• Conversion of tenant flat into ownership but circle value too high

I am Arpan Goenka from Kolkata. We are 12 tenants in building under padgi system from last 30 years. Now landlord wants to sell officially to tenants by convenance of deeds. Both party agrred @ Rs. 1000 sq feet approx while circle value by state govt showing Rs. 4500 per sq feet. Hence if tenant pay stamp duty on Rs. 4500 and pay chque of Rs. 1000 then will get IT notice from central govt as per all charted accountant. What is the solution ? Building is more than 60 years old and landlord doesnt want to maintain now.
Asked 4 days ago in Property Law
Religion: Hindu

First answer received in 10 minutes.

Lawyers are available now to answer your questions.

10 Answers

Circle rate is 4500 per square feet but you paying at the rate Rs. 1000 per square feet. A property can be sold at lesser price than fixed by Government. There is nothing illegal in it. The parties have to see that rates agreed are not unreasonably low. In that case government  will come forward to purchase the property and sell it in auction to earn revenue.  

Ravi Shinde
Advocate, Hyderabad
1654 Answers
21 Consultations

5.0 on 5.0

1) Delhi HC has held that regsitrar cannot refuse registration if property value mentioned is lower than circle rate . document can be referred for adjudication to the collector . after hearing the parties collector has to to determine correct valuation of property

 

2) you can take plea property is being sold at 1000 per square feet as building is 60 years and you have been tenant for 30  years 

Ajay Sethi
Advocate, Mumbai
85548 Answers
5730 Consultations

5.0 on 5.0

) according to Special inspector general (registration), transactions should not be affected by high circle rates.

“Circle rate is just an indicative rate. If you have registered property on an amount lower than the circle rate, the sub-registrar will register it and the case will be sent to the registrar to verify the market value,

Ajay Sethi
Advocate, Mumbai
85548 Answers
5730 Consultations

5.0 on 5.0

1. The well settled proposition of law is that if the market value (circle rate0 of the property is Rs.4,500/- per Sq. Ft which you have purchased at Rs.1,000/- per Sq.Ft. then you have made an earning of Rs.3,500/- per Sq.Ft for which you shall have to pay Income Tax.

 

2. You can file an appeal for reduction of the market price due to the dilapidated condition of the old building.

Krishna Kishore Ganguly
Advocate, Kolkata
26290 Answers
726 Consultations

5.0 on 5.0

1. I have not heard of any such rule in Gujrat and Maharashtra.

 

2. In pagdi system, .the amount of pagdi as well as token rent paid are not the same. It can widely vary for similar houses taken at the same time at the same place for which the amount required for conversion from pagdi to ownership will vary widely.

 

3. However, unless otherwise specified by any court order, you shall have to pay the said I.Tax.

Krishna Kishore Ganguly
Advocate, Kolkata
26290 Answers
726 Consultations

5.0 on 5.0

As per the provisions of Section 50C, if the sale consideration declared by the assessee (seller) is less than the stamp duty value, then the stamp duty value shall become deemed sale consideration for the purpose of calculating capital gain tax.

with the intention of tax evasion, assesses started entering into an agreement with the buyer, where the sale value declared by the seller is less than the actual sale consideration. This led to the loss of tax to the government, and thus to avoid this, section 50C and Section 56 (2)(x) were introduced as two sides of a coin. Section 50C states the taxability of such cases in the hands of the seller while Section 56 (2)(x) specifies the taxability of such transactions in the hands of the buyer.

Section 43CA shall be applicable, wherein if the sale consideration received or to be received by the assessee (seller) is less than the stamp duty value adopted by the stamp valuation authority, such stamp duty value shall be considered for the purpose of computing the profits and gains from the business arising out of such sale.


T Kalaiselvan
Advocate, Vellore
75676 Answers
1313 Consultations

5.0 on 5.0

As per Section 56 (2)(x) of the act, if the market value of a property is lower than the circle rate, then the difference is taxed as 'other income' for the buyer. While the seller of the property will have to pay capital gains tax on the circle rate of the property

Under section 50c of income tax act, if agreement value is less than market value, then it is deemed that the property is undervalued to save capital gains tax and thus the difference is transacted in cash

Even if the seller is ready to under value and sell the property at an undervalued rate, the buyer has to pay the appropriate stamp duty as applicable in accordance to the prescribed circle rate value of the property

T Kalaiselvan
Advocate, Vellore
75676 Answers
1313 Consultations

5.0 on 5.0

Dear Client,

Leave and License is the safest way to let out a residential flat. Mostly all states have a competent authority to go to for violation of the terms of the leave and license and/or for eviction. So u dont have to go to Court. If Leave and License if for a period over 5 yeaars, then its treated as a Lease and thus requiring to go through a civil court to redress griviances, which is time consuming. 

Anik Miu
Advocate, Bangalore
3311 Answers
34 Consultations

4.9 on 5.0

If you disclose the same as aforesaid you may come under IT scanner. Only way is to show less amount and do cash transactions. Still you need to pay minimum IT amount

Prashant Nayak
Advocate, Mumbai
25386 Answers
65 Consultations

4.4 on 5.0

i think IT will not be an issue because what the landlord is selling is his reversionary rights i.e. whatever right that remained with him after granting of tenancy to the tenants

so the circle rate would not apply in my view

or else all the tenants can form themselves into a co-operative housing society

then tenants as members of such society will transfer the amounts payable to the landlord, to the society, so that the latter can pay to the landlord

the landlord has to register a conveyance deed in favour of the society and the society will issue share certificates to its members

calculate the market value of fully occupied building which will be less 

 

Yusuf Rampurawala
Advocate, Mumbai
6639 Answers
63 Consultations

5.0 on 5.0

Ask a Lawyer

Get legal answers from lawyers in 1 hour. It's quick, easy, and anonymous!
  Ask a lawyer