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Smart Summary

Factual and Procedural Background

This appeal was preferred by the respondents in Writ Petition No. 13984/1992 against the order dated 5th August 1992 passed by the learned Single Judge. The core factual matrix involves an immovable property owned by several co-owners that was conveyed by all co-owners together under one sale deed. The total apparent consideration for the property exceeded the monetary threshold prescribed under the Income-tax Rules for Section 269UC, but the value of each co-owner's individual share did not exceed Rs. 10 lakhs. It was not in dispute that the respondents had divided the property before the alienation and thereafter executed one sale deed transferring each co-owner's share to the vendee.

Legal Issues Presented

  1. Whether the provisions of Section 269UC of Chapter XX-C of the Income Tax Act apply where an immovable property, owned by several persons, is conveyed by all the co-owners together under one deed and the total value exceeds the prescribed threshold but the value of the share of each co-owner does not exceed Rs. 10 lakhs.
  2. Whether, for the purpose of Section 269UC, the relevant value to be considered is the value of the entire property as conveyed under one deed or the value of each co-owner's individual share in the property.

Arguments of the Parties

Appellants' Arguments

  • The learned Counsel for the appellants contended that because the property was one and was conveyed under one deed, the provisions of Chapter XX-C and specifically Section 269UC of the Income Tax Act are attracted. In other words, the appellants argued that the total value of the property (conveyed under one deed) should be taken into account, thereby bringing the transfer within Section 269UC.

The opinion does not contain a detailed account of any separate or specific legal arguments advanced by the respondents in opposition beyond the factual assertions about prior division and the value of each share.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
K.V. Kishore, K.R.V. Ratinam v. Appropriate Authority, Income-Tax Department (189 ITR 264) Holds that where co-owners have definite shares, each co-owner's transfer is of his definite share; plurality joining in one agreement does not convert the transfers into a transfer of the whole so as to attract Chapter XX-C provisions based on the aggregate consideration. The court followed K.V. Kishore as directly analogous: the facts were similar and Kishore's conclusion that each transferred only his definite share (and that the value of each share, being below the threshold, meant Chapter XX-C was not attracted) was applied to dispose of the present appeal.
Commissioner of Gift Tax, Kerala v. Smt R. Valsala Amma (82 ITR 828) Affirms that co-owners (tenants-in-common / tenants-in-common-like holdings) who make a gift by one document are treated as having made gifts of their individual shares; a single deed does not alter the legal character of individual shares for taxation purposes. The court cited this Supreme Court decision to show that the Gift-tax Act did not change the general law of property rights and that transfers executed by co-owners through one document remain transfers of individual shares; this precedent supports the conclusion that Section 269UC should be applied to each co-owner's share and not to the aggregate.
R. Lokeswari v. State of Tamil Nadu (1992 196 ITR 501) Holds, in the context of Section 230A of the Income-tax Act, that when co-owners sell their respective shares and execute one deed, the value to be considered for purposes of that section is the value of the property of the person who makes a transfer (i.e., his individual share), not the combined value. The court relied on Lokeswari (and the view of Ramalingam, J., in that case) to analogize Section 230A's principle to Section 269UC, concluding that the same approach—valuing each co-owner's individual share—is applicable.

Court's Reasoning and Analysis

The court began by stating the statutory text of Section 269UC and the relevant Rule 48K (which defines "value" for the purpose of the section as the apparent consideration exceeding Rs. 10 lakhs). It acknowledged that Section 269UC contains a non obstante clause effectively overriding the Transfer of Property Act or any other law "for the time being in force," but emphasized that such overriding is limited to the purpose stated in Section 269UC itself.

The court then analyzed the general law of co-ownership: a single property may be owned by several persons where each co-owner has a definite share and may alienate his share independently without the consent of other co-owners. The court observed that even if all co-owners agree to sell together and execute a single sale deed, that fact does not convert the multiplicity of individual shares into joint ownership of a single combined interest for the purposes of characterizing what has been transferred.

