K.A. Swami, C.J.
1. In this petition under article 226 of the Constitution of India, the petitioner has sought for a declaration that the provisions of Chapter XXC of the Income-tax Act, 1961 (hereinafter referred to as 'the Act'), introduced by the Finance Act, 1986, brought into force with effect from October 1, 1986, and rule 48L of the Income-tax Rules, 1962 (hereinafter referred to as 'the Rules'), introduced by the Income-tax (Seventh Amendment) Rules, 1986, which was also brought into force on October 1, 1986, and also the provisions of section 269UD of the Act, are unconstitutional, illegal, void and unenforceable. The petitioner has also sought for the issue of a writ of certiorarified mandamus, to call for the records comprised in the proceedings of the second respondent in A. A./MDS/10(46)/12/86-87, dated December 9, 1986, and quash the same and consequently to direct respondents Nos. 1 to 3 to redeliver possession of the property bearing Door No. 98, Oliver Road, Mylapore, Madras 4, to the petitioner and to pass such further or other orders as this court may deem fit and proper in the circumstances of the case.
2. As far as the constitutional validity of the provisions contained in Chapter XXC, including that of section 269UD of the Act, is concerned, in the light of the decision of the Supreme Court in Gautam. (C. B.) v. Union of India [ : [1993]199ITR530(SC) , learned counsel for the petitioner has not addressed any argument, rightly also because in the said decision, the Supreme Court has upheld the constitutionality of the provisions contained under Chapter XXC of the Act. Therefore, what remains to be considered in this writ petition is, as contended by petitioner, the applicability of Chapter XXC of the Act to the transaction in question and also the validity of the order dated December 9, 1986, passed by the second respondent.
3. By the impugned order, the second respondent has directed pre-emptive purchase of the immovable property in question. We may also state the relevant facts which are not in dispute in this case. After the order was passed under section 269UD(1) of the Art on December 9, 1986, possession of the immovable property in question was delivered to the appropriate authority on December 13, 1986. The document evidencing the delivery of possession of the property is signed by the petitioner as well as the vendor. We may point out here that the petitioner agreed to purchase the property in question on February 24, 1986, for a sum of Rs. 5 lakhs. Thereafter, on the coming into force of Chapter XXC of the Act, Form No. 37-I was filed as required by section 269UC of the Act and rule 48L of the Rules on October 15, 1986, within 15 days from the date of application of Chapter XXC to Madras. Pursuant to Form No. 37-I, the appropriate authority passed an order on December 9, 1986, directing pre-emptive purchase of the property on the ground that the consideration agreed upon was far less than the market value of the property as on the date of the agreement. As already stated, pursuant to the order, possession was delivered. After obtaining possession, the appropriate authority put up the property for auction and the public auction was held on February 16, 1987. The sixth respondent, Suresh Mittal, was the auction purchaser. He paid the entire amount for which he had offered the bid on March 5, 1987, and the auction was confirmed on March 25, 1987. The auction purchaser was put in possession on September 14, 1987. The writ petition in question came to be filed in November, 1987. Thus, after everything was over, without any objection on the part of the petitioner, the writ petition has been filed mainly on the ground that Chapter XXC was not attracted to the agreement of sale which was entered into on February 24, 1986, and even otherwise Chapter XXC is unconstitutional and hence the order dated December 9, 1986, should be quashed. We have already pointed out that Chapter XXC has been held to be valid and, therefore, learned counsel is right in not putting forth any contention in this regard.
4. On these facts, we are now to consider :
(i) Whether Chapter XXC of the Act is attracted to the agreement dated February 24, 1986
(ii) Whether the rule laid down in C. B. Gautam's case : [1993]199ITR530(SC) can be applied to the case on hand
(iii) If so, to what relief the parties are entitled
Point No. (i) :
The contention of learned counsel for the petitioner is that, as the agreement of sale was entered into on February 24, 1986, and the petitioner was put in possession of the property agreed to be sold by the vendors, on receiving the entire sale consideration, such agreement did fall within the ambit of the expression 'transfer' as defined in Chapter XXA of the Act and, as such, it is a case which comes under Chapter XXA of the Act, and, therefore, Chapter XXC of the Act which came into force on October 1, 1986, long after the agreement is not attracted to the transaction in question. Learned counsel has placed reliance on the definition of the word 'transfer' as occurring in Chapter XXA of the Act. Section 269A(h) defines the expression 'transfer' as follows :
''transfer', -
(i) in relation to any immovable property referred to in sub-clause (i) of clause (e), means transfer of such property by way of sale or exchange or lease for a term of not less than twelve years, and includes allowing the possession of such property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882 (4 of 1882).'
