Section 269UM — Immunity to Transferor Against Claims of Transferee

CHAPTER XX-C — PURCHASE BY CENTRAL GOVERNMENT OF IMMOVABLE PROPERTIES IN CERTAIN CASES OF TRANSFER

Section 269UM — Immunity to transferor against claims of transferee for transfer

Case Laws & Commentary — Income-tax Act, 1961 (as amended by the Finance Act, 2026) — bharattax.co Treatise

Status: Historic / spent. Chapter XX-C was inserted by the Finance Act, 1986 and brought into force area-wise under section 269U; by section 269UP it does not apply to any transfer of immovable property effected on or after 1 July 2002. The pre-emptive-purchase machinery is therefore dormant. The section is reproduced and annotated in full for completeness of the Treatise.

Finance Act, 2026: No amendment. The Finance Act, 2026 does not touch any provision of Chapter XX-C (sections 269U to 269UP).

Mechanism: Where property is purchased by the Central Government under the Chapter, the transferor is not liable for any claim by the (intended) transferee in respect of the transfer, notwithstanding anything in any other law, instrument or agreement.

Litigation profile: Protective/immunity provision; no significant independent merits litigation.

A. COMMENTARY

Protecting the transferor from the displaced buyer

Section 269UM solves a problem the scheme itself creates. When the State pre-empts and the property vests in the Central Government, the intending transferee is shut out of the bargain through no fault of the transferor. Section 269UM provides that the transferor shall not be liable to any claim by the transferee in respect of the transfer, notwithstanding any contrary law, instrument or agreement. The transferor, who must accept the State as buyer, is thereby shielded from breach-of-contract or specific-performance claims by the disappointed purchaser.

Statutory supersession of contract

The provision is a deliberate statutory override of ordinary contract and property law: the operation of the Chapter is a supervening legal event that displaces the private bargain, and the transferor cannot be made to answer in damages for an outcome the statute compelled. This is the necessary corollary of compulsory pre-emption.

Candour

Section 269UM is protective machinery and has generated no separate reported merits decision; it is read as part of the integrated pre-emption scheme upheld in C.B. Gautam.

B. STATUTORY TEXT (verbatim)

Reproduced verbatim from the Income-tax Act, 1961, as amended up to the Finance Act, 2025 (the Finance Act, 2026 makes no change to Chapter XX-C). Page-header/footer artefacts of the source PDF have been removed; wording, clause-lettering and punctuation are unaltered.

Immunity to transferor against claims of transferee for transfer.

269UM. Notwithstanding anything contained in any other law or in any instrument or any agreement for the time being in force, when an order for the purchase of any immovable property by the Central Government is made under this Chapter, no claim by the transferee shall lie against the transferor by reason of such transfer being not in accordance with the agreement for the transfer of the immovable property entered into between the transferor and transferee :

Provided that nothing contained in this section shall apply if the order for the purchase of the immovable property by the Central Government is abrogated under sub-section (1) of section 269UH.

C. AUTHORITIES

Candour rule: section 269UM is an immunity provision with no direct authority; the decision below frames the integrated scheme of which it is part.

The integrated pre-emption scheme

C.B. Gautam v. Union of India (1993) 199 ITR 530 / 110 CTR 179 / 65 Taxman 440 / (1993) 1 SCC 78 (SC)

Court / Bench Supreme Court of India; decided 17 November 1992 (test case transferred from the Delhi High Court).

Issue Constitutional validity of Chapter XX-C, and whether a pre-emptive purchase order under section 269UD can be made without affording the parties a hearing and without recording reasons.

Held The Chapter was upheld in substance, but the Court read into it the principles of natural justice: a reasonable opportunity to show cause must be given to the intending purchaser and seller before an order under section 269UD is made, and the order must record reasons. Pre-emptive purchase can be resorted to only where there is significant undervaluation of about 15 per cent or more, raising a rebuttable presumption of an attempt to evade tax. The words 'free from all encumbrances' in section 269UE(1) were read down so as not to defeat bona fide tenants and encumbrancers in possession.

Relevance The foundational decision for the entire Chapter. It governs sections 269UA, 269UC, 269UD, 269UE and 269UF and is the source of the hearing-and-reasons discipline applied throughout. (Followed Kraipak v. UOI AIR 1970 SC 150 and Olga Tellis v. Bombay Municipal Corpn. (1985) Suppl. 2 SCR 51.)