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Mrs. Helen Jayaraj v. Sub-Registrar Of Mylapore And Others.

Madras High Court

Oct 11, 1979

Judgment

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Structured Summary of the Opinion (Varadarajan, J.) — Writ Petitions Nos. 623 & 832 of 1976

Factual and Procedural Background

These two writ petitions were filed by the same petitioner, Mrs. Helen Jayaraj, under Article 226 of the Constitution of India.

W.P. No. 623 of 1976 sought a writ of certiorari calling for the records of the Sub-Registrar, Mylapore, Madras (the first respondent) in relation to Enquiry No. 1 of 1975 and for quashing the first respondent's order dated November 26, 1975, as confirmed by the Inspector General of Registration (the second respondent) by order dated January 5, 1976.

W.P. No. 832 of 1976 sought a writ of mandamus (or other appropriate relief) directing the Second ITO, City Circle, II(2), Madras-34 (the fourth respondent) and the Commissioner of Income-tax, III Circle, Madras-34 (the fifth respondent) to issue an Income-tax Clearance Certificate under s. 230A of the Income-tax Act, 1961, in relation to the third respondent so that a settlement deed dated March 3, 1974 executed by the third respondent in favour of the petitioner and her sister (the seventh respondent) could be registered.

Key factual events leading to the petitions (as stated in the opinion):

The third respondent executed a settlement deed dated March 3, 1974, in favour of the petitioner and her sister in respect of properties valued at more than Rs. 50,000. The third respondent later declined registration.
The petitioner presented the document for compulsory registration on June 15, 1974, after paying deficit stamp duty and penalty. The Sub-Registrar conducted Enquiry No. 1 of 1975 and, by an order in May 1975, held the document to be duly executed and liable for compulsory registration but required production of an I.T. Clearance Certificate under s. 230A.
The petitioner sought dispensation from requiring the certificate (on the ground that s. 230A does not apply to involuntary transfers), producing a copy of the judgment C.S. Loganathan v. P.L. Kapur & Another [1972] 83 ITR 430 (Delhi). The Sub-Registrar declined to dispense with the certificate (order dated November 26, 1975), and the Inspector General of Registration confirmed that the certificate was necessary (order dated January 5, 1976) but advised seeking judicial redress if desired.
The petitioner alleges she applied to the ITO on May 31, 1975 for the I.T. Clearance Certificate in respect of the third respondent, but the ITO refused to accept the application on the ground that only the third respondent could apply.

The opinion states that W.P. No. 623 is unnecessary to elaborate because appropriate reliefs were sought in W.P. No. 832 and that W.P. No. 623 is to be dismissed in view of the relief in W.P. No. 832.

Legal Issues Presented

Whether s. 230A of the Income-tax Act, 1961, operates so as to require production of an I.T. Clearance Certificate before registering a document (including an allegedly involuntary transfer) affecting property valued at more than Rs. 50,000.
Whether the Income-tax Department (the ITO) was correct in declining to issue or accept an application for an I.T. Clearance Certificate from the petitioner (a transferee/third party) when s. 230A(2) refers to an application by "the person referred to in that sub-section".
Whether the Registering Officer was justified in insisting upon production of an I.T. Clearance Certificate under s. 230A as a precondition to registration.

Arguments of the Parties

Petitioner's Arguments

The petitioner contended that the document was an involuntary transfer and that s. 230A did not apply to involuntary transfers; she relied on the judgment in C.S. Loganathan v. P.L. Kapur & Another [1972] 83 ITR 430 (Delhi).
The petitioner alleged that she presented an application on May 31, 1975 to the ITO for the issuance of the I.T. Clearance Certificate in respect of the third respondent, but the ITO refused to receive the application and returned it on the ground that only the third respondent could apply.

Respondents Nos. 4 and 5 (Income-tax Authorities)

Respondents Nos. 4 and 5 admitted that the third respondent was not an income-tax assessee.
They contended that s. 230A applies to all transfers, whether voluntary or involuntary.
They stated there was nothing on record to show the petitioner presented an application on May 31, 1975 to the fourth respondent for the issuance of a certificate relating to the third respondent.
They contended that, under s. 230A(2), the application for the certificate must be made by the person referred to in sub-s. (1), and the petitioner was not such a person; therefore the fourth respondent had no jurisdiction to grant the certificate to the petitioner.
They also relied on the fact that the third respondent had objected by letters dated May 17, 1975 and June 11, 1975 to the issuance of a certificate to the petitioner.
They further submitted that no writ of mandamus could be issued to compel the fourth respondent to do an act which the statute did not authorize.

