Karnataka H.C : The appellant entered into an agreement with the 3rd respondent for the purchase of immovable property herein described as Mohan Buildings situated at Nos. 775 to 809, Old Kacheri Road, Chickpet, Bangalore. The agreement is dt. 28th Nov., 1990.

High Court Of Karnataka

Rajata Trust vs. Chief Commissioner Of Income Tax

Sections 269UA, 269UD, 269UL

S. Mohan, C.J. & N.Y. Hanumanthappa, J.

WA No. 1297 of 1991

20th June, 1991 

Counsel Appeared

K. Srinivasan, for the Appellant : Chander Kumar & S.R. Shiva Prakash, for the Respondent

S. MOHAN, C.J. :

The short facts leading to the appeal are as under : The appellant entered into an agreement with the 3rd respondent for the purchase of immovable property herein described as Mohan Buildings situated at Nos. 775 to 809, Old Kacheri Road, Chickpet, Bangalore. The agreement is dt. 28th Nov., 1990. The appellant—the transferee and the 3rd respondent—the transferor jointly filed a statement in Form 37-I prescribed by the Rules frame under the IT Act, 1961 (hereinafter referred to as the “Act”) with the Appropriate Authority on 30th Nov., 1990.

2. The Appropriate Authority passed an order on 24th Jan., 1991 under s. 269UD(1) of the Act. We will now extract the relevant portions of the order : “Thus, a significant point in the agreement is that the transferee agrees to purchase the property with the 46 existing tenants and that taking vacant possession is restricted only to the portion occupied by the transferor itself. On payment of the second instalment of Rs. 50 lakhs the transferor has to permit development of the property and grant necessary power of attorney in favour of Shri K.V. Shivakumar, trustee of the transferee. The nomination clause of the agreement states that on payment of full consideration, the transferor has to execute sale deed in favour of the transferee or its nominees. The agreement also contemplates payment of liquidated damages and the right of specific performance by the parties to the agreement, in case of breach. The aggrieved party has the option to terminate the agreement and claim and recover liquidated damages of Rs. 15,50,000 being 10% of the consideration from the party committing breach, as an alternative to specific performance. An important stipulation in pages 10 and 11 of the agreement is that in the event of the schedule property being purchased by the Appropriate Authority for Central Government under s. 269UD(1) of the IT Act, the agreement of 28th Nov., 1990 for sale of “Mohan Buildings” between the transferor and the transferee will be treated as cancelled without any of the penal consequences contemplated in the agreement and the transferor has to refund the entire advance to the transferee forthwith. Mohan Buildings is situated in the intensely populated commercial cradle of Bangalore, namely, Chickpet at OTCRoad, also known as Chickpet Main Road. It covers a land area of 17,160 sft (1594.2 sq. mts.). Its dimensions are irregular. The width of the road on which the property is situated is 14.9 mts. It falls in Zone ‘A’ of CDP and enjoys a FAR of 1.25. The building covers an area of 2742 sq mts. It is a double-storeyed commercial complex constructed in the year 1909, with lime mortar and bricks. The roofing is partly Madras terrace and partly by Mangalore tiles. All joinery works are with teakwood. No services have been provided except electricity, sanitary and water supply in a portion of the first floor. The building being 90 years old, has outlived its normal span of life. No maintenance has been done for many years.

The discounted value of the apparent consideration has been worked out at Rs. 1,50,17,084. The working of the discounted value is given in Schedule-II appended to this order.”

Accordingly, in exercise of the powers vested under s. 269UD(1) the Appropriate Authority ordered the purchase of the schedule property by the Central Government and to pay the appellant consideration of Rs. 1,50,17,084, which was the discounted value of the consideration of Rs. 1,55,00,000. Consequent to this, the property is to vest in the Central Government free from all encumbrances by virtue of the provisions of s. 269UD(2). It was also ordered that the transferor or any other person who may be in possession of the property shall surrender and deliver the property to the Appropriate Authority within fifteen days from the date of service of notice. A copy of this order was served on both transferor and transferee.

