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Shrikant Karwa   17 January 2023

Sales tax encumbrance is more than market value of property

There is a case of purchase of a property in bank auction at Rs.1 cr while market value of property is Rs.1.8 cr. The lower bid was due to Rs.5.8 cr of sales tax encumbrance and some other creditors under land revenue.

As per the observation of supreme court in AI Champady 2009 case, encoumberances which diminishes below market value does not remain encumbrance.

Can one file writ petition to remove sales tax encumbrance on the property? If the encumbrance is not removed, no one ever buy the property and it shall remain unproductive for ever.

Kindly advise


 2 Replies

kavksatyanarayana (subregistrar/supdt.(retired))     17 January 2023

No.  But ask your lawyer who observed your case.

Shrikant Karwa   17 January 2023

There are many high court decisions saying that since purchasers has not purchased business of defaulter, the tax liabilities should not be transferred to purchaser. However, some tax legislation treat tax liabilities as land revenue, it is transferred to purchaser of such land. This has made such properties NPA and shall remain NPA forever. The supreme court observation that tax liabilities more than market value of land should be considered null and void. Then only others shall purchase the land and make it productive resulting increased tax contribution by the new commercial activity conducted on the land as well increase employement. Keeping any land unproductive by holding it for unrecoverable taxes is a national crime.

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