistance, K.S.I.D.C. vide its letter dated 13th April 1998 sanctioned a term loan of Rs. 250 lakhs to the company for setting up a Three Star Category Hotel Complex on certain terms and conditions. Sanction letter also stated that KSIDCs disbursement would commence only after the company complying with all the terms and conditions of sanction and completion of documentation ie., signing of loan agreement / hypothecation agreement by the company and guarantees by promoters and deposit of title deeds to create equitable mortgage on land of the company. Memorandum of understanding dated 17.2.98 was entered into between K.S.I.D.C. and first petitioner who was promoter of the company. Memorandum of conditions of loan was submitted inter alia on certain conditions such as land registered in the name of the promoter directors should be registered in the name of the company towards mortgaging to K.S.I.D.C.. Petitioners who are promoters of the company therefore decided to convey the property in question to the company which was a condition precedent for sanctioning the loan by the K.S.I.D.C.

(3.) Petitioners and the company submitted the application under S.269 UC of Income Tax Act in Form No. 37-1, R.48 - L to the Appropriate Authority. Details of property was given in the application. The property is situated in survey No. 882/1 of Perumanoor Desom, Ernakulam District which was acquired by the first petitioner as joint holder as per document No. 1232/1994. Petitioners decided to transfer the said property to Palm Court Hotels Pvt. Ltd. of which they are the sole directors for a consideration of Rs. 66,99,106/- and an agreement of sale dated 7.10.90 was also entered into. Initially there was some defects in the application and the same was rectified on 13.11.1998.