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Hind Estates Ltd. Vs. C. S. Peters and Others. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKolkata High Court
Decided On
Case NumberMatter No. 1949 of 1950
Reported in[1951]20ITR67(Cal)
AppellantHind Estates Ltd.
RespondentC. S. Peters and Others.
Excerpt:
- .....:- 'effect of expiry of ordinance xxi of 1948 - on the expiry of the payment of taxes (transfer of property) ordinance, 1948 (xxi of 1948), section 6 of the general clauses act, 1897 (x of 1897), shall apply as if the ordinance had then been repealed by a central act.'at the time of the granting of the leases in favour of the petitioner by the respondents nos. 4 and 5 hereinbefore mentioned, the ordinance xxi of 1948 was already in force.on 16th may, 1950, the respondent no. 1, c. s. peters, who was then the income-tax officer, acting on behalf of the indian union, issued diverse notices to the lessors, in relation to the properties leased out to the petitioner, under section 4 (1) of the payment of taxes (transfer of property) act. the material portions of the said notices are as.....
Judgment:

DAS GUPTA, J. - This is an application on behalf of Hind Estates, Ltd., inter alia for a writ of mandamus or writ of like nature directing the respondents Nos. 1 and 2 and each of them to forbear from giving effect to the notices issued by them to respondents Nos. 4 and 5 on diverse dates including 16th May, 1950, or from taking any further steps in pursuance of the said notices or taking or continuing any proceedings under Section 4(1) of the Payment of Taxes (Transfer of Property) Act, 1949.

The case of the petitioner before me is as follows : The petitioner, Hind Estates, Ltd., is a private limited company incorporated in India under the Indian Companies Act, 1913. The registered office of the company is situate at No. 220/1, Lower Circular Road, Calcutta. The respondents Nos. 4 and 5 by a registered lease dated the 13th December, 1948, granted in favour of the petitioner a lease for 99 years commencing from 1st January, 1949, of a number of properties situate in Calcutta at a rent of Rs. 2,400 per month. By another indenture of lease, dated 4th January, 1949, the petitioner also obtained a lease from the respondents Nos. 4 and 6 for a period of 99 years Commencing from 1st January, 1949, at a rent of Rs. 1,000 per month of certain properties situate at Cawnpore. By a third indenture of lease, dated the 20th December, 1948, the petitioner obtained a lease of certain properties in Delhi from the respondent No. 4, Mohamad Amin, for a period of 99 years commencing from 1st January, 1949, at a rent of Rs. 100 per month.

After partition of India and on 7th February, 1948, an Ordinance being Ordinance No. III of 1948, was passed by the Government of India. Under the said Ordinance to Registering Officer should register any document which is required to be registered under clauses (a), (b), (c) and (e) of sub-section (1) of Section 17 of the Registration Act, unless a certificate had been obtained from the Assistant Commissioner of Income-tax, to the effect that the person making such transfer is not liable to taxation under the Indian Income-tax Act, the Excess Profits Tax Act or the Business Profits Tax Act, 1947, or that he has either paid or made satisfactory provisions for the payment of all existing and anticipated liabilities under any of the said Acts or that he has otherwise satisfied that the registration should be allowed. Section 4 of the said Ordinance provides that if any right, title and interest in any property whether movable or immovable, other than agricultural land has been transferred, assigned, limited or extinguished after 14th August, 1947, the Income-tax Officer of the area where the property is situate may issue a notice to all or any of the parties to the transactions requiring them to produce a certificate prescribed by Section 3 of the said Ordinance and if no such certificate is produced, he may forward a statement to the Collector showing the existing and anticipated liabilities of each or any of the said parties and the Collector should then proceed to recover the total amount shown in the statement as if it were an arrear of land revenue and for that purpose may treat the said property as if it belonged to all or any of the persons named in the statement. Thereafter on the 6th August, 1948, another Ordinance was passed, being Ordinance No. XXI of 1948. The said Ordinance is practically in the same terms as the Ordinance No. III of 1948 with this variation, namely, that under Section 4 of the Ordinance III of 1948, stocks, shares and securities are excluded from the operation thereof and in place of the words 'the certificate prescribed by Section 3' used in Section 4 of the Ordinance III of 1948 the expression 'a certificate by the Inspecting Assistant Commissioner of Income-tax of the said area in the terms mentioned in Section 2 of the said Ordinance' is used. The Ordinance XXI of 1948 expired on the 7th February, 1949, and on the 22nd April, 1949, and on the 22nd April, 1949, an Act being Payment of Taxes (Transfer of Property) Act (Act XXII of 1949) came into force.

