Sundaram Clayton Ltd. Vs. Appropriate Authority and ors. - Court Judgment

SooperKanoon Citationsooperkanoon.com/816942
SubjectDirect Taxation
CourtChennai High Court
Decided OnDec-22-2000
Case NumberW.P. No. 2269 of 2000
JudgeR. Jayasimha Babu, J.
Reported in[2001]252ITR330(Mad)
ActsIncome-tax Act, 1961 - Sections 269UD; Constitution of India - Article 226
AppellantSundaram Clayton Ltd.
RespondentAppropriate Authority and ors.
Appellant AdvocateR. Krishnamoorthy, Adv. for ;P.P.S. Janarthana Raja, Adv.
Respondent AdvocateT.V. Ramanujam, Adv. for ;T.V. Krishnamachari, Adv. and ;Chitra Venkataraman, Adv.
Excerpt:
- r. jayasimha babu, j.1. the petitioner is aggrieved by the order of the appropriate authority declining to grant no objection certificate for the purchase of approximately 13.1 grounds in an area known as boat club, one of the sought after areas in the city of madras. the total consideration for which it was proposed to be purchased was rs. 5,85,01,540. this area is part of a larger area measuring 46.945 grounds which the petitioner had agreed to buy under an agreement dated october 11, 1999, from binny limited, which being a sick company, had been permitted to sell this valuable property with a view to realise its cash equivalent2. the agreement with binny limited provided for the sale of that larger area of 46.945 grounds to the petitioner or its associates for a consideration of rs. 2,565 lakhs. the petitioner nominated five of its associates to purchase parts of that areas--t.v.s. suzuki limited 8.576 grounds, lakshmi auto components-6.166 grounds, t.v.s. electronics limited-6.138 grounds, t.v.s. finance limited-8.965 grounds, mr. gopala srinivasan, joint managing director of the petitioner-company, as an individual 4 grounds. the remaining extent of 13.1 grounds was to be purchased by the petitioner in its own name.3. the valuation of the portions of the larger property purchased by the petitioner's associates, by dividing the consideration paid by them by the area worked out to rs. 58.50 lakhs per ground. the appropriate authority, relying on that fact, as also on its own estimate of the fair market value for the land in the area has held that the fair market value is rs. 59.02 lakhs per ground, and that the rate of about rs. 44 lakhs per ground for the 13.1 grounds purchased by the petitioner was less by more than 15 per cent, and, directed compulsory purchase of 13.1 grounds.4. the petitioner has placed before the court copies of form no. 37-i filed by it, as also the copies of that form filed by the associate companies. along with form no. 37-i, the petitioner had produced its agreement with binny limited, that agreement being the one dated october 11, 1999, under which the petitioner was entitled to buy the entire area of 46.945 grounds for a consideration of rs. 2,565 lakhs in its own name, and/or in the names of its associates. in form no. 37-i filed by the associates also, reference was made to that agreement with binny limited, and copies of that agreement had also been produced by them before the authority. the authority, therefore, had before it the complete picture and had been made aware that the petitioner herein had contracted to buy this larger extent of 46.945 grounds for the agreed consideration of rs. 2,565 lakhs with option to nominate its associates to purchase all or parts of that area under one or more sale deeds.5. the common vendor binny limited, it is clear had executed the sale deeds in favour of the petitioner and its associates only pursuant to the agreement of november 11, 1999, with the petitioner, under which, it could look forward only to the receipt of the total sum of rs. 2,565 lakhs, and that was the amount which it could insist upon before parting with its title to 46.945 grounds. the associates of the petitioner had no right by themselves to purchase any part of this land except through the petitioner by being nominated by the petitioner as its nominee for the purpose of claiming the benefit of the agreement between the petitioner and binny limited.6. that agreement provided among other things for the specific performance of that agreement thereby underscoring the right of the petitioner to purchase that entire extent for the price stipulated in the agreement. it was, however, left to the petitioner to apportion that area among itself and its associates and to stipulate consideration in the sale deeds to be executed by binny limited in favour of the petitioner and its associates in such a manner as to ensure the total receipt of rs. 2,565 lakhs to binny limited. the average price per ground in accordance with the agreement with binny limited for 46.945 grounds for the total consideration at rs. 2,565 lakhs works out to rs. 54.64 lakhs. this amount, when compared to the market price determined by the authority at rs. 59.82 lakhs is less only by 7.42 per cent, and is well within the permissible limit of 15 per cent. the fact that instead of one sale, there are now six sales, all traceable to one agreement which may be termed as the master agreement should not make any difference to the final outcome of the exercise undertaken by the authority when it was called upon to grant no objection certificate to these purchasers.7. the fact that the petitioner chose to show the sale consideration in the proposed sale deed between it and binny limited for 13.1 grounds at a figure which worked out to approximately rs. 44 lakhs per ground, on the assumption that the value of 3.1 grounds (out of 13.1 grounds purchased by it) being the area of the private road providing access to the other ten grounds, had a reduced value by reason of the obligation to retain that area as a pathway/private road and to make that pathway available to two others whose residences abutted that private road/pathway, does not in any way militate against the petitioner's contention that what was ultimately payable to the common vendor binny limited for the total area agreed to be sold to the petitioner and its nominees was an amount which represented the true value of the entire land, and was an amont which was not less than the market value by more than 15 per cent. once that contention is found to be acceplable, it is evident that no presumption could be made that the proposed conveyance from binny limited to the petitioner was with a view to evade the amount required to be paid as tax by suppressing the true value of the transaction.8. the authority has clearly, misled itself in not paying attention to these aspects.9. counsel for the respondents-revenue points out that the case had not been advanced before the authority in the manner set out above and, therefore, the authority had no occasion to consider the case in that light.10. counsel, therefore, submits that the matter be sent back to the authority for fresh consideration of the matter. this suggestion is not seriously opposed by learned senior counsel for the petitioner.11. the impugned order of the authority is, therefore, set aside and the matter remanded for fresh consideration in accordance with law and in the light of the observations made in the course of this order.12. the authority shall render its decision within a period of four weeks from the date of receipt of a copy of this order.
Judgment:

