ADAIR DUTTA AND CO. INDIA PVT. LTD. versus THE APPROPRIATE AUTHORITY, INCOME TAX DEPARTMENT

Citation: [1996] SUPP. 6 S.C.R. 775 · Decided: 25-09-1996 · Supreme Court of India · Bench: KULDIP SINGH · Disposal: Disposed off
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Judgment (excerpt)

ADAIR DUTTA AND CO. INDIA PVT. LTD. 
v. 
THE APPROPRIATE AUTHORITY, INCOME TAX 
DEPARTMENT 
SEPTEMBER 25, 1996 
[KULDIP SINGH AND KT. THOMAS, JJ.] 
!11come Tax Act, 1961: 
A 
B 
Chapter XX-C, ss. 269 UD and 269 UE (!)-Purchase by Central C 
Govemment of immovable property agreed to be sold-Vesting of prope1ty in 
Central Govemment free from encumbrances-Held, in case agreement stipu-
lates the prope1ty to be sold free from all encumbrances or ce1tai11 encwnbran-
ces, then the vesting in Central Govemment would be free from such 
encumbrances. 
Tamil Nadu B11ildings (Lease and Rent Control) Act, 1960: B11ilding 
belongi11g to Central Govemment-Whether exc/11ded from the pwview of the 
Act-Matter remitted back to High Cowt for decisio11. 
D 
The appellant-company was tenant in a building situate in the city E 
of Madras. The owner of the building entered into an agreement to sell the 
building. The appropriate authority under Chapter XX-C of the Income 
Tax, 1961, on coming to know of the agreement, ordered the Central 
Government to purchase the said building for the same consideration as 
shown in the agreement, in accordance with S.269 UD (1) of the Act. The 
appellant was informed that the building stood vested in the Central F 
Government by virtue of s.269 UE (1) of the Act free from all encumbran-
ces, and it was required to surrender possession of the building. 
The appellant filed a writ petition before the High Court on the 
grounds that in view of the decision in the case of C.B. Gautam* whereby G 
the expression "free from all encumbrances" in sub-section (1) of s. 269-UE 
had been struck down, only the right of the erstwhile owner of the building 
vested with the Central Government without affecting the leasehold right 
of the appellant; and that the appellant's right in the building was 
protected . by the Tamil Na du Buildings (Lease and Rent Control) Act, 
1960. The High Court dismissed the writ petition holding that the agree· H 
775 
776 
SUPREME COURT REPORTS l1996) SUPP. 6 S.C.R. 
A 
ment provided for a sale free from all encumbrances; and that the 
provisions of the T.N. Act did not afford any protection to the appellant. 
Aggrieved, the Company filed the present appeal. 
It was contended for the appellant that though the T.N.Act excluded 
B 
government building from its purview, such exclusion was confined to 
buildings owned by the State Government and not to those owned by 
Central Government. 
Disposing of the appeal, this Court 
c 
HELD : 1. In C.B. Gautam* though the Constitution Bench has 
struck down the words "free from all encumbrances" in sub· section (1) of 
s.269-UE of the Income Tax Act, 1961, it approved the distinction that in 
case the agreement for sale contains the stipulation to the effect that the 
property would be sold free from all encumbrances or certain encumbran· 
ces then the vesting in the Central Government would be free from such 
D encumbrances. In the instant ease, the agreement for sale executed by the 
erstwhile owner, regarding the property in question,contained a stipula· 
tion that the property would be sold free of all encumbrances. (780-A] 
*C.B. Gautam v. Union of India & Ors., (1983) 1 SCC 78, explained 
and followed. 
E 
2.1. The Constitution Bench in C.B. Gautam considered whether the 
vesting in central Government would affect monthly tenancies, and held 
that such tenancies would continue even on an order for purchase by 
Central Government being made under s.269 UD (1), but such tenants 
F 
would lose the protection given to tena.nts under the rent protection laws 
because such laws are not made applicable to properties owned by the 
Central Government and their tenancies could be terminated by the 
Central Government. (781-C-D] 
C.B. Gautam v. Union of India & Ors., (1983) 1SCC78, referred to. 
G 
Tata Consulting Engineers &Anr. v. Union of India & Ors., (1994) 206 
ITR 237, disapproved. 
2.2. However, in C.B. Gautam the situation where monthly tenancy 
is protected by a rent control legislation was not before the Court. The 
H question regarding application of T.N. Act to buildings owned by the 
..... 
, 
ADAIR DUIT AND CO. v. APPROPRIATEAUTIIORITY (THOMAS,J.] 777 
Central Government must be considered afresh by the High Court and, A 
therefore, the matter is remitted to the High Court for disposal of the writ 
petition accordingly. (781-H; 782-A-B] 
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1109 of 
1995. 
From the Judgment and Order dated 20.
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