WEBSETER INDUSTRIES LIMITED Vs. UNION OF INDIA

JUDGEMENT

(1.) In this petition filed under Article 226 of the Constitution of India, the writ-petitioners Webster Industries Pvt. Ltd which is a company incorporated under the Companies Act and petitioner NO.2 who is the Managing Director of this company have challenged an order dated 31st May, 1994 passed by the appropriate authority i.e. respondent No.2 in this petition, in terms of section 269-UD (1) of the Income Tax Act 1961 whereby, after observing that the fair market value of the property in question exceeds more than 15% of the declared total apparent consideration, an order has been passed for pre-emptive purchase of the said property by the Central Government under section 269-UD(1) of the Income Tax Act. While thus exercising such power the appropriate authority ordered the purchase of the said immovable property located at 24, Netaji Subhas Chandra Bose Road, Calcutta by the Central Government at an amount of declared apparent consideration of Rs. 19.405 lakhs only. The facts leading to the filing of the petition are that respondents 4-16, being the successors-in-interest of one Munshi Abdul Kader, (since deceased) son of late Chand Mistry claimed to be the co-owners and joint sharers of the property in question. According to them the said Munshi Abdul Rader claimed the rayet 100 Zaminder Pravash Chandra Mondal and others in respect of the property in question and after the abolition of the Zamindary Pratha, the said Abdul Kader became the absolute owner lawfully of the said property and came into its possession by constructing a two storied building which he used for his residence. The name of Munshi Abdul Rader was also mutated as the owner in possession of the property in question and he also started paying tax to the Tollygunge Municipality. The said property was duly assessed with Tollygunge Municipality in the name of deceased Abdul Kader as Municipal Premises No. 166/2, Russa Road South, Calcutta-700 033. It is also claimed that the said Abdul Kader who was absolutely seized and possessed of the property died intestate on 20th March, 1951 leaving behind him his widow and seven sons. Among other things, it has also been claimed that respondents 4-16 being the sole surviving legal heirs and representatives as also successors-in-interest of the said Abdul Rader became the absolute co-owners and joint sharers of the property in question which was also in their possession, except a portion thereof which was in the possession of some tenants of the property. At present the property is claimed to be measuring 19 kathas of land with a two storied building constructed thereupon and situated at 24, Netaji Subhas Chandra Bose Road, Calcutta. It is claimed by the petitioners that they entered into an agreement with respondents 4-16 on 21st December, 1993 whereby the respondents agreed to sell and the petitioners agreed to purchase the said property for a consideration of Rs. 20 lakhs.

(2.) Pursuant to the execution of the aforesaid agreement, the petitioners flied before the appropriate authority under the Income Tax Act 1961 a statement of Transfer of immovable Property required to be furnished to such appropriate authority in terms of section 269-UC(3) of the Income Tax Act in Form 37-I. This statement in Form No. 37-I was filed on l8th February, 1994 but on 20th May, 1994 petitioner No.1 was served with a showcause notice calling upon it to explain as to why the property sought to be transferred should not be purchased by the Central Government under its pre-emptive purchase right contained in section 269-UD(1) of the Income Tax Act. In the said notice the petitioner was also informed that the fair market value of the property in question as on the date of agreement for transfer had been fixed by the appropriate authority at Rs. 60.72 lakhs as unencumbered value of the property as against the apparent declared consideration of Rs. 20 lakhs as it was recorded in the agreement for sale. Petitioners submitted their reply on 26th May, 1994 to the aforesaid show-cause notice and pleaded that the agreement for sale between them and respondents 4-16 in effect and substance amounted to as many transfers as there were co-owners of the property, that is, 13 in all with respective specific shares of all the co-owners who succeeded the deceased Abdul Kader in terms of the Mohammedan Law of inheritance and therefore the transfer in the sold case did not and could not attract the provisions relating to pre-emptive purchase as contained in chapter XX(C) of the Income Tax Act, 1961 and that the exercise of the pre-emptive power of purchase conferred by the said chapter of the Act was neither appropriate nor proper. The case of the petitioners is that the under the law of inheritance governing the Muslims, each co-owner is a co-transferor in the agreement for sale and he having a specific share in the undivided joint ownership property can sell his own share and thus, even if one composite agreement is executed by 13 co-owner, and co-sharers, each of them could be deemed to have executed an agreement for we and therefore even if the total apparent unencumbered consideration of the property may be considered to be above Rs. 60 lakhs, yet the property could not attract the previsions of pre-emptive purchase by the Central Government because the share of each of the 13 co-owners would in any case come to be less than Rs. 10 lakhs per sale transaction. The petitioners claimed that even though there was a composite agreement for sale, this should be construed as 13 sale agreements because all the 13 co-owners have sold their respective specified shares in the property and since the value of each respective specified share is less than Rs.10 lakhs, the exercise of the power under chapter XX(C) of the Income Tax Act was neither warranted nor called for.

(3.) The respondents have denied the contentions of the petitioners and have stated that the property in question was one and that even though there were 13 co-owners, still the provisions contained in chapter XX(C) of the Income Tax Act were attracted in such cases because the shares of the co-owners were neither specified nor identified, nor defined. Various other submissions were also made in support of the action of the respondents for resorting to pre-emptive purchase and was alleged that the order impugned in the petition passed on 31st May 1994 by the Appropriate Authority was both legal and justified.