3. As per the terms of the agreement, the total consideration of sale was Rs. 1,55,00,000. The appellant paid a sum of Rs. 50 lakhs by way of advance on the date of the agreement. It was further stipulated that an additional advance of Rs. 50 lakhs shall be paid within ten days from the date of the receipt of the “no objection certificate” and finally the appellant was to pay the balance of Rs. 55 lakhs to the transferor either at the time of registration or within one year from the date of the agreement whichever was earlier. Thus, it will be clear that what the appellant-transferee had paid to the transferor under the terms of the agreement was Rs. 50 lakhs by way of advance.

4. It is common case before us that the transferor had authorised the Chief CIT to pay a sum of Rs. 50 lakhs to the appellant which the transferor had received by way of advance. It is equally common case before us that this Rs.50 lakhs paid by the Chief CIT was received by the appellant without any demur.

5. The appellant filed WP 5614/91 praying to quash the order of the Appropriate Authority dt. 24th Jan., 1991 passed under s. 269UD(1) of the Act. In that writ petition, an additional prayer was made to direct the respondent to issue no objection certificate under s. 269UL of the Act. The learned single Judge, Justice S.R. Rajasekhara Murthy, was of the opinion that in so far as the appellant before us (the writ petitioner) had received the sum of Rs. 50 lakhs paid by way of advance under the agreement dt. 28th Nov., 1990 he had no right to challenge the order of the Appropriate Authority. Therefore, he dismissed the writ petition.

6. In this appeal before us, Mr. K. Srinivasan, learned counsel for the appellant, strenuously urges as follows:

No doubt the appellant is only a person, who entered into an agreement for the purchase of the property. It may be true that under ordinary law a person who merely enters into an agreement for sale cannot claim any interest in the immovable property, but, the IT Act treats him as a person interested in the property. When cl. (e) of s. 269UA talks of person interested, it is an inclusive definition. Under the rules of interpretation, an inclusive definition must be interpreted as to include every other person so as to enlarge the scope of the definition. In other words, it cannot be restricted to persons who are mentioned in that definition. Then again, under s. 269UD(2) the Appropriate Authority is to serve the copy of the order under sub-s. (1) of the said section on the transferee as well. Equally so, under s. 269UL(3) when the authority desires to issue “no objection certificate”, a copy of the same is to be given not only to the transferor but to the transferee as well. As a matter of fact, the Bombay High Court in CIT vs. Vijay Flexible Containers (1990) 81 CTR (Bom) 29 : (1990) 186 ITR 693 (Bom) has taken the view that the right to obtain a conveyance of immovable property falls within the expression “property of any kind” used in s. 2(14) of the Act. Equally, in Andalammal vs. Alamelu Ammal AIR 1962 Mad 378 it has been held that such a right to get reconveyance of his property is capable of assignment. Then again in CIT vs. Tata Services Ltd. (1979) 13 CTR (Bom) 227 : (1980) 122 ITR 594 (Bom) it has been held that such a right to obtain a conveyance of the immovable property was clearly a property as contemplated under s. 2(14) of the IT Act. Therefore, it is submitted before us that the transferee has every right or locus standi to question the order of the Appropriate Authority dt. 24th Jan., 1991. On the applicability of the principle of acquiescence he would state that the appellant was not entitled to receive the money. It was only due to the transferor to whom alone, under s. 269UG(1), the consideration is liable to be paid. Further, under sub-s. (3) of the said section, the Central Government is enabled to deposit if the person entitled to the amount of consideration does not consent to receive it. Where, therefore, the money was legitimately due to the transferor, the mere fact that the transferee had received the same does not mean the principle of acquiescence could be applied. Looked at from that point of view, the judgment of the learned Judge is incorrect. As a matter of fact in Writ Appeal Nos. 621 and 622 of 1988 this Court has taken a view in favour of the appellant. The same ratio will have to be applied in this case.

