PURCHASE OF PROPERTY AND CAPITAL GAINS

THE PURCHASE OF PROPERTIES, WHERE THE CONSIDERATION(PRICE) IS LESSER THAN THE GUIDANCE VALUE OR THE RATE FIXED BY THE DG REGISTRATION, AS DECLARED BY THE BUYER, ATTRACTS THE CAPITAL GAINS TAX AND WOULD BE TAXED ACCORDINGLY AS PER SECTION 50C OF THE FINANCE ACT.

THE PURCHASE OR TRANSFER, EITHER THROUGH  A REGISTERED SALE DEED OR THROUGH A GPA,  THE PURCHASER MUST QUOTE AND PAY THE CONSIDERATION PRICE AT THE PRICE/VALUE FIXED BY THE VALUATION COMMITTEE, OF DEPARTMENT OF STAMPS AND REGISTRATION,WHICH HAD BEEN PUBLISHED IN THE GAZETTE, AND IS QUOTED AS GUIDANCE VALUE.  THUS IT IS VERY CLEAR THAT IN VIEW OF SECTION 50 C, ALL THE BUYERS AND SELLERS, WHILE CALCULATING THE CAPITAL GAINS PAYABLE ON THE STAMP DUTY VALUATION.

THUS THE IMPACT WOULD BE THAT THE VALUE ADOPTED BY THE STAMP DUTY AUTHORITY WOULD BE DEEMED TO BE THE FULL VALUE OF CONSIDERATION RECEIVED, AS A RESULT OF TRANSFER OF PROPERTY.


ALL THE SELLERS WHO MAY BE COMING WITHING THE  AMBIT OF THIS ACT SHOULD CAREFULLY PLAN AND PAY ADVANCE TAX. FAILURE WILL INVITE PENAL PROCEEDINGS AND 24% PER ANNUM.  THE ACT IS IN FORCE FROM THE FINANCIAL YEAR 2003-2004.  ALL THE ASSESSES AND BUYERS OF PROPERTIES, SHOULD SUBMIT THE TAX RETURNS, TAKING INTO ACCOUNT THE PROVISIONS OF THE SAID ACT.


FOR EXAMPLE:  

THE PURCHASE OF A PROPERTY OR TRANSFER OF PROPERTY IS NEGOTIATED FOR xxxxx CONSIDERATION.  THE GUIDANCE VALUE FIXED BY THE VALUATION AUTHORITY OF DEPARTMENT OF STAMPS AND REGISTRATION IS yyyy, THOUGH THE ACTUAL CONSIDERATION PAID IS xxxx BUT UNDER THE PROVISIONS OF SECTION 50 C OF THE FINANCE ACT OF 2002, THE CAPITAL GAINS TAX WILL BE CALCULATED ON THE yyyy AND WILL BE TAXED ACCORDINGLY.

ORAL PARTITION AND FAMILY ARRANGMENT

 ORAL PARTITION AND FAMILY ARRANGEMENT IS  INCLUDED IN FAMILY PARTITION 

Section 6 of the Hindu Succession Act, 1956 deals with devolution of interest in coparcenary property. The Act was amended by Act 39 of 2005 and a new section 6 was substituted. Sub-section (5) of section 6 and the Explanation thereto read thus:

The Explanation defines “partition” as any partition made by execution of a deed of partition duly registered under the Registration Act, 1908 or partition effected by a decree of court. This definition of “partition” does not include oral partition and family arrangement.

Since the amended Act has failed to include oral partition and family arrangement within the definition of “partition”, which are common and legally accepted modes of division of property under the Hindu Law, the Commission undertook this subject suo motu.

1.1 The Hindu Succession Act, 1956 (30 of 1956) is a part of the Hindu Code which also includes the Hindu Marriage Act, 1955, the Hindu Adoptions and Maintenance Act, 1956 and the Hindu Minority and Guardianship Act, 1956. These Acts brought about revolutionary changes in the law relating to Hindus. It codified the law relating to marriage, succession, adoption, etc.

1.2 The Hindu Succession Act made a revolutionary change in the law relating to succession, especially for female Hindus. For the first time, a Hindu female could become an absolute owner of property. She could inherit equally with a male counterpart and a widow was also given importance regarding succession of her husband’s property as also of her father’s property. The Hindu Succession Act

was amended in 2005 by the Hindu Succession (Amendment) Act, 2005 (Act 39 of 2005) to provide that the daughter of a coparcener in a joint Hindu family governed by the Mitakshara Law shall by birth become a coparcener in her own right in the same manner as the son, having the same rights and liabilities in respect of the said property as that of a son.

1.3 Section 6 of Hindu Succession Act deals with devolution of interest in coparcenary property. Section 6, before its substitution by Act 39 of 2005, read as under:

2. JUDICIAL VIEW

2.1 The Supreme Court of India in its judgment dated 21.01.1976 in Kale and Ors. v. Deputy Director of Consolidation and Ors., 1976 (3) SCC 119, while dealing with a memorandum of family arrangement through family settlement, held that the family arrangements are governed by a special equity peculiar to themselves and that the family arrangement may have been oral in which case no

registration is necessary and that the registration would be necessary only if the terms of the family arrangement are reduced into writing.

