RAMESH BHAI J. PATEL ETC. ETC.versusUNION OF INDIA

A                      RAMESH BHAI J. PATEL ETC. ETC.
                                            v.
                                  UNION OF INDIA

                                 DECEMBER 6, 2000

B                 [S.P. BHARUCHA, N. SANTOSH HEGDE AND
                            Y.K. SABHARWAL, JJ.]


           Income Tax Act, 1961-Section 269UA (b)-Apparent consideration-
C   Discounted value of consideration-Interpretation of-Held, the discount
    relates to period between date(s) of payment under agreement and date of
    the agreement and not the period between date of payment by Central
    Government and date (s) of payment under agreement.

          Appellant-assesses filed writ petitions before High Court contending
D that the discounted value stated in Section 269UA(b) relates to the period
    between the date of payment of the purchase price by the Central Government
    and the date of the last payment stated under the agreement on the premise
    that the discount is made because the transferor is compensated by payment
    earlier than scheduled under the agreement; and that such compensation is
    for the period that is saved, that is, between the date of payment by the Central
E   Government and the last date of payment under the agreement The High Court
    dismissed the Writ Petitions. Hence the appeals.

          Dismissing the appeals, the Court
           HELD: 1.1. On a plain reading of Section 269UA(b) of the Income Tax
F   Act, 1961, there is no interlinking of the apparent consideration to be
    determined thereunder with the payment to be made by the Central Government
    on purchase under Chapter XX-C of the Act. Section 269UA(b) prescribes
    how the apparent consideration under the agreement, that is, the consideration
    for the agreement, is to be determined, and it states that ifthe consideration
    under the agreement is payable on any date or dates falling after the date of
G   the agreement, the value of the consideration that is payable after the date of
    the agreement shall be deemed to be the discounted value ofsuch consideration
    as on the date of the agreement. In other words, the apparent consideration in
    such case will not be the consideration that is stated in the agreement but it
    shall be the amount thereof less a discount to be calculated in the manner set
H   out in the definition. The period of such discount shall be the period between
                                          424
             RAMESH BHAI J. PATEL v. U.0.1. [BHARUCHA. J.]                  425

 the date of the agreement and the date or dates on which the consideration or      A
 part thereof is payable. Since under the agreement, the transferor gives the
 transferee time to pay the considerati 1, the consideration is assumed to
 comprehend some element of interest f ·such delayed payment, and this is
 ascertained and deducted to arrive at the real consideration for the agreement,
 or the apparent consideration. The period of the delay necessarily starts on       B
 the date of the agreement. 1427-B, C, D, El

        1.2. The purpose of Chapter XX-C and the definition of "apparent
  consideration" in the Act are to be determined whether immovable property
  has been sought to be transferred at an under-valuation. To determine whether
  there has been an under-valuation, the true consideration for the transfer        C
  has to be determined and, necessarily, it has to be determined as on the date
  of the agreement for transfer. That this is so is clear from the latter part of
  clause (b) of section 269UA, the phrase "the discounted value of such
  consideration, as on the date of such agreement for transfer" therein indicates
- the point of time from which the period for discounting must be calculated.
                                                                      [428-B-CJ     D
        Shrichand Raheja & Anr. v. S.C. Prasad. (Appropriate Authority) &
 Ors., (213 1.T.R. 33), overruled.

       CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1158of1998.
                                                                                    E
       From the Judgment and Order dated 19.10.95 of the Gujarat High Court
 in S.C.A. No. 7506of1991.

                                         WITH

       Civil Appeal Nos. 1159/98 and 1160/98.
                                                                                    F
      T.L.V. Iyer and R.P. Bhatt, Sr. Advs., Mayur R. Shah, Goodwill lndeevar,
 Lax mi Iyengar, Ajay Shanna, S.K. Dwivedi and S. Rajappa, H.J. Jhaveri for the
 appearing parties.

       The Judgment of the Court was delivered by
                                                                                    G
       BHARUEHA, J. These are appeals against the judgment and order of
 a Division Bench of the High Court of Gujarat, delivereci on writ petitions. The
 controversy before us relates to the correct interpretation of Section 269UA(b)
 of the Income Tax Act, 196 I.

       Section 269UA falls within Chapter XX-C of the Act, which deals with         H
    426                       SUPREME COllRT REPORTS [2000] SUPP. 5 S.C.R.