Other Respondents

The opinion notes that the third respondent and respondents Nos. 1 and 2 did not file counter-affidavits in W.P. No. 832 of 1976. Respondents Nos. 6 to 8 also did not file counter-affidavits in that writ petition.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
C.S. Loganathan v. P.L. Kapur & Another, [1972] 83 ITR 430 (Delhi)	Relied upon by the petitioner to support the proposition that s. 230A does not apply to involuntary transfers (the petitioner produced a copy of this judgment with her application to the Registering Officer).	The judgment was produced by the petitioner; the court's decision in the opinion does not state that it adopted or directly relied upon this precedent as the basis for its decision. The court examined the statutory provisions of s. 230A and reached its conclusion on the basis of the facts and statutory interpretation recorded in the opinion.

Court's Reasoning and Analysis

The court's analysis proceeded in the following steps, closely reflecting the reasoning contained in the opinion:

Statutory threshold and initial correctness: The court observed that the properties involved were admittedly valued at more than Rs. 50,000. On that basis, the Registering Officer was entitled to insist upon production of an I.T. Clearance Certificate under s. 230A before registering the document.
Admission by failure to deny: The petitioner alleged she presented an application on May 31, 1975 to the fourth respondent ITO for a certificate and that the ITO refused to receive it. Respondents Nos. 4 and 5 did not specifically deny that allegation; they merely stated there was nothing on record to show the petitioner had presented such an application. The court treated the absence of a specific denial as an admission by respondents Nos. 4 and 5 that the petitioner had presented the application and it was returned to her on the stated ground.
No tax arrears: Respondents Nos. 4 and 5 admitted that the third respondent was not an income-tax assessee. The court observed that, therefore, there could not have been arrears of tax under s. 230A(1)(a) due from the third respondent — a fact admitted in the proceedings.
Text of s. 230A(2) and practical effect: The court noted that s. 230A(2) states that the application for the certificate shall be made by "the person referred to in that sub-section" (i.e., the person who purports to transfer, etc.). Nonetheless, the court considered the broader factual context: the third respondent had executed the document but thereafter refused registration and had sent letters dated May 17, 1975 and June 11, 1975 objecting to issuance of a certificate to the petitioner.
Rejection of a rigid literalism that defeats rights: The court held that simply because s. 230A(2) refers to the person in sub-s. (1), the I.T. Department cannot decline to issue a certificate to the petitioner where that refusal amounts to permitting the transferor to defeat the transferee's rights under the document. The court emphasized that when the I.T. Department itself finds the transferor was not an assessee and no arrears were due, it should take an "overall picture" and not be guided only by a literal reading of sub-s. (1) to refuse issuance to a transferee in all circumstances.
No positive statutory provision for third-party issuance but erroneous departmental refusal: The court acknowledged there was "no positive law in the Act for the issuance of a certificate to a third party." Nevertheless, on the facts of this case — specifically, the admission that the transferor was not an assessee and that no tax arrears were due — the court concluded that the I.T. Department had wrongly declined to issue a certificate in respect of the third respondent in favour of the petitioner.
Remedial direction: Given the above, the court found it appropriate to direct the Registering Officer to register the document without insisting upon production of the I.T. Clearance Certificate under s. 230A.
Procedural note on Writs: The court also observed that W.P. No. 623 need not be pursued separately because appropriate reliefs were prayed for in W.P. No. 832; accordingly W.P. No. 623 was dismissed without costs in light of the directions granted in W.P. No. 832.

Holding and Implications

Holding:

W.P. No. 832 of 1976 is allowed, directing the first respondent (the Registering Officer) to register the document dated March 3, 1974 presented for compulsory registration by the petitioner without insisting upon production of the I.T. Clearance Certificate under s. 230A of the Income-tax Act, 1961. W.P. No. 623 of 1976 is dismissed without costs.