Applying that legal principle to Section 269UC, the court reasoned that the statute's requirements (agreement in writing, furnished three months prior, etc.) are triggered by transfer of an immovable property of value exceeding the prescribed threshold. Where co-owners each transfer their own definite shares—even by a single document—the relevant value to be considered is the value of each co-owner's share and not the aggregate consideration for the entire property.

The court supported and reinforced this reasoning by reference to earlier authorities: it followed K.V. Kishore which held that plurality joining in one agreement still amounts to transfer of individual undivided shares, cited the Supreme Court decision in Valsala Amma which similarly treated gifts by co-owners as gifts of individual shares, and relied on R. Lokeswari which applied the same principle under Section 230A. From these authorities the court concluded that the principle of considering each co-owner's share for threshold purposes applies equally to Section 269UC.

On the facts, because the respondents had divided the property before alienation and each co-owner's share was valued below Rs. 10 lakhs, Section 269UC's requirements were not attracted. Consequently, there was no ground to admit the appeal.

Holding and Implications

REJECTED

Holding: The appeal was rejected. The court held that for the purpose of Section 269UC of the Income-tax Act the relevant value is the value of each co-owner's individual share and not the total value of the entire property when several co-owners, each owning a definite share, convey their respective shares together under one deed. Because each co-owner's share was below the prescribed threshold (Rs. 10 lakhs as defined by Rule 48K), Section 269UC did not apply.

Implications: The direct consequence for the parties is that the transfer in question did not attract the procedural requirements of Section 269UC and the respondents' attempt to invoke Section 269UC to invalidate or complicate the transfer failed; the appeal was dismissed. The court applied and followed existing case law (K.V. Kishore, Valsala Amma, R. Lokeswari) to reach this result. The opinion confines itself to applying established legal principles to the facts at hand and does not purport to lay down a broader new precedent beyond affirming the existing line of authority.

    Appropriate Authority, Income-Tax Department v. J.S.A Raghava Reddy

    K.A Swami, A.C.J:— This Appeal is preferred by the respondents in Writ Petition No. 13984/1992 against the order dated 5th August 1992 passed by the learned Single Judge.

    2. The learned Single Judge has followed a Decision of the High Court of Madras in K.V. Kishore, K.R.V. Ratinam v. Appropriate Authority, Income-Tax Department . 189 ITR 264..

    3. The question for consideration is as to whether the provisions contained in Section 269 UC of Chapter XX C of the Income Tax Act are applicable to the alienation of the property made under one deed by several co-owners, the value of which exceeds 10 lakhs but the value of the share of each of the co-owners does not exceed Rs. 10 Lakhs.

    4. The contention of the learned Counsel for the appellants is that as the property is one and it is conveyed under one deed, even though it is owned by several persons the provisions of Chapter XX C and specially Section 269 UC of the Income Tax Act are attracted. Section 269 UC of the Act, which is relevant for our purpose reads thus:

    “269 UC. (1) Notwithstanding anything contained in the Transfer of Property Act, 1882 (4 of 1882), or in any other law for the time being in force, no transfer of any immovable property of such value exceeding five lakh rupees as may be prescribed, shall be effected except after an agreement for transfer is entered into between the person who intends transferring the immovable property (hereinafter referred to as the transferor) and the person to whom it is proposed to be transferred (hereinafter referred to as the transferee) in accordance with the provisions of sub-section (2) at least three months before the intended date of transfer.

    (2) The agreement referred to in sub-section (1) shall be reduced to writing in the form of a statement by each of the parties to such transfer or by any of the parties to such transfer acting on behalf of himself and on behalf of the other parties.

    (3) Every statement referred to in sub-section (2) shall,-

    (i) be in the prescribed form;

    (ii) set forth such particulars as may be prescribed; and

    (iii) be verified in the prescribed manner.

    and shall be furnished to the appropriate authority in such manner and within such time as may be prescribed, by each of the parties to such transaction or by any of the parties to such transaction acting on behalf of himself and on behalf of the other parties.”