7. Mr. Chander Kumar, learned counsel for the Revenue, who had entered caveat, would submit that first and foremost a person like the appellant, who is none other than the holder of an agreement for the purchase of an immovable property cannot claim any interest in the immovable property. As a matter of fact s. 54 of the Transfer of Property Act puts this matter beyond doubt. It has also been held in Satyabrata Ghose vs. Mugneeram Bangur

& Co. & Anr. AIR 1954 SC 44 in paragraph 18 that such a person has a mere right to get a deed of conveyance, but by no stretch of imagination could it ever be said that the contract of sale of immovable property itself creates any interest in the property. To the same effect is the decision in Ram Baran Prasad vs. Ram Mohit Hazra & Ors. AIR 1967 SC 744. This principle has been applied departing from the position in English Law. It has been reiterated in Bai Dosabai vs. Mathuradas Govinddas & Ors. AIR 1980 SC 1334, wherein it was held that a mere contract does not create any interest or charge on the property but merely creates an obligation annexed to the ownership of immovable property not amounting to interest in the property. Therefore, the transferee by himself cannot question the correctness of the order of the Appropriate Authority. The ruling in Vijay Containers’ case (supra) does not in any way whittle down this concluded position under the Transfer of Property Act. That was a case in which a consent decree for specific performance had been passed. A question arose whether an assessee had a right to immovable property conveyed to him under the decree; in such an event whether it would amount to capital asset within the meaning of s. 2(14) of the Act. As a matter of fact, in that very decision itself the learned Judges have referred to the case in Ram Baran vs. Ram Mohit (supra) and Lalji Jetha vs. Kalidas AIR 1967 SC 978 and also an earlier ruling of Madras High Court in Venkateswara vs. Raman AIR 1917 Mad 358 and held that a mere contract for sale created a personal obligation of fiduciary character which could be enforced by a suit for specific performance, and it does not in any way alter the position under the Transfer of Property Act. Again, in Andalammal’s case (supra), the question arose with regard to right of reconveyance of property for the purposes of assignment. Here again, it did not say that the agreement holder could have an interest in the immovable property forming the subject-matter of sale. CIT vs. Tata Services Ltd. (supra) also dealt with the question whether right of reconveyance is (property) within the meaning of s. 2(14) of the Act. Coming to cl. (e) of s. 269UA, it talks of person interested in relation to any immovable property. If no interest is created in favour of the transferee by reason of a mere contract for sale, he cannot claim to be a person interested in relation to immovable property. No doubt the definition uses the word “includes”. It is true that the inclusive definition is to be read in an enlarged manner. But, even by reading so, it cannot take in a person like the appellant to whom under s. 269UD notice is to be served. Likewise, under s. 269UL he is served with the copy of the no objection certificate. That is because under Form No. 37-I both the transferor and the transferee seek no objection for issue of a certificate under s. 269UL. Beyond that, it cannot be said that the general law is altered or that IT Act talks of the transferee differently. In any event, this is a case in which the principle of acquiescence must apply squarely. The sale had not been completed. All that the transferee would be entitled was to the repayment of Rs. 50 lakhs paid by way of advance. It is this advance which, when paid, was received without demur. Under law, no doubt the transferor is entitled to the payment. Where, therefore, the transferee receives the benefit consequent to the sale not taking place in accordance with the agreement dt. 28th Nov., 1990, he cannot approbate and reprobate. Rightly, therefore, the learned Judge had applied this principle. This aspect becomes very relevant in view of cl. 10.3, where it had been stipulated between the parties that in the event of the schedule property being acquired under Chapter XX-C of the Act, the agreement shall be treated as cancelled and the appellant was to be authorised to receive the refund of advance directly from the Appropriate Authority. Therefore, he cannot now turn round and say that the money was paid only to the transferor under s. 269UG(1) r/w sub-s. (3).