Implications:

Direct effect on the parties: The court ordered registration of the settlement deed without requiring the I.T. Clearance Certificate, thereby enabling the petitioner to proceed with compulsory registration despite the departmental refusal to issue or accept an application for the certificate in her favour.
Costs and fees: The petitioner was awarded her costs in the writ petition payable by the fifth respondent (CIT, III Circle, Madras) and the sixth respondent (9th ITO, City Circle II, Madras). Advocate's fee of Rs. 150 was directed.
On precedent and broader law: The opinion does not state that it was setting a general new precedent altering the statutory text; rather, the court's order rests on the particular facts (including the admitted absence of tax liability and the departmental conduct). The court expressly observed that there is no positive provision in the Act for issuance of a certificate to a third party, but found the departmental refusal to be wrong on the facts. The opinion does not purport to overrule the statutory requirement in other factual circumstances where arrears exist or where the department's factual findings differ.

Note: The summary above is strictly based on the contents of the provided opinion and does not add facts or inferences beyond what the opinion itself states.

Show all summary ...

Varadarajan, J.:— These two writ petitions have been filed by the same individual, Mrs. Helen Jayaraj, under art. 226 of the Constitution of India, W.P No. 623 of 1976, being for the issue of a writ of certiorari calling for the records of the Sub-Registrar, Mylapore, Madras, the first respondent, relating to Enquiry No. 1 of 1975, and for quashing the order dated November 26., 1975, passed by him in that enquiry as confirmed by the order of the Inspector General of Registration, Madras, the second respondent, dated January 5, 1976, and W.P No. 832 of 1976, being for the issue of a writ of mandamus or any other appropriate direction or order directing the Second ITO, City Circle, 11(2), Madras-34, the fourth respondent and the Commissioner of Income-tax, III Circle, Madras-34, the fifth respondent, to issue an I.T Clearance Certificate under s. 230A of the I.T Act, 1961, in relation to the third respondent in respect of income tax and other taxes specified in this section for registering the document dated March 3, 1974, executed by the third respondent in favour of the petitioner and the seventh respondent which has been presented for compulsory registration by the petitioner before the first respondent. It is unnecessary to state the facts mentioned in W.P No. 623 of 1976, which has to be dismissed having regard to the fact that appropriate reliefs have been prayed for in W.P No. 832 of 1976.

2. According to the petitioner, the third respondent had executed a settlement deed dated March 3, 1974, in favour of herself and her sister, the seventh respondent, both of whom are the daughters of the third respondent, in respect of properties valued at more than rupees fifty thousand. Subsequent to the execution of the settlement deed, the third respondent declined to have the document registered.

3. The petitioner, therefore, presented the document before the first respondent, the Sub-Registrar on June 15, 1974, for compulsory registration after paying the deficit stamp fee of Rs. 1,380-25 together with penalty of Rs. 100. The first respondent conducted an enquiry in Enquiry No. 1 of 1975, on his file and passed an order dated May), 3, 1975, holding that the document had been duly executed by the third respondent and is liable for compulsory registration and that having regard to the fact that the properties in respect of which the settlement deed was executed by the third respondent are valued at more than Rs. 50,000, an I.T Clearance Certificate under s. 230A of the I.T Act, 1961, has to be produced for registering the document. The petitioner filed an application before the first respondent on July 15, 1975, requesting him to dispense with the production of the I.T Clearance Certificate on the ground that s. 230A does not apply to involuntary transfers. Proceeding on the basis that the document dated March 3, 1974, is an involuntary document, she produced the copy of the judgment in C.S Loganathan… v. P.L Kapur & Another…S, [1972] 83 ITR 430 (Delhi), along with the application. The first respondent passed the impugned order dated. November 26, 1975, declining to dispense with the I.T Clearance Certificate. Thereafter, the petitioner filed an application for appropriate relief before the second respondent, the Inspector General of Registration; but by his order dated January 5, 1976, he held that the I.T Clearance Certificate was necessary and that the petitioner could seek redress in a court of law, if so advised. Thereafter, the petitioner presented an application on May 31, 1975, before the fourth respondent, the ITO, for the issue of the certificate in respect of the third respondent. But the fourth respondent declined to receive the application for the issue of the I.T Clearance Certificate stating that the application could be made only by the third respondent.

