• Registration of property at current circle rate on an old agreement to sell

My Grandfather purchased a half portion of a property in 1987 and paid full consideration in 1987 and got an Agreement to Sell and a Power of attorney. We got a will also from the seller as an additional document mentioning our portion of property in our name. We have been staying in our portion since 1987 and have electricity/ water/ house tax bills in our name. The seller did not have the freehold right until now and hence we could not get the property registered. They have got the property freehold now and we want to get our portion registered in our name. The seller heirs are reluctant to register the property in our name stating Capital Gain tax implications due to the registered value being substantially high at prevailing Circle rates.

What is the best way to register the property in my father's name now ?
a). Through Agreement to Sell ( which I believe will carry Stamp Duty as per prevailing circle rates)
b). Through Will.( which may not have stamp duty implication)

Also, if we register through Agreement to Sell, will the seller have any Income tax liability since the Registered Value of the property at prevailing Circle rates is substantially high despite the fact there is no exchange of money now or no fresh income to the seller now ? The seller's heirs are not ready to transfer stating that they will have Income tax liability.

Can we register each floor separately to avoid/reduce the tax implications ?

Request you to please provide your expert advise.

Asked 3 years ago in Capital Gains Tax from Delhi, Delhi
The property was transferred to your father as per Income Tax Act when he paid full consideration and the PoA was given in his favour. The seller ought to have offered the profit on sale of such property at that time itself. 

Now your father can get the property registered in his name as per the Agreement to Sell. 

The seller has no additional tax liability on registration now. As he ought to have offered the capital gains in 1987 itself, after receiving the full consideration. As he did not do so, it is income escaping assessment and hence assessment may be re-opened u/s 147/148. However, the proceedings u/s 147/148 are now time barred. 

If the PoA is irrevocable and all the rights were passed on to your father, then the transfer would have been complete in 1987 itself. Otherwise, there will be capital gains now on registration. So the PoA is an important document that determines the tax liability now or then.

If the sale is now considered to have take place, the stamp duty value will be considered, if the consideration is less than the stamp duty value.
B Vijaya Kumar
CA, Hyderabad
833 Answers
46 Consultations

5.0 on 5.0

First thing your father has paid full consideration of the property and got POA. Also it was good that it was mentioned in the Will. This in my view is enough proof of your ownership and also your stay since 1987.
First as per your question it will be better to have registration as per Agreement of sale where you need to pay tax on prevailing circle rates. compulsory a notice u/s. 56 (2)(vii) will come to you. At the time of hearing you need to produce all the relevant documents to the Officer and if satisfied can drop the same in your favour. 

Also in case of seller the same procedure follows and he need to satisfy the tax officer for the notice he gets U/s.50C.

You need to convince the officer that the posession and rights were already passed in your fathers favour in 1987 itself.

Also I suggest to consult an advocate as he can guide you regarding property that only sale deed is the option or there is any other way.
Shyam Sunder Modani
CA, Hyderabad
1408 Answers
95 Consultations

5.0 on 5.0

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