    Rule 48K of the Income-tax Rules, defines the expression ‘Value’ thus:

    “The value of any immovable property for the purpose of sub-section (1) of Section 269UC shall be the apparent consideration of that property exceeding ten lakh rupees.”

    Though Section 269UC of the Act has the effect of overriding the provisions of the Transfer of Property Act or any other law for the time being in force as it opens with the non obstante clause, but this overriding is limited to the purpose as stated in that Section itself and nothing beyond that. As per the aforesaid provisions, the transfer of an immovable property of the value exceeding Rs. 10 Lakhs as prescribed by the aforesaid Rule 48K cannot at all be effected without furnishing the agreement of sale in writing in the form of a statement as prescribed under sub-section (3) of Section 269UC of the Act to the authority concerned by the alienor and the alienee three months before the intended date of transfer.

    5. The point for consideration is, when an immovable property owned by several persons is conveyed by all the co-owners together under one sale deed, whether it is the value of the entire property that has to be taken into consideration or the value of the share of each of the co-owners that has to be taken into consideration for the purpose of Section 269UC of the Act?

    6. Under the general law a single property can be owned by more than one person and in that event each will be a co-owner along with others. Each one will be entitled to sell his share according to his own will and wish. The other co-owners will not be entitled to place any embargo nor their consent is required for such a sale. For all purposes, a co-owner will be a owner of his definite share in the property and he is entitled to alienate his share on his own account without the consent of other co-owners. The fact that all the co-owners together agree to sell the property to one or more persons and agree to convey it under one sale deed does not in any way make them as the joint owners of the property. The property may be one item; in other words, it may be a building, a piece of land, but in law it will have to be considered as consisting of as many different bits of properties as there are co-owners. The general law which is not over-rided by Section 269UC of the Act permits and recognises plurality of ownership. Therefore, for the purpose of Section 269UC of the Act the value of the share of each co-owner has to be taken into account and not the total value of the shares of the co-owners even when all of them together sell the property and convey the title under one deed.

    7. It is not in dispute in this case that the respondents had divided the property in question before the alienation in question. After the division they have agreed to sell the property to another person under one sale deed. The sale deed so executed results in transferring the property of each co-owner to the vendee. The transferee will get the title of each co-owner. The value of the share of each co-owner does not exceed rupees ten lakhs. As such the provisions of Section 269UC of the Act are not attracted.

    8. The facts involved in K.V Kishore's case were similar to the one on hand. In that case also it was held thus:

    “After giving deep consideration to these rival submissions, the following facts would clinchingly establish the case in favour of the petitioners. It is not denied or it is not disputed that the original allottee, A. Srinivasan, died in the year 1962. He being a Hindu, governed by the Hindu Succession Act, on his death, his wife and children acquired a vested right to the definite quantified shares in the property left behind by him. As owners of their respective shares, they were competent to enter into a family arrangement which they did on April 8, 1987, under the terms of which, each one of respondents Nos. 4 to 8 were allotted a definite share in the property. After April 8, 1987, they were individual owners of definite shares in the property. Each one could deal with only his respective share and he cannot deal with the share of another. The property which so fell to the share of each individual will come definitely within the definition of the words “immovable property”. Such a sharer was entitled to transfer his immovable property to a third person. Merely because a plurality of such individual owners joined together to enter into one single agreement to transfer their respective shares in favour of one or more person, that would not make any difference to the main issue that what each transferred is his definite share in the property. Viewed from that perspective, the agreement entered into between the petitioners and respondents Nos. 4 to 8 is to be understood only as an agreement to convey the respective undivided share of respondents Nos. 4 to 8. It is not in dispute that the value of each such share is less than Rs. 10,00,000. The recitals in the agreement in more than one place refer to the fact that what is sold is the individual undivided share in the property. Consequently, the impugned order made under Chapter XX-C of the Act taking the total consideration, the collective shares cannot be sustained (sic.). Both the Writ Petitions are, accordingly, allowed. No costs.”