A the purchase by the Central Government of immovable properties in certain
    cases of transfer. Section 269UA is the definition section for the purposes of
    the Chapter. Clause (b) thereof defines 'apparent consideration'. So far as is
    relevant, 'apparent consideration' means:

                "( 1) in relation to any immovable property in respect of which an
B           agreement for transfer is made, being immovable property of the
            nature referred to in sub-clause (i) of clause (d), means,-----

            (i)    ifthe immovable property is to be transferred by way of sale, the
                   consideration for such transfer as specified in the agreement or
                   transfer;
c           (ii)   xxxxx
            (iii) xxxxx

           and where the whole or any part of the consideration for such transfer
           is payable on any date or dates falling after the date of such agreement
D          for transfer, the value of the consideration payable after such date
           shall be deemed to be the discounted value of such consideration, as
           on the date of such agreement for transfer, determined by adopting
           such rate of interest as may be prescribed in this behalf;


E
         The rate of interest in this behalf is prescribed by Rule 48(i) of the
    Income Tax Rules and it is eight per cent per annum.

           The contention on behalf of the appellants (assessees) was that there
    can be no discount of the price mentioned in the agreement of transfer and,
F   if there can, the discount must relate to the period between the date of
    payment of the purchase price by the Central Government and the date of the
    last payment under the agreement. No argument was, however, advanced in
    respect of the first contention. The only argument was based on the premise
    that the discount is made because the transferor is compensated by payment
G   earlier than scheduled under the agreement; and that such compensation is
    for the period that is saved, that is, between the date of payment by the
    Central Government and the last date of payment under the agreement.

          It is relevant, before we proceed, to point out that Section 269UG
    provides that the amount of the consideration payable on purchase by the
H Central Government must be tendered to the person entitled thereto within a
            RA'.'v!ESH BHAI J. PATEL v. U.O.I. [BHARUCHA, J.]                 427
period of one month from the end of the month in which the immovable                  A
property vests in the Central Government. Section 269UH states that if the
Central Government fails to tender such payment within such time, the order
of purchase by the Central Government of the immovable property shall stand
abrogated and the immovable property shall stand re-vested in the transferor.

       On a plain reading of Section 269UA(b), there is no interlinking of the        B
apparent consideration to be determined thereunder with the payment to be
made by the Central Government on purchase under Chapter XX-C. Section
269UA(b) prescribes how the apparent consideration under the agreement,
that is, the consideration for the agreement. is to be determined, and it states
that if the consideration under the agreement is payable on any date or dates         C
falling after the date of the agreement, the value of the consideration that is
payable after the date of the agreement shall be deemed to be the discounted
value of such consideration as on the date of the agreement. In other words,
the apparent consideration in such case will not be the consideration that is
stated in the agreement but it shall be the amount thereof less a discount to
be calculated in the manner set out in the definition. The period of such             D
discount shall be the period between the date of the agreement and the date
or dates on which the consideration or part thereof is payable.

       To put it differently, because, under the agreement, the transferor gives
the transferee time to pay the consideration, the consideration is assumed to
comprehend some element of interest for such delayed payment, and this is             E
ascertained and deducted to arrive at the real consideration for the agreement,
or the apparent consideration. The period of the delay necessarily starts on
the date of the agreement.

      Our attention was drawn by learned counsel for the appellants to the
judgment of a Division Bench of the High Court at Bombay in Shrichand                 F
Raheja & Anr. v. S.C. Prasad, (Appropriate Authority) & Ors., [213 l.T.R. 33].
It was argued by learned counsel for the Revenue before that High Court that,
for the purpose of discounting, the relevant date is the date of the agreement
and not the date of the payment by the Central Government and, in support
of his submission, he relied upon the expression "as on the date of such              G
agreement for transfer" in Section 269UA(b). The High Court did not agree
because, in its view, the plain reading of the definition of apparent consideration
made it clear that the value of the consideration payable after the date of the
agreement was the discounted value and the definition did not prescribe that
the discounted value should be ascertained with reference to the date of the
agreement. In its view, the expression "as on the date of such agreement for          H
    428                       SUPREME COURT REPORTS [2000] SUPP. 5 S.C.R.

A transfer" referred to the consideration payable on that date and was not
    indicative of the commencement of the period to ascertain the discounted
    value.

          We are unable to agree. The High Court appears to have overlooked the
    purpose of Chapter XX-C and the definition of "apparent consideration"
B   thereunder. The purpose is to determine whether immovable property has
    been sought to be transferred at an under-valuation. To deterrn ine whether
    there has been an under-valuation. the true consideration for the transfer has
    to be determined and, necessarily, it has to be determined as on the date of
    the agreement for transfer. That this is so, is clear from the latter part of clause
C   (b). which we have quoted; the phrase "the discounted value of such
    consideration as on the date of such agreement for transfer" therein indicates
    the point of time from which the period for discounting must be calculated.

           For these reasons, the appeals are dismissed with costs.

    B.S.                                                          Appeals dismissed.