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Income Tax Act, 1961 . Sections 269-UD (I), 269-UE (I), 269-UG(1) and 269- UH (I). Income Tax-Immovable property-Compulsory purchase of- Payment of consideration-Hy cheque-Misdescription of name of payee in cheque-Failure to correct same within prescribed statutory time-limit- Effect of-Held: Misdescription of name amounted to description of another legal entity- Hence, order of purchase stood abrogated and property got revested in transferors-Income Tax Rules, 1962, R.48-L and Form 37. Income Tax-Immovable property-Compulsory purchase of- Payment of consideration-By cheque-Statutory time-limit-Computation of-Payee neither indicated mode of payment nor appeared personally to receive cheque-Hence cheque dispatched to payee by post on last date of statutory time-limit- Payee received cheque on some later date-Held: It was reasonable to assume that payment of a large amount would be made by cheque and sent by post- Post office was agent of payee for purpose of receiving payment-Hence, though the cheque was received by payee on some later date it amounted Jo payment within prescribed period of statutory time-limit. Income Tax-Immovable property-Compulsory purchase of- payment of consideration- Made by cheque-Short-fall in payment to transferee-Though entire consideration was made collectively to persons entitled to receive payment-Held: Adjustment of exact amount due to each persons was an internal arrangement–Hence, such short-fall in payment by itself would not vitiate order of purchase. An agreement for sale of the right, title and interest of the respondents- transferors in respect of a property was made in favour of the appellant- transferee. The appellant-transferee was described as “Prima Ready, Partnership Firm”. A statement in statutory form No. 37-1 as required by Section 269-UG(l) and (3) of the Income Tax Act, 1961 read with Rule 48L of the Income Tax Rules, 1962 duly signed by all the parties to the agreement was filed with the appropriate authority giving details of the persons ” interested in consideration”. As required by the proviso to Section 269- UD(l) of the Act the purchase order had to be made within a period of 3 months from the date of filing of the agreement. After a show cause notice under Section 269-UD(l-A) of the Act to the persons concerned, the order of purchase was passed under Section 269-UD(l) of the Act acquiring the property and determining the apparent consideration payable by the Central Government. The purchase order correctly recorded the date on which the payment was required to be made by the Central Government under the Act The cheque in favour of appellant-transferee was drawn in the name of “Prime Realty Ltd.” instead of Prima Realty, Partnership Firm”. This cheque was sent by speed post on the required date of payment and was delivered to the appellant-transferee only on the next day. However, there was a short-fall in the amount tendered to the appellant-transferee. Subsequently, the appellant-transferee returned the cheque with a covering letter to the appropriate authority contending that the purchase order stood abrogated on account of non-compliance with Section 269-UG(l) of the Act. The appellant- transferee then filed a writ petition before the High Court for quashing the compulsory purchase order, and it was dismissed. Being aggrieved the appellant-transferee preferred the present appeal. On behalf of the appellant-transferee it was contended that the tender of the amount of consideration was not as required by Section 269-UH(l) of the Act and, therefore, there was revesting of the property in the transferors in accordance with Section 269-UD(l); that the cheque was not a valid tender since the description of the payee in the cheque was of a different legal entity, i.e., a limited company other than the partnership firm which was the correct description of the appellant; that the cheque was sent by post and since the post office could not be deemed to be the agent of the addressee and mere posting of the cheque on the last date for payment of consideration under Section 269-UG(l) of the Act would not operate as the delivery of cheque to the addressee and, therefore, the tender of the consideration was not a valid one; and that the purchase order made under Section 269-UD(l) must be quashed. -Allowing the appeal, this Court HELD :”1.1. The appellant-transferee is a partnership firm with the name “Prima Realty” but the cheque described the payee as “Prime Realty Ltd,” which referred to a different legal entity, a limited company instead of a firm. The tender of the cheque could not, therefore, be treated as tender to the appellant-transferee. It was reasonable to assume that (he cheque would not be honoured by the banker to credit the amount of that cheque to the account of the appellant since it could relate to another legal entity, a limited company. In such a situation the appellants were justified in taking the view that the cheque was not meant for them, and they could not lawfully require the bank to deposit the amount of the cheque in their account. There was, thus, clear non-compliance of the requirement of Section 269-UG(I) of the Act, The consequence envisaged by Section 269-UH of the Act ensued. [674-E-G] 1.2. Although the Central Government sent a corrected cheque in the name of “Prima Realty”, the same was admittedly of no consequence. [671-B| 1.3. Accordingly, the order made under Section 269-UD(l) of the Act by the appropriate authority stood abrogated and the property was revested in the transferors in terms of Section 269-UH(l) of the Act with the other consequential results including those specified in Section 269-UH(2) and Section 269-UD(3) of the Act. In view of the fact that the cheque for the amount has not been encashed, the remaining amount has become refundable to the Central Government, which would be refunded by the appellants with interests @12% per annum from the date due till the date of payment. |674- H, 675-AB| Davies v. Elsby Brothers Ltd., (1960) 3 All, E.R. 672, referred to. 2. According to the ordinary course of business usage the only reasonable and proper inference is that the payment of a large amount would be made by cheque issued by the Central Government and unless the payee went to collect the cheque personally, the cheque had to be sent by post to the payee. According to this implied term, it must be assumed that unless the cheque was collected personally by the payee it would be sent by post thereby constituting the post office as the agent of the payee for the purpose of receiving the payment. In the present case the payee did not indicate the mode of payment to them inspite of a letter received by them to indicate the mode of payment. The appellant did not even choose to reply’ to that letter. In these circumstances it was reasonable for the concerned authority to have waited for the cheque to be collected personally by the payee till the last date and to have dispatched it by post on that day when no one came to collect the cheque personally from the authority. In such a situation, payment by cheque dispatched by post amounted to tender of the payment to the payee on that date itself when the cheque was put in the course of transmission through post so as to be beyond the control of the sender from the time of its dispatch by post. [672-EH, 673-A] CIT. Bihar v. M/s. Pamey & Co., [1959] Supp. 2 SCR 868 and Shri Jagdish Mills Ltd v. CIT, |1960| 1 SCR 236, relied on. 3. The payment of the entire consideration due under the purchase order was made collectively to the persons entitled to receive the payment even though there was some difference in the amount tendered to the appellant- transferee. The adjustment of the exact amount due to each, between the several persons who had to share the total amount of consideration was an internal arrangement between them, and this by itself would not vitiate the tender of the amount of consideration and order of purchase as required by Section 269-UG(l) of the Act. [673-CD| CIVIL APPELLATE JURISDICTION :Civil Appeal No.l4554of 1996. From the Judgment and Order dated 15.12.95 of the Bombay High Court in W.P. No. 1106 of 1995. F.S. Nariman, Subhas Sharma, P.H. Parekh, Jay Munim and Ms. Sunita Sharma for the Appellant. Dr. R.R. Mishra, Ranbir Chandra, B.K. Prasad, S.N. Terdol and Mukul Mudgal for the Respondents.

CASE NO.: Appeal (civil) l4554 of 1996 PETITIONER: PRIMA REALTY RESPONDENT: UNION OF INDIA AND ORS. DATE OF JUDGMENT: 18/11/1996 BENCH: J.S. VERMA & B.N. KIRPAL JUDGMENT: JUDGMENT 1996 Supp(8) SCR 665 The Judgment of the Court was delivered by J.S. VERMA, J.: This appeal by special leave is against the judgment dated December 15,1995 … Continue reading

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