‘Can’t deny tax relief to buyer if builder delays flat delivery’

There is no capital gains tax if the purchase price of the residential house in which the reinvestment is made exceeds the sale proceeds.

MUMBAI: The Mumbai bench of the Income-Tax Appellate Tribunal (ITAT) has held that a taxpayer cannot be denied investment-related tax benefits if due to a builder's fault the taxpayer does not get timely possession of a house in which the reinvestment was made.

The Income-Tax Act provides for benefits relating to capital gains tax, where sale proceeds of any asset other than a house (section 54F) or sale proceeds of a house (section 54) are reinvested in a residential house property in India.

There is no capital gains tax if the purchase price of the residential house in which the reinvestment is made exceeds the sale proceeds. In other cases, the capital gains, and thus the tax outgo, is proportionately reduced.

There are conditions to be eligible for such tax-breaks. The original asset (or house) that has been sold must have been held by the taxpayer for more than three years (long-term capital asset). Also, the residential house property in which money is being reinvested has to be purchased within the specified period.

At times, the house is not available for possession within the agreed time. Projects get stalled as builders have not got permission or have run out of funds. This is common in Mumbai, Noida and Gurgaon, and results in the buyer losing tax benefits.

Kanu Chokshi, managing partner at Chokshi & Chokshi, a firm of chartered accountants, said, "This judgement will help taxpayers claim exemption under sections 54F and 54, even where agreements are not executed with the builder and investment is made against an allotment letter, provided that the reinvestment is made within the stipulated time."

Rajeev B Shah had filed an appeal with ITAT, which adjudicates I-T disputes, as his claim under section 54F was rejected by the authorities during tax assessment. The I-T authorities said the residential flat in which the reinvestment was made was incomplete and the registration document was not filed by the taxpayer.

Section 54F requires that reinvestment in the residential house property, by way of purchase, subsequent to the sale of the original asset, must be within two years.

Shah had sold a plot in Rajkot, Gujarat, and reinvested in a residential flat which was under construction in La Citadel, being developed by Seth Developers and Poonam Builders.

Shah appealed to ITAT that the builder had been avoiding customers due to disputes and the project was stalled. He had also filed a civil suit against the builder and the matter was pending in the Bombay high court.

ITAT, in its order of July 8, ruled in favour of Shah and held that "the intention of the taxpayer is very clear, he has invested almost the entire sale consideration of land towards purchase of this residential flat. It is almost impossible for the taxpayer to complete other formalities, such as taking over possession for getting the flat registered in his name. This cannot be the reason for denying the taxpayer's claim for tax benefit."

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Mysuru civic body to attach properties of defaulters

As against Rs 221 crore it projected at the start of this financial year by way of property tax, it has collected only Rs 87.80 crore till February-end.

MYSURU: Mysuru City Corporation is woefully behind its target on revenue collection this fiscal.

As against Rs 221 crore it projected at the start of this financial year by way of property tax, it has collected only Rs 87.80 crore till February-end. With one month to go for the end of FY 2016-17, the civic body is facing an uphill task of collecting Rs 134 crore by the end of March to meet the target.

MCC commissioner G Jagadeesh on Friday said that the civic body has collected Rs 87.80 crore, while Rs 134 crore is pending. "This is affecting development works taken up in the city," he stated, urging property owners to pay taxes.

Setting a 15-day deadline to make payments, he warned of action in case of default. Karnataka Municipal Corporations Act (1976) empowers the civic body to attach the property of erring owners, he stated. MCC will attach properties in case of failure to pay the tax within 15 days, he stated. tnn

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Ahmedabad civic body to probe property tax discrepancies

The finance department has fished out at least eight instances where the tax department has been charging less by reducing the value of the factor in the carpet area based property tax formula.

AHMEDABAD: The property tax department of the civic body has been asked to explain as to why certain type of properties in the city pay less tax when compared to similar properties located within the same locality.

The finance department has fished out at least eight instances where the tax department has been charging less by reducing the value of the factor in the carpet area based property tax formula.