8. Chapter XX-C of the IT Act, which contains the provisions, to which we have to bestow considerable attention, came to be introduced by Finance Act, 1986 w.e.f. 1st Oct., 1986. In the definition section under s. 269UA, the important definition for our purpose is “person interested”. It reads thus: ” ‘person interested’, in relation to any immovable property, includes all persons claiming, or entitled to claim, an interest in the consideration payable on account of the vesting of that property in the Central Government under this Chapter.” What requires to be noted carefully is that the interest of the person must be in relation to any immovable property. No doubt it is an inclusive definition. As to how an inclusive definition is to be construed can be seen from the following passage of G.P. Singh’s Interpretation: “The definition of a word in the definition section may either be restrictive of its ordinary meaning or it may be extensive of the same. When a word is defined to ‘mean’ such and such, the definition is prima facie restrictive and exhaustive, whereas, where the word defined is declared to ‘include’ such and such, the definition is prima facie extensive. When by an amending Act, the word ‘includes’ was substituted for the word ‘means’ in a definition section, it was held that the intention was to make it more extensive. Further, a definition may be in the form of ‘means and includes’, where again the definition is exhaustive, on the other hand, if a word is defined ‘to apply to and include’, the definition is understood as extensive.” Again on the same subject, Bindra’s Interpretation of Statutes states thus : “It is a well known rule of interpretation that the word ‘include’ is used as a word of enlargement and ordinarily implies that something else has been given beyond the general language which precedes it: to add to the general clause a species which does not naturally belong to it. When the word ‘includes’ was used in connection with ‘income’, their Lordships of the Privy Council observed in The King vs. The B.C. Fir and Cedar Lumber Co. Ltd.AIR 1932 PC 121 ‘…their Lordships cannot doubt that in consequence the word, as used in the statute, includes, unless the context otherwise requires, not only those things which the interpretation clause declares that it shall include, but such things as the word signifies according to its natural import. The word ‘includes’ is a word of enlargement rather than of restriction. When it is mentioned that a particular definition ‘includes’ certain things it should be taken that the legislature intended to settle a difference of opinion on the point or wanted to bring in other matters that would not properly come within the ordinary connotation of the word or expression or phrase in question. ‘It is well known that the legislature uses the word ‘means’ where it wants to exhaust the significance of the term defined and the word ‘includes’ where it intends that while the term defined should retain its ordinary meaning its scope should be widened by specific enumeration of certain matters which its ordinary meaning may or may not comprise so as to make the definition enumerative but not exhaustive.’ ” Who are the persons who are included in the definition ? (i) All persons claiming; (ii) Entitled to claim an interest in the consideration payable on account of vesting of the property in the Central Government. Even by this inclusive definition, we are unable to see as to how a mere agreement holder for the purchase of the property could fall under this definition. While saying so, it is necessary on our part to refer to s. 54 of the Transfer of Property Act to find out whether a mere agreement creates an interest in the immovable property. In no uncertain terms, s. 54 says : ” ‘Sale’ is a transfer of ownership in exchange for a price paid or promised or part- paid and part-promised. Such a transfer, in the case of tangible immovable property of the value of one hundred rupees and upwards, or in the case of a reversion or other intangible thing, can be made only by a registered instrument.

In the case of tangible immovable property of a value less than one hundred rupees, such transfer may be made either by a registered instrument or by delivery of the property. Delivery of tangible immovable property takes place when the seller places the buyer, or such person as he directs, in possession of the property. A contract for the sale of immovable property is a contract that a sale of such property shall take place on terms settled between the parties. It does not, of itself, create any interest in or charge on such property.”

