GST on Joint Development of Property

By Karnataka Bureau


Applicant, Land Owner entered into a development agreement with Builder to develop and promote multi-storeyed residential apartment cum commercial building. The landowner was entitled to get a share of 50% of the total of 12 flats constructed and also 50% share out of 4,000 SFT of commercial construction.

AAR upheld that N. No. 4/2018-CTR dated 25-01-18 provides that the person who supplies development rights shall pay central tax at the time when the developer/builder transfers possession or right in the building by way of conveyance deed or similar instrument. Hence, the applicant is the person who has supplied development rights to a developer in respect of his land, is liable for registration and payment of tax.

The applicant has not submitted details with regards to the transfer of possession of the constructed flats / commercial area or allotment order of the same and hence it was presumed by Authority the possession of the constructed flats / commercial area has not been handed over to the applicant as on date.

Sri Patrick Bernardiz D’sa – KAR ADRG 29/2018 (AAR – Karnataka) – Dated 28-11-2018

Loss of Property Documents

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By Advocate S. R. Agarwal

One is expected to exercise due care in the preservation of his/her property documents, as these are the only proof of the ownership of the property. As and when a property transaction takes place by way of transfer or assignment of the rights, title and interest therein, all the previous documents from the very root are passed on, in original, to the transferee, as per the well-established practice in such type of transactions. Not only for the transfer or assignment, as said, when financial assistance is required from the banks or a housing finance company, hereinafter referred as the ‘financial institution’, all the property documents in original are required to be submitted as a condition precedent, in-as-much as security is created in favour of the financial institution by way of deposit of title deeds, popularly known as equitable mortgage, as it is less expensive and time-consuming, as against the creation of the security by way of registered mortgage.

In terms of Section 58 (f) of the Transfer of the Property Act, mortgage by deposit of title deeds (equitable) is created when a person delivers his title deeds to a creditor with the intention to create a security thereon at a notified town. Thus as per the said provision, such mortgage is created by merely delivering any or more title deeds of the same property. Therefore, it is a well established practice in vogue that all the original title deeds relating to the same property right from the root are deposited in original with the creditor to rule out the possibility to any earlier charge or encumbrance on the property on the basis of any one or more original documents, because such charge cannot be known from the search of the records of the office of the Sub-Registrar, as the same is not required to be registered, except in the State of Tamilnadu, where a Memorandum of Deposit of the Title Deeds has, recently, been made compulsorily registerable.

Some time certified true copies of the documents, which are not available in original, are submitted under the belief of these copies being the original, which is a misconception in the sense that a certified true copy of a document can not be taken or deemed by any stretch of the imagination as the original. A person may obtain as many as certified true copies from the office of the Sub- Registrar, as he may desire, and the possibility of an earlier charge or encumbrance on the basis of the originals of such certified true copies may not be ruled out.

In Maharashtra from the eighties till the date of computerization of registration process in April 2002, the documents, relating to the property transactions lodged for registration in the offices of the Sub-Registrar, were sent to Pune for microfilming etc., and not returned to the parties. LIC Housing Finance Ltd., hereinafter referred as to the LICHFL, which started operations in the year 1988 faced the problem of the creation of the equitable mortgage in the absence of the original title deeds lodged for registration in the offices of Sub-Registrar. With a view to helping the prospective borrowers, LICHFL devised a procedure for creating an equitable mortgage on the basis of the Registration Receipt and, simultaneously, sending an Authority Letter by the executant of such a document to the office of the Sub-Registrar concerned to send the document, after registration, directly to LICHFL.

It was thought at that time that such an Authority Letter would be taken note of in the office of the Sub-Registrar and the document will not be released, without the No objection from LICHFL. The same procedure was adopted by the banks when the housing finance sector was opened up for the banking sector and other housing finance companies came into the market. But the said belief of LICHFL of not delivering the documents by the offices of Sub-Registrars without their NOC stands belied by the present practice of managing delivery of the documents by the parties from said procedure has been gone through, security by way of equitable mortgage cannot be legally created in the absence of the original documents and, therefore,  registered mortgage is the only way out, if a financial institution decides to accept such property as security.