The heading of the said Act is as follows :- 'An Act to make provision for the payment of taxes before transfers of property are registered in certain cases.'

The preamble of the said Act runs as follows :- 'Whereas it is expedient to make provision for the payment of taxes before transfers of property are registered in certain cases'.

The said Act, under Section 2 thereof, was made applicable to 'any person who, on account of the setting up of the Dominions of India and Pakistan, or on account of civil disturbances or the fear of such disturbances, leaves or has, since the 14th day of August, 1947, left any place in the Provinces of India for any place outside India, or who, since the said date, has been residing in any place outside India; or (ii) who, in the opinion of any of the Income-tax authorities specified in sub-section (1) of Section 5 of the Indian Income-tax Act, 1922 (XI of 1922), or a Custodian of Evacuee Property or a Collector, is likely to leave the Provinces of India with the intention of setting in any place outside the Provinces of India, and in respect of whom a declaration that he is a person to whom this Act applies has been received from any such Income-tax authority, Custodian of Evacuee Property or Collector by the registering officer of the area in which any property belonging to such person is situate'.

Section 3, 4 and 9 of the said Act are material.

Section 3 runs as follows :- 'Payment of taxes before registration of documents :- (1) Where any document required to be registered under the provisions of clause (a), clause (b), clause (c) or clause (e) of sub-section (1) of Section 17 of the Indian Registration Act, 1908 (XVI of 1908), purports to transfer, assign, limit or extinguish any right, title or interest in any property, other than agricultural land, belonging to any person to whom this Act applies, no Registering Officer appointed under the said Act shall register any such document, unless it is certified by the Income-tax Officer of the area in which the property is situate in respect of the person whose right, title or interest in the property is to be so transferred, assigned, limited or extinguished under the terms of the document that -

(a) such person is not liable to assessment or taxation under the Indian Income-tax Act, 1922 (XI of 1922), the Excess Profits Tax Act, 1940 (XV of 1940), or the Business Profits Tax Act, 1947 (XXI of 1947); or

(b) such person has either paid or made satisfactory provision for the payment of all existing or anticipate liabilities under any of the Acts specified in clause (a) of this sub-section; or

(c) the Income-tax Officer is otherwise satisfied that the registration of the document will not prejudicially affect the recovery of all existing or anticipated liabilities referred to in clause (b) of this sub-section'.

Section 4 runs as follows :-

'Recovery of taxes where property has been transferred without a certificate. - (1) Where, in respect of the transfer made on or after the seventh day of February, 1948, in the Provinces of Bombay, West Bengal, East Punjab, Bihar, Delhi and Ajmer-Merwara, and in any other Province on or after the date on which the Transfer of Property (India) Ordinance, 1948 (III of 1948), was made applicable to that Province, of any right, title or interest in any immovable property, other than agricultural land, belonging to any person to whom this Act applies, the Income-tax Officer of the area where the property is situate is satisfied, after giving such person notice in this behalf for a period of not less than one month, that no certificate in the terms mentioned in Section 3 would have been issued to him if this Act had been in force on the date the transfer was made, he may forward a statement to the Collector showing the existing and anticipate liabilities by way of taxes in respect of all or any of the parties to the transfer........'

Section 9 runs as follows :- 'Effect of expiry of Ordinance XXI of 1948 - On the expiry of the Payment of Taxes (Transfer of Property) Ordinance, 1948 (XXI of 1948), Section 6 of the General Clauses Act, 1897 (X of 1897), shall apply as if the Ordinance had then been repealed by a Central Act.'

At the time of the granting of the leases in favour of the petitioner by the respondents Nos. 4 and 5 hereinbefore mentioned, the Ordinance XXI of 1948 was already in force.