9. While speaking of a contract for sale, Mulla’s Transfer of Property Act, Seventh Edition at page 300 item 30, it is stated thus : “(30) Does not of itself create any interest.—The last clause of the section abolishes the English doctrine that a contract for sale transfers an equitable estate to the purchaser. The law of India does not recognise equitable estates, and the English rule that the contract makes the purchaser owner in equity of the estate does not apply. In Rambaran vs. Ram Mohit, the Supreme Court has now held, settling a conflict of decisions that a contract for sale does not create any interest in land. Hence, the Privy Council have held that apart from s. 53A, ‘an averment of the existence of a contract of sale, whether with or without an averment of possession following upon the contract, is not a relevant defence to an action for ejectment in India.’ A person who has contracted to buy land is not the owner of any interest in the land and is, therefore, not competent to apply to set aside an execution sale of the same land. Similarly, he is not entitled to mesne profits. It has also been held that even after a decree has been passed in a suit for specific performance, the purchaser has no interest in the property. A contract for sale is, therefore, merely a document creating a right to obtain another document and does not require registration. See Registration Act s. 17(2)(v) and Mulla’s Registration Act. Even before the enactment of the Transfer of Property Act, the proceedings of the legislature when enacting the Registration Act of 1877 show that the legislature did not regard an agreement for sale as itself creating an interest in land. This was explained by Birdwood, J., in Chunilal vs. Bomanji (1883) ILR 7 Bom 310, where an agreement for sale of immovable property was held to be exempt from registration even though it contained an acknowledgment of the receipt of earnest or part payment of the price. This settled rule of law was broken by the Privy Council decision in Dayal Singh vs. Indar Singh AIR 1926 PC 94, but was restored by the amending Act 2 of 1927. Some dicta in Skinner vs. Skinner

AIR 1929 PC 269 which may seem to infringe this rule are explained in the undernoted cases.” On the same line, in Satyabrata Ghose vs. Mugneeram Bangur & Co. & Anr. (supra) in paragraph 18 it has been held thus:

“The second contention raised by the Attorney-General can be disposed of in few words. It is true that in England the judicial opinion generally expressed is, that the doctrine of frustration does not operate in the case of contracts for sale of land vide Hillingdon Estates Co. vs. Stonefield Estates Ltd. (1952) 1 All ER 853(ChD). But the reason underlying this view is that under the English law as soon as there is a concluded contract by A to sell land to B at certain price, B becomes, in equity, the owner of the land subject to his obligation to pay the purchase money. On the other hand, A in spite of his having the legal estate holds the same in trust for the purchaser and whatever rights he still retains in the land are referable to his right to recover and receive the purchase money. The rule of frustration can only put an end to purely contractual obligations, but it cannot destroy an estate in land which has already accrued in favour of a contracting party.

According to the Indian law, which is embodied in s. 54 of the Transfer of Property Act, a contract for sale of land does not of itself create any interest in the property which is the subject- matter of the contract. The obligations of the parties to a contract for sale of land are, therefore, the same as in other ordinary contracts and consequently there is no conceivable reason why the doctrine of frustration should not be applicable to contracts for sale of land in India. This contention of the Attorney General must, therefore, fail.”