For instance, in case of some schools, the factor multiplied into the formula was just 1 instead of 2. This way the tax was literally halved for such schools. Similar was the case of auto garages. In case of auto parts shops while the factor multiple decided was 6, the AMC tax department multiplied a factor of just 2 for some of the favoured lot causing a drastic reduction in the tax.

For laboratories, while the factor multiple was 7 the AMC multiple factors like 1 in few cases, 2 in other and in some cases it was 6. In case of open air theatres, while the AMC’s standing committee had decided on a factor multiple of 6, the tax department had been charging tax from based on a factor of 2.

“We are preparing a detailed list of such properties where factor multiples have been drastically reduced. There may be more such cases to probe,” said a senior AMC official.

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Pimpri Chinchwad civic body seeks suggestions from citizens for Smart City project

With the twin township included in the Smart City mission just before the municipal elections, the corporation has begun the process of public participation.

PIMPRI CHINCHWAD: Just as the citizens of Pune chose Aundh-Baner-Balewadi as a model area for Smart City, Those staying in the twin-township of Pimpri Chinchwad can choose among Nigdi-Pradhikaran, Wakad-Pimple Saudagar, Sangvi, Moshi, Pimpri-Chinchwad station area, Bhosari and Chikhali as the model area to be replicated as part of the scheme.

With the twin township included in the Smart City mission just before the municipal elections, the corporation has begun the process of public participation. Various questions including problems faced by citizens, areas that to be prioritized for development, aspirations for the city, and smart solutions that can be adopted will be put forward to residents.

A few options for city-wide implementation are, improved traffic management, e-governance, Wi-Fi spots, smart parking and pollution monitoring, civic officials said.

The Pimpri Chinchwad Municipal Corporation (PCMC), which will be handling the development projects, will put a questionnaire on the municipal corporation's website, and also launch a mobile app on Saturday for easy access. The survey forms will also be given to various households across the city, and distributed through students of schools and colleges.

Around 1.5 lakh messages will be sent to various citizens, officials said.

According to officials, the municipal corporation, through various civic departments such as medical, engineering, water supply, town planning and LBT, is also seeking views of industrial and business associations, developers, on various aspects on how to make Pimpri Chinchwad a smart city. A meeting of NGOs was held on Friday at Auto Cluster for discussing the Smart City proposal.

In the first phase of the smart city proposal, the central and state governments are likely to grant PCMC nearly Rs 1,000 crore. The funds would be used for various development projects, including expansion of BRTS corridors, Wi-Fi service for the twin township, 24X7 water supply , and e-learning in municipal schools.

Citizens suggestions are also being sought from Central government website - mygov.in. The webpage says, “the economically vibrant city of Pimpri-Chinchwad is one step closer to fulfilling its smart city aspirations. The city is required to prepare a smart city proposal which will document the cities planned interventions for becoming a smart city”.

Citizens have also been asked to prepare the Smart City logo. After receiving the suggestions, a proposal will be sent to the Central government in a few weeks.

In July last year, Pimpri Chinchwad was ranked fourth in the smart city competition. The state government had sent a joint proposal that included Pune and Pimpri Chinchwad. Pune was selected in the list. After Pimpri Chinchwad’s exclusion, citizens, activists and political leaders raised their voices in protest.

In December, just before the municipal elections, chief minister Devendra Fadnavis announced that the twin township has been included in the Smart City mission, by excluding Navi Mumbai.

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Bank liable to pay for loss of documents taken against loan

The bank then informed Ebrahimkutty that the original deed was misplaced while shifted its building premises

When a person takes a loan from a bank, he is required to furnish collateral security to secure against default in repayment. One of the commonest forms of security is the depositing of property title deeds. What happens if the bank loses the title deed and is unable to return it after the loan is repaid?

Case Study: Ebrahimkutty had taken a loan from Mayyanad Regional Co-operative Bank against mortgage of his property in Mayyanadu village of Kerala by depositing the original title deed. On repayment of the loan in 1999, the bank failed to return the deed. The bank later verbally informed him that the original deed could not be found and attempts were being made to trace it. The bank advanced further loans to Ebrahimkutty against the same title deed. These loans too were repaid in due course. The last loan was finally closed on September 8, 2012, but the bank still could not find the title deed.