On 16th May, 1950, the respondent No. 1, C. S. Peters, who was then the Income-tax Officer, acting on behalf of the Indian Union, issued diverse notices to the lessors, in relation to the properties leased out to the petitioner, under Section 4 (1) of the Payment of taxes (Transfer of Property) Act. The material portions of the said notices are as follows :-

'Whereas you are a person to whom the Payment of Taxes (Transfer of Property) Act, 1949 (Act XXII of 1949), applies within the meaning of Section 2 of the said Act, and

(2) Whereas your right, title and interest in the movable properties mentioned below has been transferred by way of lease to Messrs. Hind Estates, Ltd., of 220/1, Lower Circular Road, Calcutta, and

(3) Whereas it appears that no certificate in the terms mentioned in Section 3 of this Act would have been issued to you if the said Act had been in force on the date the transfers were made,

'You are hereby required under Section 4 (1) of the said Act to show cause on or before 3rd July, 1950, why I should not hold that no certificate in the terms mentioned in Section 3 of the said Act would have been issued to you if the Act had been in force on the dates the transfers were made.'

No notice was given to the petitioner, who are the lessees from the respondents Nos. 4 and 5. In the circumstances the petitioner has presented this application before this Court for the reliefs I have already mentioned.

Mr. Chaudhuri appearing on behalf of the petitioner urged before me that the action of the Income-tax Officer in issuing the said notices does not come within the four corners of the Act because the Act does not apply to leases. Mr. Chaudhuri further contended before me that the transfers referred to in Section 4 of the Said Act are the kinds of transfers which are mentioned in Section 3 of the Act and for which a certificate under the said section would be necessary before they can be registered. If that is so, then Mr. Chaudhuris contention is that the action on the part of the Income-tax Officer in taking steps under Section 4 of the said Act is not warranted by the provisions of the said Act and does not come within the four corners thereof, and, therefore, a direction should be issued by this Court as asked for.

I should mention that the Advocate-General appearing on behalf of the respondents did not dispute the proposition, namely, that if the action of the authorities concerned does not come within the four corners of the Act, then suitable directions should be issued by this Court. But his contention is that the action does come within the provisions of Section 4 of the said Act.

The second contention of Mr. Chaudhuri is that the Payment of Taxes (Transfer of Property) Act, 1949, is ultra vires the Constitution of India inasmuch as it violates the fundamental rights secured for the citizens of India under the articles of the said Constitution.

This is an important point of constitutional law, but, having regard to the view which I have taken of the other points urged by Mr. Chaudhuri, it would not be necessary for me to decide this question on this application. If it were necessary, and if I had come to the conclusion that the other contentions raised on behalf of the petitioner cannot be sustained and he can succeed only if he can establish before me that the Act itself is ultra vires the Constitution of India, then I would have referred to the matter to the Honble Chief Justice for constituting a Special Bench to decide this question, as, in my opinion, it would be much more satisfactory to have it decided by a Bench of three Judges. But, as I have already said, it would not be necessary for me for the purpose of deciding this application to go into that question.

The third contention of Mr. Chaudhuri is that under Section 9 of the said Act the provisions of Section 6 of the General Clauses Act have been made operative as if the Ordinance had then been repealed by a Central Act. Mr. Chaudhuris contention is that because of that reason the Ordinance still applies and if that is so, then the action of the authorities concerned cannot be sustained.

With regard to the first contention of Mr. Chaudhuri, Mr. Advocate Generals contentions before me in short are as follows :- Section 4 is an independent section, independent of Section 3 of the Act. Under Section 3 the Registering Officer shall not register certain classes of transactions, lease being admittedly excluded. All that it meant was that in future the Registering Office shall not register those transactions. But Section 4 on the other hand applied to transfers which have already taken place after 7th February, 1948, of any right, title and interest in any immovable property. The provisions of the previous Ordinances also show that the subsequent sections are independent of the previous ones. That this was the intention of the Legislature is evident from the fact that the provisions of Ordinance III of 1948 had to be amended by changing the words, namely, 'certificates as prescribed by the Act' to 'certificates in terms of the Act'. The only difference between the Ordinances and the Act is that movables have been excluded; otherwise, the Act is merely a descendant of the Ordinances.