In Ram Baran’s case (supra) in paragraph 11 it has been observed that it is manifest that a mere contract of sale of immovable property does not itself create any interest in or charge on such property. Again in Bai Dosabai’s case (supra) in paragraph 6 this position has been further elucidated and it reads: “6. We do not wish to go in any detail into the question whether the English equitable doctrine of conversion of realty into personalty is applicable in India. However, we do wish to say that the English doctrine of conversion of realty into personalty cannot be bodily lifted from its native English soil and transplanted in statute bound Indian law. But, we have to notice that many of the principles of English equity have taken statutory form in India and have been incorporated in occasional provisions of various Indian statutes such as the Indian Trusts Act, the Specific Relief Act, Transfer of Property Act, etc., and where a question of interpretation of such equity based statutory provisions arises we will be well justified in seeking aid from the equity source. The concept and creation of duality of ownership, legal and equitable, on the execution of an agreement to convey immovable property, as understood in England is alien to Indian law which recognises one owner, i.e., the legal owner : vide Rambaran Prasad vs. Ram Mohit Hazra (1967) 1 SCR 293 : AIR 1967 SC 744 and Narandas Karsondas vs. S.A. Kamtam (1977) 2 SCR 341 : AIR 1977 SC 744. The ultimate paragraph of s. 54 of the Transfer of Property Act, expressly enunciates that a contract for the sale of immovable property does not, of itself, create any interest in or charge on such property. But the ultimate and penultimate paragraphs of s. 40 of the Transfer of Property Act make it clear that such a contract creates an obligation annexed to the ownership of immovable property, not amounting to an interest in the property, but which obligation may be enforced against a transferee with notice of the contract or a gratuitous transferee of the property. Thus, the equitable ownership in property recognised by equity in England is translated into Indian law as an obligation annexed to the ownership of property, not amounting to an interest in the property, but an obligation which may be enforced against a transferee with notice or a gratuitous transferee.” Thus, it is clear that the Transfer of Property Act does not create any interest in the immovable property. Then, the question would be whether the said definition under s. 269UA(e) gives an enlarged right to a transferee or a mere agreement holder. We have already noted that the inclusive definition takes within it only persons claiming or entitled to claim an interest in the consideration payable as a result of the property being vested in the Central Government. How could it be said that an agreement holder has an interest in the consideration payable? As a matter of fact, under s. 269UG when the property vests, as to how the payment is to be made is dealt with. We extract the section at this stage. It reads : “269UG.(1) The amount of consideration payable in accordance with the provisions of s. 269UF shall be tendered to the person or persons entitled thereto, within a period of one month from the end of the month in which the immovable property concerned becomes vested in the Central Government under sub-s. (1), or, as the case may be, sub-s. (6), of s. 269UE : Provided that if any liability for any tax or any other sum remaining payable under this Act, the WT Act, 1957 (27 of 1957), the GT Act, 1958 (18 of 1958), the ED Act, 1953 (34 of 1953), or the Companies (Profits) Surtax Act, 1964 (7 of 1964), by any person entitled to the consideration payable under s. 269UF, the appropriate authority may, in lieu of the payment of the amount of consideration, set off the amount of consideration or any part thereof against such liability or sum, after giving an intimation in this behalf to the person entitled to the consideration. (2) Notwithstanding anything contained in sub-s. (1), if any dispute arises as to the apportionment of the amount of consideration amongst persons claiming to be entitled thereto, the Central Government shall deposit with the appropriate authority the amount of consideration required to be tendered under sub-s. (1) within the period specified therein. (3) Notwithstanding anything contained in sub-s. (1), if the person entitled to the amount of consideration does not consent to receive it, or if there is any dispute as to the title to receive the amount of consideration, the Central Government shall deposit with the appropriate authority the amount of consideration required to be tendered under sub-s. (1) within the period specified therein: Provided that nothing herein contained shall affect the liability of any person who may receive the whole or any part of the amount of consideration for any immovable property vested in the Central Government under this Chapter to pay the same to the person lawfully entitled thereto. (4) Where any amount of consideration has been deposited with the appropriate authority under this section, the appropriate authority may, either of its own motion or on an application made by or on behalf of any person interested or claiming to be interested in such amount, order the same to be invested in such Government or other securities as it may think proper, and may direct the interest or other proceeds of any such investment to be accumulated and paid in such manner as will, in its opinion, give the parties interested therein the same benefits therefrom as they might have had from the immovable property in respect whereof such amount has been deposited or as near thereto as may be.” Even here nowhere the transferee is thought of. It is with reference to this, s. 269UA(e) must be interpreted.

10. With this, we shall refer to the cases relied on by Mr. K. Srinivasan, learned advocate for the appellant. The first case that is relied on is CIT vs. Vijay Flexible Containers (supra). In that case, a question arose whether right to accord the conveyance of immovable property would fall within the expression “property of any kind” under s. 2(14) of the IT Act. The answer was in the affirmative. It also requires to be noted that in that case the assessee had entered into an agreement for purchase of an immovable property and had paid certain sum as earnest money. Later on a suit for specific performance was filed. That ended in a consent decree in favour of the assessee for a certain sum. Therefore, when the assessee wanted to have the immovable property conveyed to him , the question was whether it was appropriate to add any kind so as to include under capital asset. It is interesting to note in the very decision, paragraph 3 states as follows : “Under the provisions of s. 54 of the Transfer of Property Act, 1882, a contract for the sale of immovable property is a contract that a sale of such property shall take place on terms settled between the parties and it does not of itself create any interest in or charge on such property. Sec. 40 states that where a third person is entitled to the benefit of an obligation arising out of contract, and annexed to the ownership of immovable property, but not amounting to an interest therein or easement thereon, such right or obligation may be enforced against a transferee with notice thereof or a gratuitous transferee of the property affected thereby, but not against a transferee for consideration without notice of the right or obligation nor against such property in his hands. The illustration to s. 40 reads thus : ‘A contracts to sell Sultanpur to B. While the contract is still in force he sells Sultanpur to C, who has notice of contract. B may enforce the contract against C to the same extent as against A.’

