KELVIN JUTE COMPANY LIMITED Vs. APPROPRIATE AUTHORITY

JUDGEMENT

(1.) The present writ petition has been filed by the Kelvin Jute Company Limited, a Public Limited Company and one of its Shareholder challenging the orders issued by the Appropriate Authority constituted under section 269UD of the Income-tax Act dated November 25,1988 and May 2,1989 and to refrain from giving any effect to or taking any steps in terms thereof or thereunder and to issue to the petitioners (No Objection Certificate) in respect of the transfer of the land. It is stated that the petitioner no. 1 Company is the owner of the land situated at no. 3, Burdwan Road, Calcutta containing an Area 19 Cottahs 13 Chittacks 5 Sq. Ft. and on the said premises there are several buildings, dwelling houses, tenants, tiled roof structures and shops which have been let out to several monthly tenants and the remaining portion of the said premises has been mortgaged by the Company with the State Bank of India for securing loans and advances for the purposes of its business. The petitioner no. 1 Company is stated to be a sick industrial unit within the meaning of the Sick Industrial Companies (Special Provisions) Act of 1985. It is claimed that the Industrial Reconstruction Bank of India prepared a rehabilitation scheme for the revival of the Company which was modified by the Board of Industrial and Financial Reconstruction. The draft scheme envisaged the huge cost of modernization and the means of finance proposed in the said scheme included inter alia a sum of Rs. 17 lacs. to be realised on the sale of the aforesaid premises and a portion of the property at Titagarh. The petitioners have stated in details in the writ petition that the aforesaid scheme further stipulated that the State Bank of India would give a necessary permission for sale of the said premises and the portion of the property at Titagarh and for utilization of the sale proceeds towards meeting a part of the cost of the said scheme. It is asserted that the scheme further provided that the State of West Bengal will also .give necessary permission for sale of the said properties and utilization of the sale proceeds towards meeting a part of the cost of the aforesaid scheme. The petitioners claim further that the draft scheme as formulated by the Board of Industrial and Financial Reconstruction has since been finalised in its meeting held on July 13,1989 and the petitioner no. 1 Company is required to give effect to the same with effect from September 1,1989. It is also placed on record that on September 1,1989 the petitioner Company entered into an agreement for sale with Messrs. Granito Ceramics Private Limited having office at no. 19, R. N. Mukherjee Road, Calcutta whereby the Company agreed to sell to the transferee the said premises free from all encumbrances but subject to the monthly tenancies and for a lumpsum price of Rs. 65 lacs which was appropriated towards the consideration at the time of completion of the sale. The transferee proposed to demolish the existing tenaments on the said premises and constructed a new building thereon. On September 29, 1988 the petitioner Company is alleged to have received a 1etter dated September 8/9, 1988 from the respondent no. 3 the Assistant Engineer (Technical) having office at no. 54, Rafi Ahmed Kidwai Road, Calcutta that the said respondent would inspect the said premises on September 23,1988. On November 28,1988 the petitioner no. 1 Company received the order dated November 25,1988 passed by the respondent no. 1 in respect of the said Form No. 37-1 filed on September 5,1988. The petitioners alleged that in the said purported order it was made clear that the proposed transfer was null and void under section 5 (3) of the Urban Land (Ceiling and Regulations) Act, 1976. The exemption under section 20 of the 1976 Act did not seem to have obtained and even if the exemption applied for and such exemption would be given only for paying the excess vacant land to industrial purpose and not for purpose of sale or for real Estate Development. According to the petitioners, the aforesaid order dated November 25,1988 and/or the provisions of Chapter XXC of the Income-tax Act are wholly illegal, invalid and without and/or in excess of jurisdiction and/or are ultra vires the Constitution. On February 27,1989 the Company entered into another agreement with the transferee whereby it agreed to sell to the transferee the said premises free from all encumbrances whatsoever and the said agreement dated February 27, 1989 it was duly stated that the Company had already obtained No Objection Certificate from the Competent Authority under 1976 Act any construction upon the said land. It is also disclosed in the writ petition that on March 7, 1989 the Company and the transferee 61ed Form No. 37-1 before the respondent no. 1 the Appropriate Authority in respect of the said agreement dated 27th February, 1989. On May 9, 1989 the petitioner Company is alleged to have received an order dated May 2, 1989 passed by the respondent no. 1 and in the said purported order it was alleged that the statement in Form No. 37-1 was premature and invalid and there was no question of acting upon it in any manner and the same was filed as such. It was pointed in the said order that although "No Objection" certificate obtained by the Company for construction of the said premises, there was a still possibility that ultimate permission will be withdrawn by the Competent Authority and in that case provisions of sections 6 to 14 of 1976 Act would immediately come into play. The petitioners challenged the said order claiming it to be wholly illegal, invalid and without and/or in excess of jurisdiction. Consequently, the petitioners have challenged the orders on the, ground that prior to the passing of the said purported orders, no opportunity was afforded to the Company to make its representation and that the consideration for the transfer of the said premises by the Company to the transferee was truly and correctly stated in the agreements dated September 1, 1988 and February 27, 1989 respectively. It is emphatically claimed that the consideration represents the fair market value of the said premises and the respondents have no right and/or power and/or authority and/at jurisdiction to pass the impugned orders under Chapter XXC of the Income Tax Act in respect of the said transfer. The petitioners have tried to make out a case that in passing the impugned orders the respondent no. 1. has clearly exceeded its authority and/or jurisdiction under the said Act and has transferred beyond the scope of the provision of Chapter XXC. The petitioners also tried to make out a case that the respondent no. 1 failed to appreciate that the purpose for which the said Chapter XXC has been enacted is apparently to prevent evasion of tax. Although the respondent no. 1 is concerned with its counter-evasion of tax and the said respondent is not competent to declare any agreement for transfer either premature or invalid. It is highlighted that the object of the Chapter XXC being apparently to counter evasion of tax, and the said respondent is concerned as to countering evasion of tax, is not competent to declare any agreement for transfer either premature or invalid. In the instant case, according to the petitioners, the authority concerned refused to act upon the statements in Form No. 37-1 in the absence of any such finding and there is no bar to issue a No Objection Certificate in respect of the said transfer.

