Sunil v. State of Kerala — 1998 DIGILAW 146 (KER)

Judgment :- K. Narayana Kurup, J. Petitioner's father Sri. K.P. Madhavan, has acquired Kanom right over 76.92 cents of land in old Sy. No. 139/3A, R. Sy. No. 5.15-686 of Katathikunnu Desom and Amsom in Kozhikode town by virtue of document No. 731/1955 of Kozhikode Sub-Registrar Office. He has also obtained certificate of purchase No. 3579/1977 in respect of 70 cents in R. Sy. No. 5.15-686. As such he has become absolute owner of the said land. By document No. 133/1982 petitioner's father has settled 20.40 cents of land out of the above 1 and to his wife Mrs. Radha, mother of petitioner. Petitioner's mother died leaving behind her husband, 5 sons, 2 daughters and 3 daughters of a deceased daughter as her legal heirs. Thus, Mr. Madhavan, husband of late Radha, the sons and daughters inherited one ninenth (1/9th) share each and the three daughters of the deceased daughter together inherited one ninenth share in 20.40 cents of land which belonged to late Mrs. Radha. Sri. K.P. Madhavan also settled 7.26 cents of land and 10.66 cents of land by assignment deeds No. 49/1989 and 12/1987 respectively to one of his daughters Smt-Shalini Ravindran. A portion of the property was acquired for road and another encroached. Thus, the total extent of land left with Mr. Madhavan and legal representatives of late Radha is 37.5 cents. Out of 37.5 cents of land 16.65 cents belong exclusively to Mr. Madhavan and 20.40 cents belong to legal heirs of late Radha. Mr. Madhavan on his own and as legal heir of late Radha and other legal heirs entered into an agreement with M/s. Southern Investments for sale of the entire 37.5 cents of land for a total consideration of Rs. 52,36,000/- out of which Rs. 26,97,335/- is the sale consideration of the land belonging exclusively to Mr. Madhavan and his undivided one-ninenth share in 20.40 cents which belonged to late Radha. The sale consideration for the undivided share each of the sons and daughters of later Radha is Rs. 3,17,333/- and that each of the daughters of deceased daughter is Rs. 1,05 778/-. Petitioner has executed a power of attorney in favour of his fatsher Mr. K.P. Madhavan authorising him to execute the sale deed in respect of his undivided share in 20.40 cents of land of which the sale consideration is Rs. 3,17,333/-. Ext. 3,17,333/- and that each of the daughters of deceased daughter is Rs. 1,05 778/-. Petitioner has executed a power of attorney in favour of his fatsher Mr. K.P. Madhavan authorising him to execute the sale deed in respect of his undivided share in 20.40 cents of land of which the sale consideration is Rs. 3,17,333/-. Ext. P1 is the true copy of the sale deed which is returned with Ext. P2 memo stating: "This document is returned for want of Income Tax Clearance Certificate as per Registration Rules 30(iii)." 2. The prayer in this Original Petition is for the issuance of a writ of certiorari to quash Ext. P2 and for a writ of mandamus commanding the second respondent to register the original of Ext. P1 forthwith and for other incidental reliefs. Heard learned counsel for the petitioner and Sri. P.K.R. Menon, learned Standing Counsel appearing for the Income Tax Department at length. 3. According to the petitioner, R.30(iii) has been introduced in the Registration Rules (Kerala) to conform with S.230A of the Income Tax Act and S.230A and R.30(iii) are attracted only when the value of the land purports to transfer, assign, limit or extinguish the right, title of any person to or in any property exceeds the limit prescribed therein and not the value of the entire land, whereas according to the Revenue, going by Circular dated 10.12.1992 what is relevant is the valuation of the property and not merely the interest to be transferred in the property. I do not think that the submission advanced by the Revenue is well founded for the reasons to be stated hereinafter. 4. S.230-A(i) of the Income Tax Act as amended by S.41 of the Finance Act, 1995, reads: "230A(i). I do not think that the submission advanced by the Revenue is well founded for the reasons to be stated hereinafter. 