    In Commissioner Of Gift Tax, Kerala v. Smt R. Valsala Amma . 82 ITR 828. a similar question arose under the Gift Tax Act. In that case two sisters being co-owners of the property gifted the same to another person under one gift deed. The question arose as to whether the provisions contained in Section 2(xviii) of the Gift Tax Act, 1958 were attracted. The Supreme Court held thus:

    “Section 2(xviii) of the Gift-tax Act, 1958, defines ‘person’ as ‘person includes a Hindu undivided family or a company or an association or a body of individuals or persons, whether incorporated or not’. Section 3 is the charging Section. It says “subject to the other provisions contained in this Act, there shall be charged for every (assessment year) commencing on and from the 1st day of April 1958 a tax (hereinafter referred to as Gift-tax) in respect of the gifts, if any, made by a person during the previous year (other than gifts made before the 1st day of April 1957) at the rate or rates specified in the Schedule.”

    Now the question is in what capacity the gift was made by the assessee. Did they do it as an association or as a body of individuals or as individuals. The property received by the assessees under the will of their mother was admittedly received by them as co-tenants. Each one of them had half share in that property. The question whether they divided that property or not is not a material question. In law each one of them had half the right in the property that they gifted to their brother. They were holding that property as tenants-in-common and not as joint tenants. Hence they made the gifts as tenants-in-common and not as joint tenants. Each one must be held to have made a gift of her share of the property though the gift is made through one single document. It is surprising that the Income-tax Officer or the Appellate Assistant Commissioner or the Tribunal should have ever thought that the gift in question was by an association or by a body of individuals. The Gift-tax Act did not change the general law relating to the rights of property. It merely sought to tax a gift of the property owned by a person. As mentioned earlier the property with which we are concerned in this case is a property owned by two persons as tenants-in-common, each one having a definite share.

    In our opinion, the High Court was absolutely right in answering the question referred to it in favour of the assessee. Civil Appeal No. 1436 (NT)/71 accordingly fails and the same is dismissed with costs.”

    Thus the view taken by us and the view expressed in Kishore's Case are in conformity with the Decision of Supreme Court in the aforesaid Valsala Amma's case. It is also brought to our notice that in R. Lokeswari v. State of Tamil Nadu . 1992 196 ITR 501 - 1992., Ramalingam, J., who decided the aforesaid K.V Kishore's case has reiterated the same view. In that case, Section 230A of the Income-tax Act is considered. Section 230A reads as follows:

    “230A. (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 clause(a) to clause(e) of sub-section (1) of Section 17 of 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 two lakhs rupees, no registering officer appointed under that Act shall register any such document, unless the Assessing 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)………….

    (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.”

    In Lokeswari's case one K.V Venkateshan Chettiar was the owner of the property. On his death it devolved upon his heirs. Thus each heir was entitled to a particular share. They together sold their respective shares in the said property under one deed. The value of the share of each did not exceed rupees two lakhs. Therefore, it was held that Section 230A of the Act was not attracted. The relevant portion of the Judgment reads thus:

    “If the owners of the shares of immovable property desire to sell their respective shares and execute a sale deed covering such share and if that share happens to be of value less than rupees two lakhs, no certificate under Section 230A of the Income-tax Act is required. Merely because a plurality of shareholders happen to join together and execute one single document, it would not mean conveyance by a person of a property worth more than rupees two lakhs when the combined value of the shares so transferred happens to be more than rupees two lakhs. In substance what is transferred by the sharer is his individual share. For the purpose of Section 230A of the Income-tax Act, it is the value of the property of a person who makes a transfer which has to be considered.”

    The same principle applies to Section 269UC of the Act.

    9. For the reasons stated above, we see no ground to admit this Appeal. It is accordingly rejected.

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    Appropriate Authority, Income-Tax Department v. J.S.A Raghava Reddy
    (Sep 8, 1992)