Leasehold vs Free Hold

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By Advocate S. R. Agarwal

“The system of the leasehold is the relic of the British Raj, presumably, based on the assumption that the property of a sovereign cannot be sold to its subjects. Though the country got the independence more than 60 years ago and is now a democratic republic, the leasehold system is still continuing almost throughout the country inasmuch as the land or the plots are given by the government and the government bodies and the development authorities on leasehold basis for a specified term such as 90 years or 60 years, with the restrictive condition against the sale, assignment, transfer of the rights, title and interest therein, without the prior permission of the leaser, which inter-alia, provides that such permission could be made available on payment of half of the difference i.e. 50% of the original premium paid and the declared premium at the time of transfer.

It is not a question of one-time payment, but this payment, usually known as transfer charges, are payable at the time of each transfer, to acquire a valid legal title in the property in accordance with the terms of the lease deed. In spite of various measures taken from time to time, including the incentive of paying such charges at a subsidized rate as against 50% of the difference of the premium paid and the declared premium, transactions are taking place day in and day out without obtaining such permission on payment of the transfer charges.

In other words, the compliance of the terms and conditions is more in the breach than abiding by the same. It is a well known fact that the plots are allotted in Navi Mumbai by CIDCO on lease-hold basis for a period of 60 years and by MHADA and MIDC for a term of 90 years, including the Collector (SBD), with such restrictive conditions and the CIDCO and the office of the Collector have come out with a Transfer Charges Scheme at a concessional rate, still properties are changing hands without obtaining prior permission and payment of transfer charges and, surprisingly, the financial institutions are advancing loans in respect of such properties without bothering for the NOC from the lessers. These aspects have already been discussed in the previous articles herein.

“This scheme was brought to the notice of the Government of Maharashtra by the writer in January 2003 at his individual level and through Navi Mumbai Action Committee, so that the State Government of Maharashtra may also examine the feasibility of converting the lease-hold properties into freehold. Initially, the response of the State Government seemed quite positive, because after examining the whole issue, particularly the DDA Conversion Scheme, the State Government appointed Chesterton Meghraj, an international property consultants, for framing the policy and the guidelines for the conversion method, from lease-hold rights to free-hold in respect of the government lands in the State of Maharashtra”,….. to read full article click on link given below.


Trusts have not right to sell properties communities: High Court

By Maharashtra Bureau


The Bombay High Court ruled out the judgment that trusts cannot make their own rule and sell valuable property to members of any specific communities. Justice R D Dahanuka dismissed a petition filed by the Shree Gujarati Mochi Gnyati Navnat Trust to sell the prime property in Walkeshwar for re-development to members of its own community. The judge said that the competitive bids open to all would ensure that the trust cannot be allowed to be sold only to members of a particular community. He said, that the trusts have to receive the best available price according to the market value of the property.

In my view, use of the properties of the trust for the benefit of the members of a particular community has nothing to do with the sale of the property to an outsider at the best price.

The court said that if it were to approve a change in the trust rules to allow the sale of the property to members of the community, it would give blanket authority to the trustees to sell the properties of the trust to a member of their own community.

The Gujarati Trust which was set up in the 1930s has ample properties available over 606 sq metres on Walkeshwar Road, Malabar Hill with a member of 1 lakh. Trust generally sells their properties within the community or any other community if there is no buyer only then it sells to the outsider.

Though the members appeal to the court for changes, the court said, they did not have the permission from the charity commissioner for applying for changes in rules.

Maharashtra Co-operative Societies (Second Amendment) Act 2018: All You Need To Know

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The sub-section (4), section 166 of the principal Act is been removed.

By Maharashtra Bureau


The members of the committee and its office bearers not only have to co-terminus of the committee after five years from the date of election but also the members shall be deemed to have vacated their offices as members of the committee, according to Maharashtra Co-operative Societies (Second Amendment) Act, 2018.

The Maharashtra Government after receiving the assent of the Governor it published in ‘‘Maharashtra Government Gazette ’’, on the 9th August 2018.

“The Governor of Maharashtra was satisfied that circumstances existed which rendered it necessary for him to take immediate action further to amend the Maharashtra Co-operative Societies Act, 1960, for the purposes hereinafter appearing; and, therefore, promulgated the Maharashtra Co-operative Societies (Second Amendment) Ordinance, 2018 on the 13th June 2018 and whereas both Houses of the State Legislature were not in session”, the official document said.

The act has amended few sections and sub-section which include, Section 73AAA (sub-section 3), section 73CB (sub-section 15) and section 166 (sub-section 4).