The bank then informed Ebrahimkutty that the original deed was misplaced while shifted its building premises. Aggrieved, Ebrahimkutty filed a complaint before the Kerala State Commission. He claimed that his property was worth Rs 75 lakhs, but he could not sell it as the bank had lost the original document. He sought a compensation of Rs 25 lakhs.

The state commission directed the bank to return the original deed and also pay compensation of Rs 10 lakhs within one month, or along with 12% interest, if delayed. In case of failure, to return the title deed the bank was ordered to issue a written certificate about the loss.

The bank appealed against this order. It contended that the loss of the deed was communicated way back in 1999, but the complaint was filed 12 years later, so it ought to have been dismissed. It also argued that Ebrahimkutty had not been able to show that he had suffered any damage due to the loss of the title deed. Ebrahimkutty argued that the bank had merely admitted that the deed had been misplaced, but had never admitted that it had been lost.

The National Commission observed that if a document is misplaced, there is a possibility that it could be recovered at a later stage. If it is lost, the question of recovery does not arise. The Commission noted that even in the affidavit filed by the bank, it had denied that the original title deed was lost, and had asserted that an assurance had been given that it would be returned as soon as it was traced. So the Commission held the complaint to be within limitation. The Commission also observed that the loss of the title deed would affect the value of the property, so Ebrahimkutty would be entitled to be compensated.

Accordingly, by its order of February 20 delivered by Dr B C Gupta for the Bench along with Dr S M Kantikar, the National Commission held the bank guilty of deficiency in service. However, the compensation of Rs10 lakhs which had been awarded by the state commission was considered to be quite high, so the National Commission modified the order and reduced the compensation to Rs 5 lakhs, to be paid within four weeks, or along with 12% interest in case of delay.

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RERA: Maharashtra to notify final rules in March

The officials said the file for publishing the rules is in the final stages of approval

PUNE: Housing department officials have said that Maharashtra will follow the Centre’s Real Estate (Regulation and Development) Act, 2016, and is planning to publish the final rules this month so that the legislation can be implemented from May 1.

The officials said the file for publishing the rules is in the final stages of approval.

“There will be no dilution of the act from our side. There were concerns from consumer bodies after the draft rules were published and hearings were held by the department. After the hearing, necessary amendments have been incorporated in the rules, which are in consonance with the central act. We are working towards implementing RERA from May 1,” a senior official from the housing department said.

RERA came into force last May, and since October, states began issuing their version of the rules under the central act.

The Maharashtra government published the draft rules in December and sought suggestions from consumer bodies. An officer appointed by the department on special duty later gave a hearing to some bodies from Pune and Mumbai. Over 650 suggestions and objections, many of which were a part of the act but not the draft, were heard.

The Centre had told states to not dilute the act as was alleged by many consumer bodies.

According to an official of the department, the file was submitted last month but could not be cleared because of the municipal corporation elections. The official said that it should be cleared this month itself and the rules have incorporated “all the concerns” of the consumer bodies. But the bodies said the state’s draft rules were pro-developer.

Advocate Shirish Deshpande from Mumbai Grahak Panchayat said that if there is no dilution of the Central act, then it is a welcome move as the draft was pro-developer. “We had put up our suggestions and have been told that they were incorporated. However, till I see the rules in print, I will not be assured,” Deshpande said.

The body had highlighted 53 objections which were not in consonance with the Central act. “There was definite dilution and we hope the final rules follow the central act,” he said.

Deshpande also added that he is relieved these rules will repeal the Maharashtra housing act, which was developer friendly. “However, we have to see how much the government is able to resist pressure from the builder lobby,” he said.

Pune Grahak Panchayat’s Vijay Sagar had sought over 1,000 signatures from various societies in Pune objecting to the deviation of the draft from the original act. “We had highlighted our objections and hope the government has taken cognizance,” Sagar said.

The builders’ fraternity is, however, looking at the developments closely. Rohit Gera, vice-president of Credai in Pune said, “I think the introduction of RERA will be a game-changer in the real estate sector in terms of bringing about transparency and accountability. It will transfer all the risks the consumers are facing to the developer. It is a good thing and I hope it is implemented well,” Gera said.