I have carefully considered the contentions of the Advocate-General, but I am unable to accept the same. In my opinion the use of the words 'the transfer' in Section 4 indicates the class of transfers mentioned in Section 3 of the Act and for which a certificate would be necessary before the same can be registered. In my opinion the words 'the transfer' used in Section 4 of the said Act is equivalent to and means such transfer. That this is the interpretation of Section 4 is evident from the use of the words 'no certificate in the terms mentioned in Section 3 would have issued if the Act had been in force on the date the transfer was made.' It means that if the Act had been in force on the date of the transfer in question (therefore a certificate in terms of Section 3 would be necessary before any transfer as mentioned in Section 3 could be registered), and if the Income-tax Officer is satisfied that no such certificate would have been issued to him in terms of Section 3, then he can act under Section 4. But the question whether or not a certificate would be issued in terms of Section 3 would only arise in cases of transfers as mentioned in Section 3 of the said Act. That indicates to my mind that 'the transfers' referred to in Section 4 are the kinds of transfers to which the Act would have applied if it had been in force and in respect of which certificates were necessary in terms of Section 3.

In this connection it would be helpful to refer to the material provisions of the previous Ordinances, being Ordinance III of 1948 and Ordinance XXI of 1948. Section 3 of Ordinance III runs as follows :-

Section 3. 'Registration of documents. - No Registering Officer, Revenue Officer, Custodian or other officer appointed to deal with property shall register any document, relating to property other than agricultural land, which is required to be registered under the provisions of clause (a), (b), (c) or (e) of sub-section (1) of Section 17 of the Indian Registration Act, 1908 (XVI of 1908), unless it is certified by the Inspecting Assistant commissioner of Income-tax of the area in which the property is situate in respect of every person whose right, title or interest in the property is or will be transferred, assigned, limited or extinguished under the terms of the document, either that such person is not liable to taxation under the Income-tax Act, 1922 (XI of 1922), the Excess Profits Tax Act, 1940 (XV of 1940), or the Business Profits Tax Act, 1947 (XXI of 1947), or that he has either paid or made satisfactory provision for the payment of all existing or anticipated liabilities under any of the said Acts, or that he is otherwise satisfied that the registration should be allowed'.

Section 4. 'Recovery proceedings. - If any right, title or interest in any property, whether movable or immovable, other than agricultural land, is or has been transferred, assigned, limited or extinguished after the 14th day of August, 1947, the Income-tax Officer of the area in which the property is situate may at any time issue a notice to all or any of the parties to the transaction requiring them to produce within one month the certificate prescribed by Section 3; and if such certificate is not produced he may forward a statement to the Collector showing the existing and anticipate tax liabilities of each or any of the said parties. The Collector shall then proceed to recover the total amount shown in the statement as if it were an arrear of land revenue, and for the purpose of the recovery proceedings he may treat the said property, as if it belonged to all or any of the persons named in the statement.'

An amendment was effected to the provisions of Ordinance III of 1948 by Ordinance XI of 1948, the material portions of which run as follows :-

'In Section 4 of the Transfer of Property (India) Ordinance, 1948, (a) for the words in any property, whether movable or immovable, other than agricultural land the words in any immovable property other than agricultural land or in any movable property other than stocks, shares and securities shall be substituted, and shall be deemed always to have been substituted; (b) for the words the certificate prescribed by the words a certificate by the Inspecting Assistant Commissioner of Income-tax of the said area in the terms mentioned in shall be substituted, and shall be deemed always to have been substituted.'

The provisions of Ordinance XXI of 1948 are the same as the provisions of Ordinance III as it stood after the amendment mentioned above.

It appears on a comparison of the provisions of the said previous Ordinances and the provisions of the present Act that while in the Ordinances the words used were 'any transfer', the words used in the present section are 'the transfer', and 'movables' which were included in the relevant sections of the Ordinances have been omitted from Section 4 of the Act in question. The operation of Section 4 of the present Act has also been restricted to certain areas of the Indian Dominion and to certain classes. Again, the words 'if the Act had been in force on the date the Transfer was made' are not to be found in the said Ordinances; and if the construction, which the learned Advocate-General wants me to put on Section 4 of the present Act, is to be accepted, then I see no reason why these words are introduced in the said section of the present Act.