In the case of Ram Baran vs. Ram Mohit AIR 1967 SC 744 , the Supreme Court held that it was manifest that a contract for the sale of immovable property did not create any interest in the immovable property. In Lalji Jetha vs. Kalidas AIR 1967 SC 978, the Supreme Court came to the conclusion that a contract for sale of immovable property, while it did not create interest in immovable property, created a personal obligation of a fiduciary character which could be enforced by a suit for specific performance not only against the vendor but also against a purchaser for consideration with notice. The Madras High Court, in Venkateswara vs. Raman AIR 1917 Mad 358 , held that an executory contract for the conveyance of land was not a mere right to sue. The right to sue was no doubt involved in it on breach of its stipulations, but before breach there was also the right to have the land conveyed. A mere right to sue was applicable only to cases where there had been a breach sounding in damages and where the specific enforcement of the contract could not be obtained.

The aforegoing discussion leads, we think, to the conclusion that the right to obtain a conveyance of immovable property falls within the expression ‘property of any kind’ used in s. 2(14) of the IT Act and is consequently, a capital asset.” Therefore, it is one thing to say that the right to obtain a conveyance would be ‘property of any kind’ under s. 2(14) of the IT Act and consequently a ‘capital asset’ while it is a totally different thing to say that a mere agreement holder could have an interest in the immovable property by reason of that agreement. In Andalammal’s case AIR 1962 Mad 378 , in paragraph 4, it is stated thus : “The other grounds are hardly intelligible, and do not need any discussion. There is absolutely no question of any fraud in this case, and the learned Subordinate Judge seems to have misdirected himself with regard to the legal principles applicable to the facts. There is nothing to prevent a vendor of property, who has a right to obtain a reconveyance, from assigning that right, notwithstanding the fact that he is a lessee in respect of the same property, and that some rents are due. A contract of lease is totally a different matter, and the law adequately provides for the enforcement of those obligations. Again I am quite unable to see how s. 7(1) of Madras Act I of 1955 can prevent the plaintiff-appellant (assignee) from enforcing the right obtained by the assignment. First of all, s. 7(1) refers to a transfer of ‘immovable property’, and the section might have to be strictly construed. More importantly, it is limited to a presumption which applies to the transferor alone. I know of no principle of law, including any part of Madras Act I of 1955, which can inhibit or prevent a third party from obtaining an assignment, merely because the vendor who assigned the right to obtain a reconveyance, was also a lessee who owed some arrears. It is true that Venkataswami Naidu is not a party to the present action. But, obviously, upon the facts as stated by me, he would be estopped from claiming that his assignee could not enforce the right to reconveyance of which he took the assignment.”

The learned Single Judge, Justice Anantanarayanan, as he then was, was dealing with the assignment of right of reconveyance and in that context a question arose whether it could cause property capable of assignment. That case does not afford any assistance to the appellant.