(2.) The writ petition is contested by the respondent nos. 1 and 2 by filing affidavit-in-opposition. It is disclosed in details that on 5th September, 1988, a statement in Form No. 37-1 under section 269UC(1) of the Income Tax Act read with Rule 48L of the Income-tax Rules, 1962 was filed before the Appropriate Authority, Income-tax Department, Calcutta after considering all the facts and records, the respondent no. 1 being the Appropriate Authority came to the conclusion that the statement in Form No. 37-1 is premature and invalid and therefore the question of acting upon it did not arise. It was held inter alia that the proposed transfer was null and void in view of the provisions of section 5(3) of the Urban Land Ceiling Act. It was recorded that although the application was made under Urban Land Ceiling Act no exemption was, however, allowed and even if any such objection was granted, the excess vacant could be used only for the industrial purpose and not for the purpose of sale. It is placed on record also that on 7th March, 1989 the same parties who filed the Form No. 37-1 on 5th of September, 1988 again filed another Form No. 37-1 purporting to transfer the very same property viz. no. 3, Burdwan Road, Calcutta and for the very consideration viz. Rs. 65 lacs. The Appropriate Authority considered the matter and again came to the conclusion that the Statement in Form No. 37-1 was premature and invalid and the question of acting such Form No. 37-1 did not arise. The respondent no. 1, however, held that the transferor Company was permitted to contract subject to the provisions of. section 22 of the Urban Land Ceiling Act and if the Competent Authority under the Urban Land Ceiling Act was' not satisfied they might withhold the permission to retain the land in excess of the said limit and in that event sections 6 to 14 of the Urban Land Ceiling Act was not satisfied, they might withhold the permission to retain the land in excess of the said limit and in that event sections 6 to 14 of the Urban Land Ceiling Act would come into operation. The respondent no. 1 concluded that it was not a clear-cut permission and/or clearance under the Urban Land Ceiling Act. The guidelines as laid down by the Ministry of Works and Housing by the Circular No. 1157/76-UCU dated 20th August, 1976 were not complied with. It is further placed on record that the petitioner no. 1 Company owns several property having a total Area 76 Cottahs 9 Chittacks and 1 Sq. Ft. apart from extensive vacant lands at its factory at Titagarh. The petitioner themselves filed an application under section 20 of Urban Land Ceiling Act in respect of vacant land at T'itagarh Factory and they have also filed Statements under section 6(1) of the Urban Land Ceiling Act and nothing has been disclosed as to what has happened to the said application made under section 20 of the Urban Land Ceiling Act. The respondents, have however, formally denied allegations of the averments made by the petitioners in the writ petition. The petitioners have also filed an affidavit-in-reply controverting the assertions of the respondents and have reiterated the points taken in the main writ petition.

(3.) At the time of hearing of the case, the Learned Lawyers appearing for both sides have unequivocally agreed that there is no bar to dispose of the present matter fully and finally notwithstanding the pendency of the Writ Petition being numbered 2821 of 1986 (Union of India v. C. V. Gautam) before the Hon'ble Supreme Court. It is also agreed that before the Hon'ble Supreme Court limited question of constitutional validity of the provisions of Chapter XXC of the Income Tax Act is pending for adjudication and the said limited question is sub-judiced. It is suggested that for the purpose of disposal of the present writ petition, the question of constitutional vires as to Chapter XXC of Income-tax Act is not required to be gone into. It is also agreed that this Court will consider the aspect as to whether the impugned orders are fair and/or justified on the face of the relevant provisions under Chapter XXC of the Income-tax Act.