The High Court (HC) Orissa in its recent judgement has observed that obtaining conversion by assessee will increase chance of recovery by revenue and held that the State cannot oppose the claim for conversion.
Ramavtar Agarwal, the petitioner wants the conversion of leasehold right to own to enable, the dealing with the land for liquidating demands outstanding against the estate of Nanu Ram Agrawalla, since deceased. His clients are the heirs and legal representatives.
Mr Nanda, advocate appeared on behalf of the State opposed the prayer and stated that the certificate dues are outstanding from the estate. There has to be a first recovery before petitioners, as legal heirs, can claim to have conversion.
Further, the revenue department argued that no transfer can be permitted as barred by section 281 in Income Tax Act, 1961. He submits, conversion means that the government land will be transferred by the government, to petitioners. The estate has income tax dues, to enforce recovery of which there has been the attachment of the property.
It appeared that the Second party in the lease is Nanu Ram Agrawalla since the deceased, heirs and legal representatives of whom are petitioners. Third-party in the lease is the Governor of Orissa. The second assignment of leasehold rights by this deed was between the assignee and Nanu Ram Agrawalla.
It was observed that there is a restraint on assignment because otherwise aforesaid deed would have been between the assignee and Nanu Ram Agrawalla, without the necessity of the Governor to be a party thereto.
It was viewed that Section 281 has two provisos. The second proviso permits transfer with the previous permission of the Assessing Officer. Revenue is opposing the conversion sought. It was evident that the only ground of the State, for opposing the conversion, therefore, is that revenue has outstanding demand against the estate.
A Coram comprising of Justice Arindam Sinha and Justice Sanjay Kumar Mishra observed that the leasehold is likely to have restrictions on assignment and transfer of the interest. Further viewed that in the event petitioners obtain a conversion, there will be a better chance of recovery by revenue on proceeding with the attachment of land that would then be owned by the estate.
The Court held that the State cannot sustain its opposition to the claim for conversion and set aside the impugned order. Further held that “upon the permission granted under clause (ii) of the proviso in section 281, the State will be bound to cause the conversion within four weeks thereof.”
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