Citation Codes

Equivalent Citations

citation codes

Case Number

Writ Appeal No. 847 of 1975

Judges

Sambasiva Rao
Muktadar, JJ.

Acts

Section 230A of the I.T. Act, 1961, hereinafter referred to as "the Act".
SECTION 47 INDIAN REGISTRATION ACT
REGISTRATION ACT 1908
Indian I.T. Act, 1922, or the Act or the W.T. Act, 1957.
SECTION 54 TRANSFER OF PROPERTY ACT
SECTION 47 REGISTRATION ACT
INDIAN REGISTRATION ACT

See more information ...

Smart Summary

Structured Summary of the Provided Opinion

Factual and Procedural Background

The dispute arises from the sale of the Saras-wathi Picture Palace in Malkipuram village, East Godavari District. Owners M. Linga Raju and Narasimha Raju executed a sale deed in favour of the appellant on October 28, 1972, for Rs. 1,10,000. The deed was presented for registration and the Sub-Registrar required an income-tax clearance certificate under Section 230A of the Income-tax Act, 1961. The vendors obtained and produced the clearance certificate and the deed was registered on November 16, 1972.

Chapter XX-A of the Income-tax Act (dealing with acquisition of immovable property transferred for apparent undervalue) came into force on November 15, 1972. The competent authority under Chapter XX-A issued a notice under Section 269C on May 18, 1973, proposing acquisition proceedings on the ground that the property appeared to be transferred for consideration less than fair market value. The appellant objected to the jurisdiction under Section 269D; the competent authority rejected the preliminary objection on June 21, 1973. The appellant filed W.P. No. 3928/73 challenging that rejection; the writ petition was dismissed by Chinnappa Reddy J. on July 28, 1975. This appeal challenges that dismissal.

Legal Issues Presented

Whether Chapter XX-A of the Income-tax Act (and specifically Sections 269A–269F) applies to the sale deed in question where the deed was executed on October 28, 1972 but registered on November 16, 1972, given that Chapter XX-A came into force on November 15, 1972.
Whether, by virtue of Section 47 of the Indian Registration Act (which states that a registered instrument operates from the date it purports to take effect), the sale should be deemed to have been completed on the execution date (October 28, 1972) so that the provisions of Chapter XX-A would not apply.
Whether the competent authority under Chapter XX-A had jurisdiction to initiate proceedings under Section 269C/269D in respect of the property in question.

Arguments of the Parties

Appellant's Arguments

The sale deed was executed on October 28, 1972 and, although registered on November 16, 1972, by virtue of Section 47 of the Indian Registration Act the instrument operates from the earlier execution date. Consequently, the sale was completed before Chapter XX-A came into force on November 15, 1972 and Chapter XX-A should not apply to this transaction.
The appellant relied on several precedents (listed in the opinion) supporting the proposition that Section 47 gives effect from the earlier date, i.e., the date the instrument purports to take effect.

Respondent / Competent Authority's Position (as reflected in the record and the courts below)