4. Subsequently, the petitioner filed W.P No. 623 of 1976 for the issue of a writ of certiorari as stated above. Later she filed W.P No. 832 of 1976 for the issue of a writ of mandamus. The third respondent, the executant of the document dated March 3, 1974 and respondents Nos. 1 and 2 have not filed any counter-affidavit in W.P No. 832 of 1976. Even respondents Nos. 6 to 8 have not filed any counter affidavit in that writ petition. Only respondents Nos. 4 and 5 have filed counter-affidavits in that writ petition admitting that the third respondent was not an income-tax assessee at all and contending that s. 230A of the I.T Act, 1961 is applicable to all transfers whether voluntary or involuntary. Respondents Nos. 4 and 5 have stated in their counter-affidavit that there is nothing on record to show that the petitioner presented any application on May 31, 1975, for the issuance of an I.T Clearance Certificate relating to the third respondent without specifically denying the petitioner's allegation that the application dated May 31, 1975, for the issuance of the I.T Clearance Certificate relating to the third respondent was refused to be accepted by the ITO. Respondents Nos. 4 and 5 further contend that even if the petitioner had presented such an application, no certificate could be granted to the petitioner on the ground that the fourth respondent has no jurisdiction to grant it, having regard to the provisions of s. 230A(2) of the I.T Act, 1961, under which the application for the issue of an I.T Clearance Certificate has to be made by the person referred to in sub-s. (1) of s. 230A and the petitioner was not the person, contemplated by s. 230A(1) and (2), to apply for and obtain a certificate and, also because, the third respondent objected by his letters dated May 17, 1975, and June 11, 1975, to the issuance of the certificate to the petitioner. Respondents Nos. 4 and 5 contend that no writ of mandamus could be issued against the fourth respondent to do an act which is not authorised by the statute.

5. Section 230A of the I.T Act, 1961, reads thus:

“(1) Notwithstanding anything contained in any other law for the time being in force, where any document required to be registered under the provisions of clauses (a) to (e) of sub-section (1) of section 17 of the Indian Registration Act, 1908 (16 of 1908), purports to transfer, assign, limit or extinguish the right, title or interest of any person to or in any property valued at more than fifty thousand rupees, no registering officer appointed under that Act shall register any such document, unless the Income-tax Officer certifies that—

(a) such person has either paid or made satisfactory provision for payment of all existing liabilities under this Act, the Excess Profits Tax Act, 1940 (15 of 1940), the Business Profits Tax Act, 1947 (21 of 1947), the Indian Income-tax Act, 1922 (11 of 1922), the Wealth-tax Act, 1957 (27 of 1957), the Expenditure-tax Act, 1957 (29 of 1957), the Gift-tax Act, 1958 (18 of 1958), the Super Profits Tax Act, 1963 (14 of 1963), and the Companies (Profits) Surtax Act, 1964 (7 of 1964); or

(b) the registration of the document will not prejudicially affect the recovery of any existing liability under any of the aforesaid Acts.

(2) The application for the certificate required under sub-section (1) shall be made by the person referred to in that sub-section and shall be in such form and shall contain such particulars as may be prescribed.

(3) The provisions of sub-section (1) shall not apply in a case where the person referred to in that sub-section is any such institution, association or body, or belongs to any such class of institutions, associations or bodies, as the Board may, for reasons to be recorded in writing, notify in this behalf in the Official Gazette.”