Ashutosh Limaye, national director of research in JLL, said that if the state has not diluted the rules as it had for the draft rules, then it would bring about more accountability and transparency from developers and risk mitigation on part of the consumer. “The fly-by-night operators will definitely be affected after the implementation of RERA,” Limaye said.

Chief economist and national director of research in Knight Frank Samantak Das said that implementation of RERA would be a win-win situation for all stakeholders developers as well as consumers. “It is a myth that RERA is against builders as they will also welcome it. They might take a little time to adjust to the rules and recalibrate their business model and make it comply with the legislation. However, what has to be seen is how the rules formulated by different states are being implemented and if there is no dilution of the central act,’’said Das.

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Nagpur, Indore and Surat lead implementation of smart city plan

Five out of the 17 best performing cities were selected in the second round of smart city competition in September end

NEW DELHI: Nagpur, Indore, Surat, Vadodara and Udaipur are doing better in the implementation of smart city plans in comparison to other cities that have been selected for smart city project, according to an analysis by urban development ministry.

Five out of the 17 best performing cities were selected in the second round of smart city competition in September end. What has come as a surprise is seven southern cities from the first batch of 20 smart cities are lagging behind with Kakinada (Andhra Pradesh) doing well with an Investment Conversion Ratio (ICR) of 55% among them.

ICR indicates the extent of conversion of approved smart city plans into investments through ground level implementation.

The ministry’s analysis also shows how the cities selected about eight months back are doing better than the 13 cities that were announced through a fast track competition in May. The urban development minister M Venkaiah Naidu had announced the first track competition after some of the opposition leaders had raised questions on why none of the cities from a few states did not find place in the list.

Smart city plans of 60 cities have so far been approved by the urban development ministry. The first set of 20 were announced January, second lot of 13 fast track cities were declared in May and another 27 were named in September last year.

According to the ministry’s analysis, Nagpur, among the 27 round-two cities has reported performance with an ICR of 249% having lined up an investment of Rs 2,500 crore as against the Rs 1,002 crore investment proposed in the approved smart city plan for the city. Indore has lined up Rs 4,900 crore investment as against Rs 5,099 crore proposed in the plan approved by the Centre. Surat has also lined up Rs 2,500 crore investment while the plan approved was for Rs 2,597 crore.

“With an overall ICR of 49% in less than a year and a half of announcement, the performance of first batch of 20 smart cities in respect of implementation of smart city plans is encouraging, though some of them, particularly, the southern cities need to pick up momentum. Fast track and round-two cities, which deserve more time to improve ICR have, during the review assured the ministry that conversion of respective smart city plans into ground level projects would speed up resulting in increased ICR,” a ministry spokesperson said.

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Middle class home buyers can now move SC against builders at a low cost

The Supreme Court has brought down the cost of litigation significantly through its new middle income group scheme

NEW DELHI: Making it easier for home buyers in the middle and lower income group to file cases against real estate developers, the Supreme Court has brought down the cost of litigation significantly through its new scheme.

The middle income group scheme would apply to all the people with gross income up to Rs 60,000 per month or Rs 7.5 lakh per annum.

Home buyers will just have to pay Rs 500 to the Supreme Court Middle Income Group Legal Aid Society as service charges. Another Rs 750 also needs to be deposited with the society at the stage of admission of case under the contingent fund created to meet the miscellaneous expenditure.

This scheme will being down the fee cost for home buyers by almost 75-80%, according to Vaibhav Gaggar, Partner, Gaggar & Partners. He has represented many home buyers against builders in the Supreme Court. 

"The scheme should go a long way in giving the middle and lower income group flat owners a real shot at taking their fight to a logical end," said Gaggar.

Most consumer cases in today's time relates to real estate. However, home buyers very often run out of steam by the time they reach the Supreme Court stage as normally the fees can be quite frightening for the litigants.

SC is reaching out to the citizens and the new scheme will benefit a larger strata of society, according to Shoeb Alam, advocate on record, Supreme Court.

"This will also go a long way in shunning the perception that the access to justice delivery system more often than not can be afforded by the rich," he said.