The competent authority treated the registration date (November 16, 1972) as the date on which the instrument of transfer was completed for purposes of Chapter XX-A and initiated proceedings under Section 269C. It declined the appellant's preliminary objection to jurisdiction under Section 269D.
The single judge accepted the view that, in light of Section 269A's definitions of "instrument of transfer" and "transfer" and Section 54 of the Transfer of Property Act, a transfer of immovable property is completed by registration of the instrument, and therefore Sections 269C/269D apply where the instrument is registered on or after November 15, 1972.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Ram Saran Loll v. Mst. Domini Kuer (Supreme Court)	Holds that a sale which is not completed until registration cannot be said to have been completed earlier merely because Section 47 gives the registered instrument effect from an earlier date.	The court relied on this Supreme Court decision as binding authority to reject the appellant's contention that Section 47 made the sale complete on the execution date; Ram Saran's case supports the view that completion takes effect on registration.
Tilakdhari Singh v. Gour Narain (AIR 1921 Pat 150)	Referenced as having taken the same view regarding the limited effect of Section 47 (as noted in Ram Saran's discussion).	The opinion notes that the view expressed in Ram Saran appears to have been taken in Tilakdhari Singh; used to support the position that Section 47 does not make the sale complete before registration.
Naresh Chandra Dutta v. Girish Chandra Das [1936] ILR 62 Cal 979 ; AIR 1936 Cal 17	Referenced in Ram Saran's discussion as expressing the same view about Section 47's effect.	Cited via Ram Saran to support the conclusion that Section 47 does not alter the date of completion of sale where registration is required.
Gobardhan Bar v. Gana Dhar Bar [1940] ILR 2 Cal 270 ; AIR 1941 Cal 78	Referenced (through Ram Saran) as supporting the interpretation that Section 47 does not amount to completion prior to registration in certain contexts.	Relied on through Ram Saran's exposition to bolster the view that registration is the decisive act for completion of sale.
Hiralal Agrawal v. Rampadarth Singh	Noted as a Supreme Court decision that followed the same view as Ram Saran concerning Section 47 and completion by registration.	Used as further Supreme Court authority reinforcing the conclusion that completion takes effect on registration.
Kalyanasundaram Pillai v. Karuppa Mooppanar (AIR 1927 PC 42)	Cited by appellant as supporting the proposition that Section 47 gives a registered instrument effect from an earlier date (i.e., the execution date).	The court acknowledged that this and similar rulings conform to the appellant's proposition but observed that Ram Saran (a later Supreme Court decision) is binding, and therefore those earlier rulings were not followed in this case.
Sadei Sahu v. Chandramani Dei (AIR 1948 Pat 60)	Cited by appellant in support of the Section 47-based argument.	Recognized as authority aligning with the appellant's position but not relied upon because Ram Saran is binding contrary authority.
Union Bank Ltd. v. Mst. Ram Rati	Listed among cases relied on by the appellant to support the Section 47 proposition.	Not followed by the court in the face of the binding Supreme Court authority in Ram Saran; therefore not applied to overturn the legislative scheme in Chapter XX-A.
Basant Lal v. Bala Misra	Listed among the rulings relied upon by the appellant respecting Section 47's operation.	Not applied to displace Ram Saran or the statutory interpretation of Chapter XX-A; acknowledged but not followed.
Thirumagaral Mudaliar v. Muruga Pillai	One of the rulings cited by the appellant for the Section 47 proposition.	The court noted the citation but did not adopt its reasoning in view of Ram Saran and the statutory framework.
R.M. A.R. Adaikkappa Chettiar v. Kumbakonam City Union Bank Ltd.	Another authority cited by the appellant in support of the Section 47 position.	Not followed because the Supreme Court's decision in Ram Saran and the statutory context indicated completion upon registration.
Mahavir Metal Works P. Ltd. v. Union of India (Delhi High Court)	Decision of the Delhi High Court referenced as supporting the interpretation that the competence to initiate proceedings under Chapter XX-A arises after registration of the instrument of transfer.	Invoked by the court as additional support for the view that transfer for the purposes of Chapter XX-A is completed on registration and that Section 47 is not applicable to defeat that statutory scheme.

Court's Reasoning and Analysis

The court proceeded by examining the statutory scheme and the relevant definitions and provisions rather than focusing solely on the isolated effect of Section 47 of the Registration Act. The analysis can be broken down into the following steps, drawn from the opinion:

The court considered Section 54 of the Transfer of Property Act, which defines "sale" as a transfer of ownership for a price and states that a sale of immovable property of value Rs. 100 or more can only be made by a registered instrument. From this it followed that for such immovable property a sale is completed only by registration, and until registration no title passes to the buyer.
The court then examined the definitions in Section 269A of the Income-tax Act (Chapter XX-A) which define "instrument of transfer" as the instrument registered under the Registration Act and "transfer" in relation to immovable property. These definitions show that the Chapter contemplates completion of transfer by registration.
The procedural provisions in Chapter XX-A (Sections 269C–269F) were analyzed: Section 269C permits the competent authority to initiate proceedings where it believes an immovable property of fair market value exceeding Rs. 25,000 has been transferred for an apparent undervalue; the proviso to Section 269D requires initiation of proceedings within nine months from the end of the month in which the instrument of transfer is registered. Sections 269E and 269F provide objection and hearing mechanisms, with Section 269F(6) authorising acquisition if statutory conditions are satisfied.
Given (a) the statutory requirement of registration under Section 54 for completion of sale, (b) the definitions in Section 269A treating the instrument of transfer as a registered instrument, and (c) the proviso to Section 269D which measures time from registration, the court concluded that the legislature intended that transfers be regarded as completed upon registration for the purposes of Chapter XX-A.
The court addressed the appellant's reliance on Section 47 of the Registration Act and authorities supporting an earlier effective date of operation for registered instruments. It observed that Ram Saran Loll (a binding Supreme Court decision) explicitly held that a sale not completed until registration cannot be said to have been completed earlier merely because Section 47 gives a registered instrument operative effect from an earlier date. The court treated Ram Saran as controlling.
The court also referenced subsequent supportive authority (Hiralal Agrawal v. Rampadarth Singh) and a relevant Delhi High Court decision (Mahavir Metal Works P. Ltd. v. Union of India) as reinforcing the interpretation that completion of sale for purposes of Chapter XX-A is the act of registration.
On these grounds, the court concluded that the sale deed in question was completed on the date of registration (November 16, 1972) and that Chapter XX-A applied to the transaction since registration occurred after Chapter XX-A came into force (November 15, 1972). Therefore Section 47 could not be invoked to take the transaction out of the statutory scheme.

Holding and Implications

Core Ruling: The appeal is dismissed. The court held that the sale deed was completed on November 16, 1972 (the date of registration) and that Chapter XX-A of the Income-tax Act applies to the transaction; Section 47 of the Registration Act could not be invoked to treat the sale as completed on its earlier execution date.

Consequences and immediate implications:

The competent authority was entitled to initiate proceedings under Chapter XX-A (Sections 269C–269F) in respect of the property, because the instrument of transfer was registered after Chapter XX-A came into force.
The appellant's objection to the jurisdiction of the competent authority under Section 269D was rejected by the courts; this appeal does not disturb that conclusion.
The appeal was dismissed with costs; advocate's fees were fixed at Rs. 250.
No broader new precedent beyond the application of existing authorities and statutory interpretation was stated to have been established; the court relied on existing Supreme Court authority (notably Ram Saran) and statutory construction to reach its conclusion.

This summary is strictly confined to the material and reasoning contained in the provided opinion and does not add or infer information beyond the opinion's text.

Show full summary ...

Divvi Suryanarayana Murthy v. Competent Authority, Inspecting Assistant Commissioner Of Income-Tax, And Another

1. This appeal is directed against the judgment dated July 28, 1975 of Chinnappa Reddy J. in W.P. No. 3928/73 [] dismissing the same. The facts are these :

One M. Linga Raju and Narasimha Raju were the owners of Saras-wathi Picture Palace situated in the village called Malkipuram, East Godavari District. They executed a sale deed on October 28, 1972, in favour of the appellant conveying the cinema theatre for a consideration of Rs. 1,10,000. The said deed was presented for registration to the concerned registering authority. The Sub-Registrar of Malkipuram Village called upon the vendors to obtain a clearance certificate from the income-tax authorities under Section 230A of the I.T. Act, 1961, hereinafter referred to as "the Act". The vendors obtained the tax clearance certificate on November 16, 1972, and having produced the same before the registering authority got the sale deed registered on November 16, 1972. Chapter XX-A was introduced in the Act and it came into force on November 15, 1972, The competent authority under Chapter XX-A of the Act, viz., the IAC, Income-tax, issued a notice under Section 269C dated May 18, 1973, calling upon the petitioner to show cause as to why the said property should not be acquired as the competent authority had reason to believe that the property had been transferred for an apparent consideration which was less than the fair market value of the property and that the consideration for such transfer as agreed to between the parties had not been truly stated in the instrument of transfer with the object of facilitating the reduction or evasion of the liability of the transferor to pay tax under the Act in respect of any income arising from the transfer, or facilitating the concealment of any income or any moneys or other assets which had not been or which ought to be disclosed by the transferee for the purposes of the Indian I.T. Act, 1922, or the Act or the W.T. Act, 1957. In answer to the notice, the appellant filed a letter before the competent authority on June 16, 1973, objecting to the jurisdiction of the competent authority to invoke the provisions of Section 269D. The competent authority declined to accept the preliminary objection by its letter dated June 21, 1973. Aggrieved by that order of the competent authority, the appellant preferred W.P. No. 3928/73.