11. In CIT vs. Tata Services Ltd. (supra) a Division Bench of the Bombay High Court held thus: “What is a capital asset is defined in s. 2(14) of the IT Act, 1961. Under that provision, a capital asset means property of any kind held by an assessee, whether or not connected with his business or profession. The other sub-clauses which deal with what property is not included in the definition of capital asset are not relevant. Under s. 2(47), a transfer in relation to a capital asset is defined as including the sale, exchange or relinquishment of the asset or the extinguishment of any right therein or the compulsory acquisition thereof under any law. The word ‘property’, used in s. 2(14) of the IT Act, is a word of the widest amplitude and the definition has re-emphasised this by use of the words ‘of any kind’. Thus, any right which can be called property will be included in the definition of ‘capital asset’. A contract for sale of land is capable of specific performance. It is also assignable. (See Hochat Kizhakke Madathil Venkateswara Aiyar vs. Kallur Illath Raman Nambudhri AIR 1917 Mad 358). Therefore, in our view, a right to obtain conveyance of immovable property, was clearly ‘property’ as contemplated by s. 2(14) of the IT Act, 1961.”

It could clearly be seen there again the question was as to what was the meaning attributable to “property of any kind” as a “capital asset” under s. 2(14). Therefore, this also does not lend credence to the argument advanced by Mr. Srinivasan. He also brought to our notice that under s. 269UD copy of the order is to be served on the transferor as well as the transferee and on every other person whom the Appropriate Authority knows to be interested in the property. As we have noted above, the appellant is not having interest in the property, since no interest is created in the immovable property in his favour. It is true that the copy of the order is served on the transferee. But, that by itself does not clothe him with any interest. The reason is not far to seek as to why the copy of the order is served. It may be useful to remember that under Form 37- I it is both transferor and the transferee who seek no objection certificate. Therefore, when an order is passed by the Appropriate Authority for purchase by the Central Government under s. 269UD, the copy of the order is served on the transferee to enable him to know as to what the Revenue has done. Equally when under s. 269UL(3), in the absence of an order under s. 269UD(1) the Appropriate Authority is to issue the no objection certificate and deliver copies thereof to the transferor and the transferee, here again, it is in consequence of the fact of the application being made under Form 37-I both by the transferor and the transferee. Hence, they are put on information as to the course of action adopted by the Revenue. Therefore, neither by reason of s. 269UD(2) nor s. 269UL(3) could a transferee contend that he has secured an interest in the immovable property contrary to the settled law as adumberated under s. 54 of the Transfer of Property Act and various rulings of the Supreme Court. Thus, we conclude that the appellant has no locus standi. We may also add that merely because s. 269UD(2) says “every other person whom the Appropriate Authority knows to be interested in the property”, it does not bring a transferee, who has no interest in the property, in whose favour no interest is created by reason of the contract for sale. In the result, we hold that a transferee had no locus standi to question the order of the Appropriate Authority made under s. 269UD(1).

12. Now, we pass on to the question of the application of the principle of acquiescence. One of the important terms of the agreement dt. 28th Nov., 1990 is 10.3. It reads as under: “In the event of the schedule property being acquired under the provisions of Chapter XX-C of the IT Act, 1961, then this agreement shall be treated as cancelled without any of the aforementioned penal consequences and the vendors shall refund the entire advance to the purchasers forthwith; such refund shall be by authorising the purchasers to receive the refund of advance directly from the Appropriate Authority, IT Department, from out of the sale price; in the event of the entire amount being received by the vendors directly from the IT Department, then the vendors shall forthwith refund the advance to the purchasers;” Where, therefore, the appellant had received without any demur the sum of Rs. 50 lakhs paid by way of advance, in view of the specific terms of the above clause, we do not think it is open to him to say that under s. 269UG the money is due only to the transferor and, therefore, the payment to him and the acceptance thereof will be of no consequence. As rightly contended by Mr. Chandra Kumar, had not the agreement fruitioned into a sale, all that the transferor is entitled to is the refund of the advance because it was not paid as earnest money but only by way of advance. In this connection we may add that s. 269UG(3) which enables the Central Government to deposit, will have no bearing on this issue. Therefore, the principle of acquiescence fully applies as rightly held by the learned Single Judge. In Writ Appeal Nos. 621 and 622/1988 this aspect of the matter did not come up for consideration. Even otherwise that was only an interim order and that does not purport to lay down any principle of law. For these reasons, we dismiss the writ appeal.

[Citation : 193 ITR 220]

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