4. S.230-A(i) of the Income Tax Act as amended by S.41 of the Finance Act, 1995, reads: "230A(i). Not withstanding any thing contained in any other law for the time being inforce, where any document registered under the provisions of clause (a) to clause (e) of sub-s. (i) of S.17 of the Indian Registration Act, 1908(16 of 1908) purports to assign, limit or extinguish the right, title or interest of any person to or in any property valued at more than five lakh 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 Profit Tax Act, 1940 (15 of 1940), the Business Profits Tax Act 1947 (21 of 1947), the Indian Income Tax Act, 1922(11 of 1922), Wealth Tax Act, 1957 (27 of 1957) the Expenditure Tax Act 1957, (29 of 1957), the Gift Tax Act, 1958, (18 of 1958) Super Tax Act, 1963 (14 of 1963) the Companies (Profits) Sur Tax Act 1964 (7 of 1964). OR (b) the Registration of the document will not prejudially affect the recovery of any existing liability under any of the aforesaid Acts". Consequent on the amendment of Income Tax Act mentioned above R.30(iii) of the Registration Rules (Kerala) was also amended with effect from 1st July 1995 and the same is published in Gazette dated 5th July, 1995 RR 4-34540/94. After the amendment the Rule reads: "30 (iii). Where any document which purports to transfer, assign, limit or extinguish the right, title or interest of any person to or in immovable properly other than agricultural land valued at more than five lakh rupees no registering officer shall register any such document unless accompanied by a certificate from the Income Tax Officer to the effect that: " (a) Such transferor, assignor, etc. has paid or made satisfactory provision for payment of all existing liabilities under the Income Tax Act, 1961 (43 of 1961), Excess Profit Tax Act, 1940 (15 of 1940), the Business Profit Tax Act 1947 (21 of 1947), the Indian Income Tax Act, 1922 (11 of 1922), Wealth Tax Act, 1957 (27 of 1957), the Expenditure Tax Act 1957,(29 of 1957) and the Gift Tax Act, 1957(18 of 1958). 25 (b the Registration of the document will not prejudially affect the recovery of any existing liability under any of the aforesaid Acts". 5. Thus, the question that arises for consideration is what is the value to be reckoned, ie. whether the value of interest in property sought to be transferred or the value of the entire property so as to determine the applicability of S.230-A of the Income Tax Act R.30(iii) of the Registration Rules. On the close reading of S.230-A of the Income Tax Act and R.30(iii) of the Registration Rules, I have no doubt in my mind that whatever be the value of the entire property, the value of the undivided interest of the petitioner being less than the statutory ceiling (viz. five lakhs rupees ) - since out of the entire estate left intestate by the deceased mother of the petitioner 1/9th share alone is sought to be transferred under Ext. P1- he is entitled to get Ext. P1 registered without insisting for production of Income Tax Clearance Certificate. Since the second respondent has not adverted to the fact that the value of the undivided interest of the petitioner is below the statutory limit, Ext. P2 insisting production of Income Tax Clearance Certificate reckoning the whole value of the property sought to be transferred cannot be legally sustained. In my opinion, the very purport of the Act and the Rule is to make the value of interest to be transferred as a relevant criterion and not the value of the property as a whole and a departmental interpretation in the form of a certificate as produced by the Revenue which runs counter to the statutory mandate cannot be given effect to. The view I am taking is forfeited by the following rulings: In Samudrala Ganesh Rao v. State of A.P. (1988) 174 ITR 304 the Andhra Pradesh High Court has considered this question and held as follows: "S.230A(i) provides that registration cannot be effected unless a certificate is obtained from the concerned Income Tax Officer with regard to clearance of all the existing liabilities regarding direct taxes. Sub-s.(i) provides that the clearance certificate is necessary if valuation exceeds Rs. 50,000/-. The valuation of Rs. 50,000/- is with reference to the right, title or interest of any person in the property. The criterion should be the value of the property or the interest of the person in such property that is sought to be transferred. The authorities have taken into consideration the value of the entire property though it is stated that the interest of the sisters relinquishing the property is only 3/40 share. It is obvious that they are not concerned with the major chunk of the property and their right is restricted only to 3/40ths share and they can either transfer or relinquish to the extent of 3/40ths share only. It is only with respect to this extent that the