5. The Explanation is not relevant for our purpose; therefore, it is not referred to. It is submitted by learned counsel that as the agreement of sale coupled with the delivery of possession in part performance of an agreement of sale as per section 53A of the Transfer of Property Act squarely falls within the aforesaid definition as contained in section 269A(h) and the transaction is required to be registered with the competent authority as per section 269AB of the Act by filing the agreement in the prescribed form, the mere fact that the deed of transfer was not executed before Chapter XXC came into force, will not make the provisions contained in Chapter XXC applicable to the agreement. It is contended that if Chapter XXC were to be applied to the agreement in question, it would not be possible for the petitioner to comply with the requirement of rule 48L of the Rules.
6. On the contrary, it is contended by Mr. N. V. Balasubramaniam, junior standing counsel for income-tax cases, appearing for respondents Nos. 1 to 3, and also Mr. V. Ramachandran, learned senior counsel appearing for respondents Nos. 6 to 8, who are the auction purchaser and the subsequent purchasers, that the fact that the agreement was entered into on February 24, 1986, is not of any materiality as long as it remained an agreement and there was no transfer of the property as per law as contemplated under section 269UC in Chapter XXC of the Act; the provisions contained therein continued to apply. It is also submitted that this is a case in which the contention of the nature raised by the petitioner is not at all applicable, because it was the petitioner and the original owner of the property who together submitted Form No. 37-I and sought for a decision of the appropriate authority, and thereby submitted themselves to the jurisdiction of the appropriate authority, admitting that the transaction in question is governed by the provisions contained in Chapter XXC of the Act. Learned counsel also brought to our notice Form No. 37-I and the contents mentioned therein. As already pointed out, Form No. 37-I has been filed on October 15, 1986, as required by rule 48L of the rules. Relying upon rule 48L of the Rules, learned counsel submitted that a reading of the said provision makes it clear that there is no difficulty whatsoever for complying with that rule even in the case of transactions of agreement of sale which had taken place prior to the coming into force of Chapter XXC and which had remained an agreement of sale and not resulted in execution of a deed of transfer before the coming into force of Chapter XXC of the Act.
7. Rule 48L reads thus :
'Statement to be furnished under section 269UC(3). - (1) The statement required to be furnished to the appropriate authority under sub-section (3) of section 269UC shall be in Form No. 37-I and shall be signed and verified in the manner indicated therein by each of the parties to the transfer referred to in sub-section (1) of that section or by any of the parties to such transfer acting on behalf of himself and on behalf of the other parties.
(2) The statement in Form No. 37-I shall be furnished, in duplicate, to the appropriate authority -
(a) before the 30th day of October, 1987, in a case where the agreement for transfer is entered into before the coming into force of Chapter XXC in the areas comprised in the 'Bangalore Metropolitan Region', and 'Ahmedabad Urban Development Area' and the areas comprised in the city of Ahmedabad, as referred to in the Notification of the Government of India in the Department of Revenue, No. S.0. 835(E), dated 21st September, 1987;
(b) before the expiry of 15 days from the date on which the provisions of Chapter XXC come into force in any areas, other than the areas referred to in clause (a) where the agreement for transfer is entered into before such date; and
(c) before the expiry of 15 days from the date on which the agreement for transfer is entered into, in cases not covered by clauses (a) and (b).'