2. Before the learned single judge, Mr. Y. V. Anjaneyulu who was appearing for the petitioner had argued that the sale deed was executed on October 28, 1972, but was registered on November 16, 1972, i.e., after the coming into force of Chapter XX-A of the Act; therefore, having regard to the provisions of Section 47 of the Indian Registration Act, the sale deed would be deemed to operate from the date of its execution and not from the date of its registration, and since Chapter XX-A came into force on November 15, 1972, it did not apply to the sale deed in question. In support of that contention, Mr. Anjaneyulu had cited several rulings. That contention was not accepted by the single judge in view of the ruling of the Supreme Court in Ram Saran Loll v. Mst, Domini Kuer, . The learned single judge also was of the opinion that, having regard to the provisions of Section 269C of the Act read in conjunction with the definitions of the expressions "transfer" and "instrument of transfer" in Section 269A of the Act, Section 269C would apply to all cases of transfer of property which were completed on or after November 15, 1972, by registration of the instrument. He, therefore, dismissed the writ petition. Hence, this appeal.

3. The same contention that was advanced before the learned single judge is being reiterated by Mr. Anjaneyulu in this appeal. The learned advocate contends that, having regard to the provisions of Section 47 of the Indian Registration Act, although the sale deed in question was registered on November 16, 1972, nevertheless it takes effect from the date of its execution, viz., October 28, 1972, and, therefore, it should be held that Chapter XX-A of the Act has no application to the sale deed. In support of this contention, Mr. Anjaneyulu relied upon several rulings, viz, Kalyanasundaram Pillai v. Karuppa Mooppanar, AIR 1927 PC 42, Sadei Sahu v. Chandramani Dei, AIR 1948 Pat 60, Union Bank Ltd. v. Mst. Ram Rati, , Basant Lal v. Bala Misra, , Thirumagaral Mudaliar v. Muruga Pillai, and RM. AR. Adaikkappa Chettiar v. Kumbakonam City Union Bank Ltd., . No doubt, the'arguments advanced by Mr. Anjaneyulu conform to the proposition of law as stated in those rulings ; nevertheless, having regard to the decision of the Supreme Court in Ram Saran's case, , which is binding on us, we need not probe into that contention. In Ram Saran's case, , the Supreme Court has categorically observed (p. 1749):

"A sale which is admittedly not completed until the registration of the instrument of sale is completed, cannot be said to have been completed earlier because by virtue of Section 47 the instrument by which it is effected, after it has been registered, commences to operate from an earlier date. Therefore, we do not think that the sale in this case can be said, in view of Section 47, to have been completed on January 3,1, 1946. The view that we have taken of Section 47 of the Registration Act seems to have been taken in Tilak-dhari Singh v. Gour Narain, AIR 1921 Pat 150. We believe that the same view was expressed in Naresh Chandra Dutta v. Girish Chandra Das [1936] ILR 62 Cal 979 ; AIR 1936 Cal 17 and Gobardhan Bar v. Gana Dhar Bar, [ 1940] ILR 2 Cal 270; AIR 1941 Cal 78."