The public document says that under section 73CD of sub-section (15), “Where in respect of any society, the term of its committee has expired before the date of commencement of the Maharashtra Co-operative Society (Second Amendment) Act, 2018, the election to such committee shall be held by State Co-operative Election Authority within a period of six months from the date of such commencement.”

Although in respect of such a society, the committee shall continue to hold the office till such a period of six months or declaration of results of the election of such a society whichever is earlier, it said.

In case of society doing the business of banking, the requisition made or guidelines issued by the Reserve Bank of India or the National Bank shall prevail.

The amendment has extended the section 73AAA of sub-section (3) by adding a small paragraph which says that, The term of the office of the elected members of the committee and its office bearers shall be five years from the date of election and the term of the office bearers shall be co-terminus with the term of the committee (before amendment) and ‘on the expiry of the term of the committee, the members shall be deemed to have vacated their offices as members of the committee’ (amended).

However, the sub-section (4), section 166 of the principal Act is been removed, according to the document.



Bombay High Court says RERA provisions would apply to long-term lease agreement

By Accommodation Times Bureau


The Bombay High Court on August 8 while giving a landmark judgment it said cases of a long-term lease agreement and compensation complaints can be heard by Maha RERA. An appeal was filed by the Lavasa Corporation, which is constructing a township project around Pune.

The single bench of Justice Shalini Phansalkar Joshi was hearing the case and  passed the ruling. The project is also registered with the authority.

The authority had the power to hear the case and law was applicable to the 3 apartments which were booked on an agreement of lease for 999 years and also 80% of the purchase price was paid, the bench said.

The Lavasa Corporation challenged the order passed by Maha RERA and in its appeal claimed that cases of agreement of lease would not apply under the authority. It further requested High Court tat this case is of lessor and lessee which doesn’t consist of any sale or transfer agreement.

The project is registered with RERA however, provisions would apply to it, a court said. It further said, it can never be the intention of the Legislature to exclude long-term leases as act would be defeating the very object of the Act, the developer in such cases by executing the ‘Agreement’ with the nomenclature as the ‘Agreement of Lease’, can very conveniently escape from the clutches of the provisions of this Act.

Merely because the Legislature has excluded the allotment, when it is given on rent, it does not exclude the long-term lease. That will be defeating and be frustrating the object of the Act and hence, it has to be held that the Appellate Tribunal has rightly held that, so far as the present case is concerned, considering the long-term lease of ‘999 years’, it would definitely amount to a sale, the court judgement said.

The mechanical interpretation given by the ‘Adjudicating Officer’ to the provisions of the Act, merely focusing on the nomenclature of the ‘Agreement’, was clearly defeating the object of the Act and hence, it was rightly set aside by the Appellate Tribunal, it said.

The interplay of all the provisions contained in the Act, coupled with the real purport of the ‘Agreement of Lease’, leads to no other inference, but to hold that, the complaints filed by the Respondents before the ‘Adjudicating Officer’, under Section 18 of the Act, are definitely maintainable and the ‘Adjudicating Officer’ is having the jurisdiction to entertain and decide those complaints.

In view thereof, the Civil Applications pending therein do not survive and the same is disposed of as infructuous.

Land Law: Acquisition Of Land And Compensation Law

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By Maharashtra Bureau

The CBA Act provides for assessment of compensation on the basis of the market value on the date of notification under section 4(1) of the said Act and it is determined by taking into account the average of the last three years registered sale deeds in the locality and also the ready reckoner rate for the year of notification under section 4(1) of the said Act, prescribed by the State Governments. In addition to the market value so determined, solatium @ 30% of the market value, escalation @ 12% per annum from the date of notification under section 4(1) to the date of notification under section 9(1) of the said Act or for a period of 36 months, whichever is less, interest for delayed payment from the date of notification under section 9(1) of the said Act @ 9% per annum for the first year and 15% per annum for the subsequent years are also being paid to the land losers.

In addition to the above, the following Rehabilitation and Resettlement (R&R )benefits are also provided to Project Affected Persons by the public sector coal companies:-

(a) Alternative house site measuring 100 Sq. meter per family with all necessary infrastructure.

(b) Each affected family that is displaced shall get a one- time financial assistance of Rs 10,000/- or shifting of the family, building materials, belongings and cattle.

(c) Each affected family that is displaced and has cattle, shall get financial assistance of Rs. 15,000/- for construction of cattle shed etc.