Cases can only be filed through advocates on record. The applicant will also have to suggest the names of three lawyers from the panel for his case, however, the final right to assign rests with the society.

In case the advocate finds the case not fit for an appeal to the Supreme Court, the entire amount after deduction Rs 750 towards minimum service charges of the committee will be refunded to the applicant by way of cheque.

If the advocate is found negligent in the conduct of the case, he will be required to return the brief together with the fee which he may have received from the applicant under the scheme.

The society will not be responsible for the negligent conduct of the case but the entire responsibility will be that of the advocate vis-a-vis the client.

The name of the advocate will, however, be struck off from the panel prepared under the scheme.

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DeMon has forced real estate to rethink its biz model: Rangarajan

Meanwhile, speaking about the Budget, he said there was much expectation in relation to corporate tax.

HYDERABAD: Former Reserve Bank of India (RBI) governor C Rangarajan on Monday said that real estate is one of the major sectors that will continue to reel under the heat of demonetisation in the near-term. "The adverse impact of demonetisation will wear off as currency availability approaches normalcy. But some effects will not go away. Sectors like real estate will have to rethink how to run their businesses," the former RBI head said on the sidelines of a panel discussion on 'Union Budget-2017' here

Meanwhile, speaking about the Budget, he said there was much expectation in relation to corporate tax. “But the finance minister has limited the reduction to 25% from 30% only to MSME companies. Though in terms of numbers MSME companies may dominate, this is not true in relation to output,” he added.

According to him, the budget acted prudently to keep the fiscal deficit target at 3.2% of the GDP in 2017-18, which is lower than 3.5% during the current fiscal and slightly higher than 3% which was indicated earlier.

Speaking on the issue of non-performing assets (NPAs), the former RBI chief said that banks have to control NPAs in their balance sheets. "The banking system is undoubtedly under stress. How to resolve that particular problem is only through capitalisation…I think that the general scene is that the capital provided is not adequate...I think this cannot let the banks escape the responsibility for the non-performing assets that they have in their asset portfolio,” he said.

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Airports Authority of India plans norms for flexible use of land assets

The national airports operator, which manages 125 aerodromes including civil enclaves, is awaiting amendments to to the AAI Act that would allow effective monetisation of land assets.

NEW DELHI: Airports Authority of India (AAI) plans to put in place regulations for flexible use of land parcels as part of asset monetisation efforts, as it prepares for large scale upgradation of airport infrastructure.

The national airports operator, which manages 125 aerodromes including civil enclaves, is awaiting amendments to to the AAI Act that would allow effective monetisation of land assets.

Sources said the proposal to amend the Act whereby certain provisions would be included with respect to land assets and their utilisation has already been floated.

In this regard, a draft Cabinet note has already been circulated for inter-ministerial consultations and the process is at a "very advanced stage".

An amendment to an Act has to be approved by the Parliament.

AAI owns around 55,000 hectares of land in urban areas across the country. Under the current norms, airport land could be used only for limited purposes.

According to sources, once the Act is amended AAI would make its own regulations on flexible use of land. Having those norms would also help in expediting the overall approval process, they added.

"Flexible use of land needs to be allowed as the market conditions as well as utilisation patterns are dynamic and needs to be reviewed at least every ten years," a senior AAI official said.

Already, the land assets are being monetised at some airports including at New Delhi and Mumbai -- both of which are run by consortiums with AAI being a stakeholder.

In the case of Delhi international airport, around 10 per cent of the land assets on the city side has been monetised while it is around 5 per cent at Mumbai international aerodrome, sources said.

Presenting the Union Budget for 2017-18 last week, Finance Minister Arun Jaitley said the AAI Act would be amended to enable effective monetisation of land assets.

"The resources, so raised, will be utilised for airport upgradation," he had said.

Last week, aviation Minister Ashok Gajapathi Raju said AAI could monetise around 2,000-3,000 acres of its land and utilise the funds raised in airport infrastructure development.

AAI's non-aeronautical revenue currently account for around 19 per cent of its annual top line. In 2015-16 fiscal, the national airports operator saw its profit after tax jump nearly 30 per cent to Rs 2,537.36 crore.

During that period, total revenue touched Rs 10,824.50 crore.

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