8. As per the aforesaid rule, the case on hand falls under clause (b) of sub-rule (2) of rule 48L and, accordingly, the application in Form No. 37-I has been filed on October 15, 1986. It may be pointed out here that rule 48L provides for the transactions of agreement of sale which have taken place even prior to October 30, 1986, and even before the application of Chapter XXC to the various areas. Form No. 37-I specifically provides Column No. 6 for furnishing information as to the agreement of sale, if any, which had taken place earlier to the coming into force of Chapter XXC of the Act. Therefore, it is not possible to agree with the contention of learned counsel for the petitioner that, in the case of agreements of sale that had taken place prior to the coming into force of Chapter XXC of the Act, it is not at all possible to comply with rule 48L and as such the agreements falling under Chapter XXA of the Act should be held to have been kept outside the purview of Chapter XXC of the Act. It may be pointed out here that though rule 48L has no retrospective operation, nevertheless it will apply to an agreement entered into prior to October 1, 1986, as long as it had not resulted in the execution of the deed of transfer on the date Chapter XXC is made applicable.
9. However, relying upon the provisions contained in section 269UC of the Act, it is contended by learned counsel for the appellant that as the agreement in question is a 'transfer' within the meaning of Chapter XXA as well as Chapter XXC of the Act, there is no question of applying Chapter XXC, as held by a Division Bench of the Delhi High Court in Captain Sanjeev Sethi v. Union of India : [1992]195ITR338(Delhi) . The contention is that the transaction must be held to have been completed before Chapter XXC came into force, because it answered the definition of the expression 'transfer' and as the scope of Chapter XXA is different from that of Chapter XXC, and in view of the fact that Chapter XXA is not as onerous as Chapter XXC and further that Chapter XXA is intended for purchase whereas Chapter XXC is intended for pre-emptive purchase or in other words for compulsory acquisition of property. Therefore, it is contended that in the absence of any provision making Chapter XXC of the Act retrospective, the normal rule is to hold that it is prospective and would be applicable only to such agreements of sale which come into existence after the coming into force of Chapter XXC. In Sanjeev Sethi (Captain) v. Union of India : [1992]195ITR338(Delhi) , the Division Bench of the Delhi High Court has held that an allotment of a flat amounted to a transaction of 'transfer' as defined under Chapter XXA of the Act; therefore, Chapter XXC of the Act was not attracted. The relevant portions of the aforesaid judgment of a Division Bench are extracted below (at page 345) :
'The main contention of learned counsel for the petitioner is that the provisions of Chapter XXC of the Income-tax Act are not applicable in the present case. The submission of Mr. Syali is that, in the instant case, a valid agreement had been entered into between the petitioner which expression will include his predecessor-in-interest, viz., his brother, Navneet Sethi, and the other flat buyers on the one hand and Competent Builders on the other. This agreement was entered into prior to October 1, 1986, with effect from which date Chapter XXC was incorporated in the Income-tax Act, 1961. It is submitted that the said agreement was covered by the provisions of Chapter XXA and, according to section 269RR, the provisions of this Chapter were to be applicable in relation to the transfer of any immovable property made before September 30, 1986. The word 'transfer' is defined in section 269A(h) and the same has to be read along with the definition of the word 'immovable property' occurring in sub-clause (e) which includes any rights of the nature referred to in clause (b) of sub-section (1) of section 269AB. The provisions of section 269AB, inter alia, refer to a transaction by way of an agreement whereby any person acquires any right in respect of any building which has been constructed or is to be constructed even if that right is not by way of transaction of sale, exchange or lease, etc. In other words, the letters of allotment which were issued by Competent Builders in favour of the petitioner and the other flat buyers would, admittedly, fall within the ambit of Chapter XXA of the said Act. This being so, the contention of Shri Rajendra, on behalf of the respondents, was that the original agreement between the buyers and Competent Builders had come to an end and there was a fresh agreement which had been entered into between the buyers and the Ansals when the letters of allotment were issued in 1990. Shri Rajendra further submits that, in the fresh letter of allotment which has been issued, there is no reference to the earlier agreement which had been entered into with Competent Builders nor were the earlier agreements registered under the provisions of rule 48L of the Income-tax Rules. He further submitted that, in any case, the petitioner, Sanjeev Sethi, was not a party to the original agreement of 1979, and therefore, he cannot be regarded as being one of the original allottees/buyers and his case, in any case, will be covered by the provisions of Chapter XXC.