(d) Each affected person, who is a rural artisan, small trader or self-employed person and who has been displaced shall get a one-time financial assistance of Rs. 25,000/- for construction of working shed or shop.

(e) Each affected family will get subsistence allowance of 25 days of Minimum Agricultural Wages (MAW) per month for one year


(f) Each affected family will be offered a one-time lump sum payment of Rs. 1,00,000/-(One lakh) in lieu of all benefits given in (a) to (e) above.

(g) The tribal affected family will be given one-time financial assistance of 500 days Minimum Agricultural Wages for loss of customary right or usages of forest produce.

(h) Tribal affected families resettled out of the district shall be given 25% higher rehabilitation and resettlement (R&R) benefits

(i) The subsidiary will shift the tribal community as a unit and provide facilities to meet the specific needs of the tribal community that will allow them to maintain their unique cultural identity.

Subject to suitability and availability of vacancies, the coal companies offer one employment for every two acres of land acquired. A person who has been offered employment can forego employment and receive cash compensation as announced by the concerned State Government. In case the State Government has no policy in this regard, the monetary compensation being offered by CIL R&R Policy is as under:-

(i) Rs. 2,00,000/-( Rs. two lakhs) for the first acre of land on pro-rata basis subject to a minimum Rs. 50,000/- only.

(ii) Rs. 1,50,000/- (Rs. One and a half lakhs) on pro-rata basis for the second and third acre of land.

(iii) Rs.1,00,000/- (Rs. One lakh) on pro-rata basis for land beyond three acres.

However, CIL Board in its meeting held on 1.2.2011 has decided to enhance compensation in lieu of employment to the extent of Rs. 5 lakh for each acre of land on pro-rata basis subject to a minimum of Rs. 2 lakh.

There have been a few instances where complaints have been received in the Ministry of Coal seeking higher compensation and employment to land oustees. However, after consulting coal companies it was found that the complaints were forgiving the amount of compensation beyond the provisions of CBA Act and instructions of the Ministry of Coal, or employment to the non-eligible relatives of the land oustees or more number of employment than provided in R&R Policy. The coal companies are providing compensation /employment as per norms.

This information was given by the Minister of State for Coal (Independent Charge) Shri Sriprakash Jaiswal, in a written reply to a question the Lok Sabha.


Development Rights taxable In Case Of Housing Societies

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By Maharashtra Bureau

Commissioner of Income Tax-18


Sambhaji Nagar Co-op. Hsg. Society Ltd.,

Income Tax Appeal No. 1356 of 2012



In Mumbai, hundreds of Co-operative Housing Societies are functioning whose buildings have become old and dilapidated due to age. The societies lack finance and technical expertise to repair their buildings. The societies, therefore, seek the help of a developer to carry out the construction at his own cost and pay compensation to the society members in the form of the corpus, rent and larger area.

Controversy had existed between societies and the IT Department regarding taxability of these amounts. On 11-12-2014 the Bombay High Court has given very important judgment on this point.  It is hoped that this decision of Bombay High Court would put the matter to rest.


Recently Bombay High Court has rendered a decision in the above case and confirmed the order of ITAT that compensation of Rs. 2,23,25,157/- received by the society from Developer is not taxable.

Brief Facts of the case are as under:

With the promulgation of Development Control Rules, 1991 (DCR), the society acquired right of putting up the additional construction through TDR. The society transferred the said valuable TDR right to a Developer.

A.O. held that the said right is attached to the land owned by the society which had been acquired for a value and therefore there is a transfer of Capital asset chargeable to Tax. The CIT(A) upheld the order of A.O. holding that this is not a case where extra FSI had occurred due to change in the law but TDR already existed at the time of reconstruction of society’s Bldg.

The Tribunal followed a decision by Coordinate Bench in the case of New Shailaja CHS involving similar controversy and held that sale of TDR does not give rise to any Capital Gains chargeable to tax.

The High Court looked into the provisions of Sec. 48 wherein mode of computation of Capital Gain is laid down, Sec. 49 wherein cost with reference to certain modes of acquisition is set out and Sec 55 (2) clarifying the cost of acquisition for the purpose of sec 48 of 49.

The High Court gave a finding that in the present case additional FSI/TDR is generated by a change in D.C. Rules and it is not a case of sale of development rights which were embedded in the land. High Court held that Tribunal has followed its own decision in New Shailaja Co-operative Housing Society which is based on Supreme Court’s decision in B.C. Srinivasa Setty 128 ITR 294 SC holding that society did not incur any cost of acquisition in respect of the right emanating from 1991 Rules.