2.2 The Supreme Court has observed: -

“By virtue of a family settlement or arrangement members of a family descending from a common ancestor or a near relation seek to sink their differences and disputes, settle and resolve their conflicting claims or disputed titles once for all in order to buy peace of mind and bring about complete harmony and goodwill in the family. The family arrangements are governed by a special equity peculiar to themselves, and will be enforced if honestly made, although they have not been meant as a compromise, but have proceeded from an error of all parties, originating in mistake or ignorance of fact as to what their rights actually are, or of the points on which their rights actually depend.  “The object of the arrangement is to protect the family from long drawn litigation or perpetual strifes which mar the unity and solidarity of the family and create hatred and bad blood between the various members of the family. It promotes social justice through wider distribution of wealth. Family therefore has to be construed widely. It is not confined only to people having legal title to the property.

“Courts lean in favour of family arrangements. Technical or trivial grounds are overlooked. Rule of estoppel is pressed into service to prevent unsettling of a settled dispute.

“Family arrangement may be even oral in which case no registration

is necessary. Registration would be necessary only if the terms of the family arrangement are reduced into writing. Here also, a distinction should be made between the document containing the terms and recitals of a family arrangement made under the document and a mere memorandum prepared after the family arrangement had already been made either for the purpose of the record or for information of the court for making necessary mutation. In such a case the memorandum itself does not create or extinguish any rights in immovable properties and therefore does not fall within the mischief of Section 17(2) of the Registration Act and is, therefore, not compulsorily registrable. “So a document which was no more than a memorandum of what had been agreed to did not require registration.

 “Hence a document which is in the nature of a memorandum of an earlier family arrangement and which is filed before the court for its information for mutation of names is not compulsorily registrable and therefore can be used in evidence of the family arrangement and is final and is binding on the parties.

“Even if a family arrangement which required registration was not

registered it would operate as a complete estoppel against the parties who have taken advantage of the family arrangement. “Before dealing with the respective contentions put forward by the parties, we would like to discuss in general the effect and value of family arrangements entered into between the parties with a view to resolving disputes once for all. By virtue of a family settlement or arrangement members of a family descending from a common ancestor or a near relation seek to sink their differences and disputes, settle and resolve their conflicting claims or disputed titles once for all in order to buy peace of mind and bring about complete harmony and goodwill in the family. The family arrangements are governed by a special equity peculiar to themselves and would be enforced if honestly made. In this connection, Kerr in his valuable treatise Kerr on Fraud at p. 364 makes the following pertinent observations regarding the nature of the family arrangement which may be extracted thus:

2.4 Thus, it would appear from a review of the decisions (supra), that the courts have taken a very liberal and broad view of the validity of the family settlement and have always tried to uphold it and maintain it. The central idea in the approach made by the courts is that if by consent of parties, the matter has been settled, it should not be allowed to be reopened by the parties to the agreement on frivolous or untenable grounds.

3. RECOMMENDATION by the LAW COMMISSION.

3.1 Oral partition or family arrangement is an extremely valuable power whereby the peace, happiness and welfare of a family are secured and litigation is avoided. It is specifically helpful in the case of illiterate members of a family or who have no means to bear expenditure of legal process/advice etc.

3.2 By the 2005 amendment in the Hindu Succession Act, oral partition and family arrangement which had been effected prior to the enactment would be set at naught. Hence, the Commission proposes a suitable amendment in the Explanation to section 6 of the Hindu Succession Act, 1956 to include oral partition and family arrangement in the definition of “partition”.

UN AUTHORISED STRUCTURES BUYER`S CANNOT MOVE COURT OR CONSUMER FORUM-COIMBATORE.

In a step that seeks to discourage people from buying houses or other buildings unauthorisedly constructed without plan approval/violations/deviations by local bodies, the Coimbatore District Consumer Disputes Redressal Forum is turning away petitions seeking compensation for deficiency in service on the part of builders of such structures.

In fact, the buyers of flats or houses constructed without an approved plan stand to lose, as the consumer forum will not even entertain the petition.

In which case, the buyer will not be able to get any compensation from the builder/seller for deficiency in service.

Already, the Government has ordered a halt to registering sites in unapproved layouts and there are curbs in providing electricity connections.

Now, the consumer forum (commonly known as consumer court) has added a new dimension to the efforts to curb the menace of unauthorised constructions.

Forum President S.A. Sree Ramulu says the building plan forms the basis for accepting or turning away the petition. “If the petitioner says there is no approved plan for the building, we do not entertain the petition. The forum cannot take up the case of anything illegal or unauthorised. A building without an approved plan is unauthorised.”

Mr. Sree Ramulu says if the forum accepts such a petition and hears it, this will only amount to legitimising an unauthorised activity. “If there is damage to an illegal consignment of arms, can anyone sue the transport company for compensation?”