10. Before we conclude, we must deal with the contention of Shri Rajendra to the effect that, in this case, Sanjeev Sethi is not the same person with whom the agreement was entered into originally. It is not in dispute that the provisions of Chapter XXC are not applicable in the case of transfer of property by a person to his relative on account of natural love and affection. In the present case, it is only on October 4, 1990, that a letter was written by Navneet Sethi to the Ansals to the effect that the allotment be transferred to the name of his brother Sanjeev Sethi. The right of Navneet Sethi to get the flat was recognised. It is this right which was transferred by Navneet Sethi to his brother, Sanjeev Sethi. This was obviously a transfer on account of natural love and affection and such a transfer would be exempt from the provisions of Chapter XXC by virtue of the provisions of section 269UD. Moreover, in clause 24 of the agreement dated September 4, 1979, it was, inter alia, provided that the power of attorney would be executed in favour of Competent Builders so as to enable Competent Builders to execute 'sale agreements in favour of the purchasers of the flats or their assigns or nominees and. . .'. The said clause clearly provides that the purchasers could have their nominees or assigns and they would necessarily step into the shoes of the purchasers. This is precisely what has happened here. Sanjeev Sethi has stepped into the shoes of his brother, Navneet Sethi, who was the original allottee. It is for this reason that no transfer charges were demanded by or paid to the Ansals, even though the agreement postulates that, in the case of any transfer, such charges will have to be paid.
11. With regard to the applicability of rule 48L, the conclusion is very simple. The said rule will apply only if Chapter XXC applies. For the view that we have taken, on the facts of the present case, Chapter XXC does not apply. Therefore, the question of the said rule becoming applicable does not arise. Furthermore, at the time when the rule came into operation, viz., October 1, 1986, the price which had been agreed to be paid by the erstwhile buyers was less than Rs. 10 lakhs per flat. In the very nature of things, Chapter XXC was not applicable to the sale of immovable property of value less than Rs. 10 lakhs. Therefore, there would be no occasion at that point of time for any application of rule 48L. The price was increased to beyond Rs. 10 lakhs only in 1990.
12. Lastly, the said rule 48L has no retrospective operation and would not apply to an agreement entered into prior to October 1, 1986, specially to such cases where the provisions of Chapter XXA were applicable like in the present case.'
13. With great respect to the learned judges who constituted the Division Bench, we find it difficult to agree, and apply the said decision to the facts of the present ease. The decision in that case turned upon the allotment of a flat which, according to the learned judges, amounted to transfer, and the transaction was complete in all respects and hence Chapter XXC was not applicable. It is not clear from the judgment as to whether the very allotment amounted to transfer of title and as such it was equivalent to a deed of transfer as required by law. It is to be noted that no relevant rule relating to the allotment of flats with which the learned judges were concerned, has been referred to. However, a mere allotment as such cannot be considered as transferring title. As such with great respect we find it difficult to agree with the ultimate decision arrived at. If a mere allotment or a mere agreement of sale were to result in the transfer of title, in such an event, it is not at all necessary under section 269UC of the Act to provide that no transfer of immovable property of value exceeding Rs. 5 lakhs shall be effected, except after an agreement for transfer is entered into between the person who intends transferring the immovable property and the person who intends to purchase it. Therefore, we are of the view that the said decision cannot be accepted as laying down the law correctly.
14. A contention is also put forth before us that sub-section (1) of section 269UC provides that the agreement shall be entered into three months before forwarding of the same to the appropriate authority and the same is not possible in cases where agreements for sale have come into existence before the coming into force of Chapter XXC of the Act. It is relevant to notice that sub-section (1) of section 269UC says that such an agreement should be entered into at least three months prior to the intended date of transfer. The expression 'intended date of transfer' used in sub-section (1) must be read with the earlier portion of the provision 'no transfer of any immovable property', which means that the transfer contemplated is the actual transfer by the deed in accordance with law. If that is so, the application and enforcement of the provisions contained in section 269UC to the agreements entered into earlier to the coming into force of Chapter XXC of the Act does not create any difficulty. Therefore, we are of the view that the contention of the petitioner has to be rejected. Point No. (i) is answered in the affirmative.