4. The same view was followed by the Supreme Court in Hiralal Agrawal v. Rampadarth Singh, .

5. Even otherwise, having regard to the relevant provisions of Chapter XX-A of the Act and Section 54 of the Transfer of Property Act, we are of the opinion that the sale deed in question was completed on November 16, 1972, and, therefore, Section 47 of the Indian Registration Act has no application. According to Section 54 of the Transfer of Property Act," sale" has been denned as a transfer of ownership in exchange for a price paid or promised or part-paid and part-promised. A sale 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. Therefore, under Section 54 of the Transfer of Property Act, a sale of immovable property for a consideration of Rs. 100 or more is completed only by registration of the document, and until the sale deed is registered, no title in the property passes to the buyer. Clause (f) to Section 269A of the Act defines "instrument of transfer" to mean "the instrument of transfer registered under the Registration Act, 1908 (16 of 1908)" and according to Clause (h) "transfer ", in relation to any immovable property, means transfer of such property by way of sale or exchange under Section 269C of the Act, the competent authority appointed under Section 269B of the Act is entitled, to initiate proceedings for the aequisition of any immovable property where the competent authority has reason to believe that any immovable property of a fair market value exceeding Rs. 25,000 has been transferred by one person to another for an apparent consideration which is less than the fair market value of the property, and that the consideration for such transfer as agreed to between the parties has not been truly stated in the instrument of transfer with the object of facilitating the reduction or evasion of the liability of the transferor to pay tax under this Act in respect of any income arising from the transfer, or facilitating the concealment of any income or any moneys or other assets which have not been or which ought to be disclosed by the transferee for the purposes of the Indian I.T. Act, 1922, or the Act or the W.T. Act, 1957. The proviso to Section 269C provides for the recording of reasons by the competent authority for the initiation of such proceedings. under Section 269D of the Act, the competent authority will initiate proceedings for the acquisition under Chapter XX-A by issuing notice to that effect by way of publi-. cation in the Official Gazette provided that no such proceedings should be initiated in respect of any immovable property after the expiration of the period of nine months from the end of the month in which the instrument of transfer in respect of such property is registered under the Registration Act, 1908.. Section 269E provides for filing of objections by the person to whom notice has been issued and Section 269F provides for hearing of the objections. Subsection (6) of Section 269F of the Act empowers the competent authority, if after hearing the objections, if any, and after taking into account all the relevant material on record, it is satisfied that the immovable property to which the proceedings relate is of a fair market value exceeding Rs. 25,000, that the fair market value of such property exceeds the apparent consideration therefor by more than 15% of such apparent consideration and that the consideration for such transfer as agreed to between the parties has not been truly stated in the instrument of transfer with such object as is referred to in Clause (a) or Clause (b) of Sub-section (1) of Section 269C of the Act, to make an order for the acquisition of the property under the Chapter after obtaining the approval of the Commissioner.

6. A perusal of the sections noted above especially in view of the definitions of the expressions "instrument of transfer" and "transfer" under Section 269A of the Act, would leave us in no doubt that the legislature intended that on the completion of the instrument of transfer by registration under the Indian Registration Act, the competent authority would be entitled to acquire the property if the conditions mentioned in Section 269F of the Act have been satisfied. As pointed out earlier, under Section 54 of the Transfer of Property Act, a sale of immovable property of the value of Rs. 100 or more could only be completed by registration under the Indian Registration Act. The expressions "instrument of transfer" and "transfer" in Section 269A of the Act read in conjunction with the relevant provisions noted above would clearly show that a sale by means of an instrument of transfer could only be completed by registration of the instrument and not otherwise. The above interpretation of ours receives support from the proviso to Section 269D which provides that no such proceedings should be initiated in respect of any immovable property after the expiration of a period of nine months from the end of the month in which the instrument of transfer in respect of such property is registered under the Registration Act, 1908. Proceedings under Section 269C could only be initiated after the instrument of transfer is registered under the Registration Act and the limitation for initiation of such proceedings is provided in the proviso to Section 269D. It could, therefore, be safely concluded that transfer of immovable property would be completed only when the instrument of transfer is registered under the Registration Act, in which case only, proceedings under Section 269C would be initiated and, under the proviso to Section 269D, such initiation should take place within nine months from the end of the month in which the transfer in respect of such property is registered under the Registration Act. When such is the position, it cannot be said that Section 47 of the Registration Act is applicable to the case. When having regard to the provisions of Section 54 of the Transfer of Property Act and Sections 269A and 269F of the Act a sale is completed only by the registration of the instrument of transfer under the Registration Act, it is not possible to invoke the provisions of Section 47 of the Indian Registration Act; more so, when the Supreme Court has held in Ram Saran's case, , that the completion of sale takes effect on the date of its registration. We are fortified in our view by the decision of the Delhi High Court in Mahavir Metal Works P. Ltd. v. Union of India .

7. We, therefore, see no substance in this appeal. It is, accordingly, dismissed with costs. Advocate's fees Rs. 250.

Divvi Suryanarayana ... v. Competent Authority,...