6. Admittedly, the properties in respect of which the settlement deed dated March 3, 1974, had been executed by the third respondent in favour of the petitioner and her sister, the seventh respondent, are valued at more than Rs. 50,000. Therefore, the first respondent Registering Officer was well within his rights in insisting upon the production of an I.T Clearance Certificate issued under s. 230A of the I.T Act, 1961. The petitioner has clearly alleged in para. 5 of his affidavit filed in support of W.P No. 832 of 1976 that she presented an application on May 31, 1975, before the fourth respondent ITO for the issuance of a certificate relating to the third respondent and that the fourth respondent refused to receive the same, on the ground that it was only the third respondent who should apply for the certificate, and returned the application to her. There is no specific denial of this allegation. What is stated in the counter-affidavits of respondents Nos. 4 and 5 is that there is nothing on record to show that the petitioner presented any application on May 31, 1975, before the fourth respondent for the issuance of a certificate relating to the third respondent. In the absence of any specific denial in the counter-affidavits of respondents Nos. 4 and 5 of the petitioner's said allegation, it must be deemed to have been admitted by respondents Nos. 4 and 5 that the petitioner presented an application on May 31, 1975, to the fourth respondent for the issuance of a certificate under s. 230A of the I.T Act, 1961, relating to the third respondent and it was refused to be received and returned to her on the ground that the third respondent alone could apply for the issuance of the certificate. If the application had been returned as alleged by the petitioner in the affidavit, certainly there would be nothing on record to show that the petitioner presented an application on May 31, 1975, before the fourth respondent for the issuance of a certificate relating to the third respondent. It is admitted by respondents Nos. 4 and 5 in the counter-affidavits that the third respondent was riot even an income-tax assessee. Therefore, there could not have been any arrears of tax as mentioned in s. 230A(1)(a) of the Act. This is also admitted before me. The document dated March 3, 1974, had no doubt been executed by the third respondent in respect of his properties valued at more than Rs. 50,000. Sub-section (2) of s. 230A of the Act no doubt says that the application for the certificate required under sub-s. (1) shall be made by the person referred to in that sub-section, namely, a person who purports to transfer, assign, limit or extinguish the right, title or interest of any person to or in any property valued at more than fifty thousand rupees and that it shall be in such form and shall contain such particulars as may be prescribed. But, in the present case, it is found that the third respondent who has been held by the first respondent, in Enquiry No. 1 of 1975 by his order dated May 13, 1975, to have executed the document dated March 3, 1974, had subsequently turned round and refused to have the document registered and he had gone one step further by sending letters dated May 17, 1975, and June 11, 1975, to the fourth respondent objecting to the issuance of a certificate under s. 230A of the I.T Act, 1961, to the petitioner. In the correspondence between the learned counsel appearing for respondents Nos. 4 and 5 on the one hand and the Commissioner on the other, one other reason for the I.T Dept. declining to issue a certificate under s. 230A of the I.T Act, 1961, to the petitioner is mentioned, and that is, the third respondent is now no more and the application for the certificate had been made only by the petitioner herein and the petitioner's sister, the seventh respondent had objected to the issuance of the certificate. Merely because a reference has been made in sub-s. (2) of s. 230A of the Act to the person referred to in sub-s. (1), namely, the person who puports to transfer, assign etc., his interest in properties valued at more than fifty thousand rupees, the I.T Dept. cannot, in my opinion, decline to issue a certificate in favour of the petitioner on the ground that the third respondent had objected to the same with the object of defeating the rights claimed by the petitioner under the document and also because the seventh respondent appears to have objected to the issuance of the certificate in favour of the petitioner. When the I.T Dept. finds that the third respondent was not even an income-tax assessee and no arrears of any of the taxes mentioned in cl. (a) of s. 230A(1) of the Act was due from the third respondent, the I.T Dept. should have issued a certificate to the petitioner after taking an overall picture of the matter and not be guided only by the words of sub-s. (1) of s. 230A. There is no positive law in the Act for the issuance of a certificate to a third party. Therefore, I am of opinion, that the I.T Dept. has wrongly declined to issue a certificate under s. 230A of the Act in respect of the third respondent in favour of the petitioner. Having regard to the facts and circumstances of the case, I find that this is a fit case where the first respondent has to be directed to register the document without insisting upon the production of the certificate under s. 230A of the I.T Act, 1961. For the reasons stated above, W.P No. 623 of 1976 is dismissed without costs and W.P No. 832 of 1976 is allowed directing the first respondent to register the document dated March -3, 1974, presented by the petitioner for compulsory registration without insisting upon production of the I.T Clearance Certificate under s. 230A of the I.T Act, 1961. The petitioner will have her costs in the writ petition payable by the fifth respondent, the CIT, III Circle, Madras, and the sixth respondent, the 9th ITO, City Circle II, Madras. Advocate's fee Rs. 150.