Apart from any reference to the provisions of the previous Ordinances, on a proper consideration of the section itself and also as read with other provisions of the Act, it seems to me that Section 4 of the Act applies to the class of transfers mentioned in Section 3. The heading of the Act, the preamble of the Act and the heading of the section itself also support the view which I have taken in this matter. The heading and the preamble of the Act show that the object, or, as Mr. Sen puts it, the main theme of the Act, is to provide for payment of taxes before transfers of property are registered in certain cases. Such a provision is made in Section 3 of the Act so far as future transfers are concerned, and in Section 4 of the Act in cases of transfers which took place prior to the commencement of the Act. But both the sections, in my opinion, refer to the same class of transfers. This view makes the heading of the Act, the preamble and the heading of the section itself consistent with the provisions of the said section.

Mr. Advocate-General laid considerable emphasis upon the words 'any right, title and interest in any immovable property' appearing in the said section. These words no doubt create some difficulty in the matter, and they did cause some hesitation in my mind before I came to the conclusion, to which I have referred. But it appears that in Section 3 also similar expressions are used. The expressions used in the said sections are 'purports to transfer, assign, limit or extinguish any right, title and interest in any immovable property' although referring only to such documents which are required to be registered under the provisions of clauses (a), (b), (c) and (e) of Section 17 of the Registration Act. It appears to me that similar language has been used in Section 4 of the Act. I must confess that the sections of the Act are not happily worded. It seems to me that almost the same words appearing in Section 17, clauses (b), (c) and (e), of the Registration Act, have been used in both the sections, being Sections 3 and 4 of the Act.

Besides, if the contention of the learned Advocate-General is to be accepted, then the result would be that even in cases of leases for one year, or less than a year, for example monthly tenancies, the Income-tax Officer would be entitled to act under Section 4 and issue a notice, although such leases do not come under the provisions of Section 17 of the Registration Act and do not even require any registration at all. The main theme of the Act is to provide for payment of taxes before transfers of property are registered in certain cases unless a certificate in terms of Section 3 obtained. One of the terms of such certificate, as mentioned in Section 3, is that the Income-tax Officer is satisfied that the registration of the document will not prejudicially affect recovery of existing or anticipatory liability. But if the contention of the Advocate-General is to be accepted, then even in the case of documents creating leases for one year or less than a year and which do not require any registration at all the Income-tax Officer would be able to issue a notice under Section 4 of the Act.

On a full consideration of the matter, I have come to the conclusion that Section 4 (1) does not authorise the Income-tax Officer to act in the case of leases, and this being a case of a lease he is not entitled to issue the notices which have been issued. I am fully aware of the possibility of dishonest parties avoiding the provisions of the Act by taking resort to leases instead of transfers. But I have to interpret the Act as it has been enacted, and if on such interpretation the leases do not come within the purview of Section 4 (1) of the said Act, then the Income-tax Officer cannot take the action under the said section.

With regard to the contention of Mr. Chaudhuri, which is based on Section 9 of the present Act, I must confess that I am unable to see any force in the said contention. Section 9, as Mr. Advocate-General has rightly pointed out, only keeps alive the proceedings which started under the previous Ordinances, because, it is now well-established that the General clauses Act does not apply to temporary Acts. That is why a provision had to be made in this Act providing for the application of Section 6 of the General Clauses Act. The effect of Section 9 is nothing more than that. That being so, I cannot accept Mr. Chaudhuris contentions on this point.

But on the view which I have taken as to the effect of Section 4 (1) of the Act and having come to the conclusion that the Income-tax Officer has acted beyond his powers, I shall give relief to the petitioner in this case.

The result is that the rule will be made absolute and the respondents Nos. 1, 2 and 3 are hereby prohibited and restrained from taking any steps in furtherance of the notices mentioned in the petition or from giving effect to the said notices or from proceeding thereunder. The applicant is entitled to the costs of this application. The costs will be as of a motion but each days hearing would be allowed separately as of a motion.

Application allowed.


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