Income Tax Clearance Certificate can be insisted upon. It is not disputed that the valuation of this interest is only Rs. 21,775/- and it does not exceed Rs. 50,000/- Therefore, S.230A is not applicable and hence the authorities erred in insisting upon the production of the Income Tax Clearance Certificate". The Madras High Court in N. C. Rangesh v. Inspector General of Registration (1991) 189 ITR 270, held as follows:- "In my view, the criterion to obtain a certificate either under S.230A of Income Tax Act, 1961, or under Chapter XX-C should be the value of the property or the interest of the person in such property that was sought to be transferred and it was sought to be transferred and it was only with respect to that extent that the Income Tax Clearance Certificate could be insisted upon. As such, in my view, in all these cases, before me, neither S.230-A of Income Tax Act, 1961 nor Chapter XX-C will apply, especially when an undivided share is sold under a valid sale deed or under a valid agreement of sale as provided in the Transfer of Property Act. As such, in my view, in all these cases, before me, neither S.230-A of Income Tax Act, 1961 nor Chapter XX-C will apply, especially when an undivided share is sold under a valid sale deed or under a valid agreement of sale as provided in the Transfer of Property Act. This view of mine is supported by the view taken by a single judge of High Court of Andhra Pradesh which is Samudrala Ganesh Rao v. State of A.P. (1988 174 ITR 304). In that case, when the valuation of interest of 3/40ths share was only Rs. 21,775/- the learned single judge has held that S.230-A of Income Tax Act is not applicable. With respect, I agree with the view of learned judge of High Court of Andhra Pradesh in the above mentioned case. In my view, it is the proper construction to be put on the provisions of the Income Tax Act which we are concerned". Again, Madras High Court in R. Lokeswari v. State of Tamil Nadu (1992) 196 ITR 501, held as follows: "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 a value less than rupees two lakhs, no certificate under S.230A of the Income Tax Act is required". In A. Mohan v. Vivekandan & Ors. (1994) 206 ITR 634, besides the question discussed above, the validity of the circular produced by the counsel for the Revenue before the Madras High Court also arisen for consideration. After referring to the decision cited supra, it was held as follows: "I am in entire agreement with the view expressed by the learned judge in the decision referred to above. The position of law which emerges from the decisions referred to above is this: According to S.230A(i) of the Act, an Income tax Clearance Certificate is necessary only when the value of the right, title or interest of transferor sought to be transferred under the document exceeds the limit prescribed under the said section. According to the plain words of S.230A(i) the criterion should be the value of the property or the interest of the person in such property that is sought to be transferred and not the value of the property as a whole in which such interest of the transferor is sought to be transferred. According to the plain words of S.230A(i) the criterion should be the value of the property or the interest of the person in such property that is sought to be transferred and not the value of the property as a whole in which such interest of the transferor is sought to be transferred. In view of the above legal position, I have no hesitation in rejecting the contention of learned counsel for respondents 4 and 5 that it is not the value of interest of the person transferring the property lent the value of the property as a whole in which such interest is sought to be transferred that is criterion for the purposes of S.230A. For the same reason, it has to be held that the clarification issued by the Central Board of Direct Taxes in its circular dated December 10,1992 (see(1993) 1991 (TR (st) 8 does not give the correct interpretation of the "value" as mentioned in S.230A". The Karnataka High Court in M. Mohan Shet v. State of Karnataka & Ors. (1994) 206 ITR 174 has also taken as same view. For the aforesaid reasons, I am satisfied that Ext. P2 is one issued without jurisdiction and the same is liable to be quashed. Accordingly, I quash Ext. P2 and direct the second respondent to register Ext. P1 forthwith without insisting the production of Income Tax Clearance Certificate. Original Petition is allowed as above.