R. Jayasimha Babu, J.

1. The petitioner is aggrieved by the order of the Appropriate Authority declining to grant no objection certificate for the purchase of approximately 13.1 grounds in an area known as Boat Club, one of the sought after areas in the city of Madras. The total consideration for which it was proposed to be purchased was Rs. 5,85,01,540. This area is part of a larger area measuring 46.945 grounds which the petitioner had agreed to buy under an agreement dated October 11, 1999, from Binny Limited, which being a sick company, had been permitted to sell this valuable property with a view to realise its cash equivalent

2. The agreement with Binny Limited provided for the sale of that larger area of 46.945 grounds to the petitioner or its associates for a consideration of Rs. 2,565 lakhs. The petitioner nominated five of its associates to purchase parts of that areas--T.V.S. Suzuki Limited 8.576 grounds, Lakshmi Auto Components-6.166 grounds, T.V.S. Electronics Limited-6.138 grounds, T.V.S. Finance Limited-8.965 grounds, Mr. Gopala Srinivasan, joint managing director of the petitioner-company, as an individual 4 grounds. The remaining extent of 13.1 grounds was to be purchased by the petitioner in its own name.

3. The valuation of the portions of the larger property purchased by the petitioner's associates, by dividing the consideration paid by them by the area worked out to Rs. 58.50 lakhs per ground. The Appropriate Authority, relying on that fact, as also on its own estimate of the fair market value for the land in the area has held that the fair market value is Rs. 59.02 lakhs per ground, and that the rate of about Rs. 44 lakhs per ground for the 13.1 grounds purchased by the petitioner was less by more than 15 per cent, and, directed compulsory purchase of 13.1 grounds.