15. Point No. (ii) :
16. This is a case in which the rule laid down in C. B. Gautam's case : [1993]199ITR530(SC) cannot be applied at all. It has been specifically made clear in that decision that the same would not apply to cases in which the transactions have been completed. The relevant portion of the judgment in C. B. Gautam.'s case : [1993]199ITR530(SC) is as follows (at page 562) :
'We may clarify that, as far as completed transactions are concerned, namely, where, after the order for compulsory purchase under section 269UD of the Income-tax Act was made and possession has been taken over, compensation was paid to the owner of the property and accepted without protest, we see no reason to upset those transactions and hence, nothing we have said in the judgment will invalidate such purchases. The same will be the position where public auctions have been held of the properties concerned and they are purchased by third parties. In those cases also, nothing which we have stated in this judgment will invalidate the purchases.'
17. Thus, from the aforesaid observations made by the Supreme Court, it is clear that the principle laid down in that case would not apply to cases where pursuant to the compulsory purchase order, the owner of the property has delivered possession on receiving the compensation without any protest and also to cases where the appropriate authority had sold the property in public auction. This is a case in which, as pointed out by us earlier, even before the judgment in C. B Gautam's case : [1993]199ITR530(SC) was delivered, the petitioner and the intended vendor, i.e., the original owner of the property, had not only accepted the order of pre-emptive purchase but had also delivered possession voluntarily to the appropriate authority on December 13, 1986. That proceeding was confirmed on January 17, 1987, and the property in question was sold in public auction on February 16, 1987. The auction purchaser paid the entire consideration on March 5, 1987, and the sale was confirmed on March 25, 1987, and he was put in possession of the same. Thereafter, the auction purchaser has sold the property to respondents Nos. 7 and 8. The writ petition has been filed only in November, 1987. The mere fact that the writ petition was pending when the judgment in C. B. Gautam's case : [1993]199ITR530(SC) came to be delivered will not be of any materiality in the instant case, because it cannot be held that the principle laid down in that decision is applicable to the instant case. In the absence of the observation made by the Supreme Court, extracted above, it would have been possible to apply the said decision, but the applicability of the rule laid down in C. B. Gautam's case : [1993]199ITR530(SC) to a case of the nature on hand has been excluded by the Supreme Court, by the clarification extracted above. Therefore, even if it is considered that the writ petition was pending on the date the judgment in C. B. Gautam's case : [1993]199ITR530(SC) was delivered, nevertheless, the case falls within the clarificatory observations extracted above and as such the rule laid down therein cannot at all be applied to the case on hand. Accordingly, point No. (ii) is answered in the negative.
18. There is no other contention raised except that the petitioner had not been given an opportunity by the appropriate authority to put forth his case before the order of pre-emptive purchase was passed. The validity of that contention depends upon the application of the rule laid down in C. B. Gautam's case : [1993]199ITR530(SC) but, as already pointed out, the application of this rule to the case on hand is excluded by reason of the clarificatory observations made in the very judgment in C. B. Gautam's case : [1993]199ITR530(SC) .
19. For the reasons stated above, the writ petition fails and the same is dismissed. As a result thereof, the interim order passed in the writ petition comes to an end. It is now open to the appropriate authority, viz., the Chief Commissioner of Income-tax, to execute the appropriate document in favour of respondents Nos. 7 and 8, because it is not disputed that the auction purchaser/sixth respondent has sold the property in question, on obtaining permission from the appropriate authority, to respondents Nos. 7 and 8. However, we make it clear that this direction will not enable the sixth respondent to escape the liability, if any, for capital gains tax.
20. As the validity of the provisions was challenged before the decision in C. B. Gautam's case : [1993]199ITR530(SC) was delivered, we direct that there will be no order as to costs.