The High Court upheld the Tribunals order.

This judgment will be a big relief for all those societies which have redeveloped their properties.


Lift expenses has to be shared by all housing societies members

By Maharashtra Bureau

Mr. S.B.Bhinde a shopkeeper and full-fledged member of Housing Co-operative Society has written to me to know whether a society can now all of a sudden recover lift charges when especially he has not paid for the same for the last 14 years. Mr. Bhinde, writes that the Society is not ready to listen to the shopkeepers and garage owners at all in this matter. A very important question is when the shopkeepers and garage owners who are the member of the society and who have been given the share certificates and those who do business from the ground floor of the building are liable or not pay for the lift expenses in a Society?

Most of the Societies do not recover expenses relating to lifts from shopkeepers and garage owners. Some Societies do not recover lift expenses even from members residing on the ground floor stating that such members do not use the facility of lifts at all.

In many buildings, the shops are located in the front portion of the building and the building for residence is built at a distance of 50 to 100 feet. However, the Society is named for both shopkeepers and the members residing in the building. Often the shopkeepers do not even see the face of the lift as there is considerable distance between the shop and the lift. Lately, many Societies have adopted the Model Bye-law and it is indicated in section 71(A)(5) that all members will have to bear the expenses of lift equally. Whether the member uses the lift or not, would not matter at all. It is also mentioned in the same section that the expenses of the salary of the liftmen, running the lift, electricity expenses etc. should be paid equally by all members. Moreover when the society has to spend heavily to get the lift repaired the expenses for the same should be borne equally by all members.

-When a lift goes out of order and it has to be repaired, the society may have to spend lakhs of rupees. How can the society recover from a member who is not using the lift facility to contribute towards such heavy charges?

Most of the shopkeepers and the garage owners register their strong protest over this issue. Many shopkeepers and garage owners remove items of expenditure on lift from maintenance bill and show a willingness to pay only the rest of the bill. Now the question is that once a society has adopted the Model Bye-laws then whether it is incumbent upon every member including shopkeepers, garage owners and members residing on the ground floor and first floor to pay for such charges? It is to be remembered that while paying such a bill if the member refuses to pay charges for lift expenses, the society is not bound to accept the bill at a reduced rate? Once the member is given a bill, it is his responsibility to pay the full amount. The society is not bound to accept the reduced amount.

Now suppose due to this dispute, if a member does not pay full maintenance bill has the society any remedy for the same? Certainly. A society can serve a notice upon such a member under section 101 of the Maharashtra Co-operative Society Act. On receiving this notice, if the member does not pay full maintenance bill then the society can get a certificate from the Registrar under section 101 of the Maharashtra Co-operative Society Act. Once this certificate is given to the society by the registrar, the society has to give a second notice to the member concerned. If the member still does not pay the maintenance bill in full, then the Registrar may assign tax recovery officer who will take charge of all items in the members flat and may auction them to recover the amount due to the society. If the society’s maintenance bill has gone up to the extent that it cannot be recovered by auctioning all the items in the member’s premises then he may even auction the flat, shop or garage and recover the entire dues for the society.

For this reason, it is my sincere advice that if the society has adopted the Model Byelaws the shopkeepers, garage owner or the member of the first and ground floors should pay for lift expenses.


Housing societies below 100 member may hold election on own

By Maharashtra Bureau

After several efforts from consumer activists, the state cabinet immune those cooperative housing societies who have less than 100 members may soon be allowed to hold elections itself rather than going to long process.

“The decision of cabinet will have to enacted through amendment or ordinance of  Maharashtra Cooperative Societies Act. Till then, elections will be held under the supervision of the election authority”, Official from Maharashtra State Co-op Housing Society Federation said

Previously, the societies need to approach Maharashtra State Cooperative Election Authority for election.

For conducting elections the state government established Maharashtra State Cooperative Election Authority in 2015.

In which housing societies were also included, the consumer activist contrary to the addition of housing societies it stated that long paperwork and the expensive process would create an unnecessary burden.

For carrying out elections societies need to spend around Rs 10,000 – Rs 25,000. In which it has to inform at least 3 months prior.

The committee was formed to seek into the matter and resolve an issue quickly. Recently the committee submitted reports and recommended to free the smaller housing societies.

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