4. The petitioner has placed before the court copies of Form No. 37-I filed by it, as also the copies of that form filed by the associate companies. Along with Form No. 37-I, the petitioner had produced its agreement with Binny Limited, that agreement being the one dated October 11, 1999, under which the petitioner was entitled to buy the entire area of 46.945 grounds for a consideration of Rs. 2,565 lakhs in its own name, and/or in the names of its associates. In Form No. 37-I filed by the associates also, reference was made to that agreement with Binny Limited, and copies of that agreement had also been produced by them before the authority. The authority, therefore, had before it the complete picture and had been made aware that the petitioner herein had contracted to buy this larger extent of 46.945 grounds for the agreed consideration of Rs. 2,565 lakhs with option to nominate its associates to purchase all or parts of that area under one or more sale deeds.

5. The common vendor Binny Limited, it is clear had executed the sale deeds in favour of the petitioner and its associates only pursuant to the agreement of November 11, 1999, with the petitioner, under which, it could look forward only to the receipt of the total sum of Rs. 2,565 lakhs, and that was the amount which it could insist upon before parting with its title to 46.945 grounds. The associates of the petitioner had no right by themselves to purchase any part of this land except through the petitioner by being nominated by the petitioner as its nominee for the purpose of claiming the benefit of the agreement between the petitioner and Binny Limited.

6. That agreement provided among other things for the specific performance of that agreement thereby underscoring the right of the petitioner to purchase that entire extent for the price stipulated in the agreement. It was, however, left to the petitioner to apportion that area among itself and its associates and to stipulate consideration in the sale deeds to be executed by Binny Limited in favour of the petitioner and its associates in such a manner as to ensure the total receipt of Rs. 2,565 lakhs to Binny Limited. The average price per ground in accordance with the agreement with Binny Limited for 46.945 grounds for the total consideration at Rs. 2,565 lakhs works out to Rs. 54.64 lakhs. This amount, when compared to the market price determined by the authority at Rs. 59.82 lakhs is less only by 7.42 per cent, and is well within the permissible limit of 15 per cent. The fact that instead of one sale, there are now six sales, all traceable to one agreement which may be termed as the master agreement should not make any difference to the final outcome of the exercise undertaken by the authority when it was called upon to grant no objection certificate to these purchasers.

7. The fact that the petitioner chose to show the sale consideration in the proposed sale deed between it and Binny Limited for 13.1 grounds at a figure which worked out to approximately Rs. 44 lakhs per ground, on the assumption that the value of 3.1 grounds (out of 13.1 grounds purchased by it) being the area of the private road providing access to the other ten grounds, had a reduced value by reason of the obligation to retain that area as a pathway/private road and to make that pathway available to two others whose residences abutted that private road/pathway, does not in any way militate against the petitioner's contention that what was ultimately payable to the common vendor Binny Limited for the total area agreed to be sold to the petitioner and its nominees was an amount which represented the true value of the entire land, and was an amont which was not less than the market value by more than 15 per cent. Once that contention is found to be acceplable, it is evident that no presumption could be made that the proposed conveyance from Binny Limited to the petitioner was with a view to evade the amount required to be paid as tax by suppressing the true value of the transaction.

8. The authority has clearly, misled itself in not paying attention to these aspects.

9. Counsel for the respondents-Revenue points out that the case had not been advanced before the authority in the manner set out above and, therefore, the authority had no occasion to consider the case in that light.

10. Counsel, therefore, submits that the matter be sent back to the authority for fresh consideration of the matter. This suggestion is not seriously opposed by learned senior counsel for the petitioner.

11. The impugned order of the authority is, therefore, set aside and the matter remanded for fresh consideration in accordance with law and in the light of the observations made in the course of this order.

12. The authority shall render its decision within a period of four weeks from the date of receipt of a copy of this order.