175 FAQs on Co-operative Housing Societies

Co-op. Housing Societies

Q.1. Which are the books of accounts that have to be maintained by the Society ? What are the statement of accounts that have to be circulated by the Society at the end of the Co-operative year to its members ?

Ans. The Society should maintain the Cash book, General Ledger and Personal Ledger. In the Cash Book all the cash transactions should be recorded. The General Ledger and the Personal Ledger reflect the heads of various accounts for which payments are made by the Society. The Society must prepare the Receipts and Payments Account, the income & Expenditure Statement and the Balance-Sheet as on 31st March every year.

Q. 2 What should be the approach of the member and of the society with regard to the additions and alterations being proposed to be carried out by the member of the Society ?

Ans. The member when propose to carry out additions and alterations in the flat should first submit a written proposal to the society. Member should ensure that he does not carry out structural changes in the flat. After the collapse of Navroze Apartment at Sion and Poonam Chambers at Worli, the office bearers of Co-operative society have become more vigilant and have started asking indemnify bond from members proposing to carry out major repairs.
Even the courts have held that member should not carry out. Alteration in the flat. As far as the society is concerned, if the nature of repairs are such that no inconvenience / nuisance / damage is caused to the society than the approach of the society should not be to view the same seriously. There are a number of judgements on additions and alterations in a flat. It would be pertinent to note that the Co-operative Court have in the matter of Ganesh Co-operative Housing Society Ltd. 1969 CTD page 238 observed that craving out a Niche for free breeze was thought to be not objectionable. Also carving out the door or a window which should not affect any other member of the society is not prohibited as long as the changes and additions or alterations are of internal nature not affecting the structure of the building.

Q.3. Can the Society amend the Bye-laws ? Can the Society frame Bye-Law ?

Ans. It is the right of the society to amend as well as t frame new Bye-Laws. However, any Bye-law that is proposed to be amended or is to be framed should not be against the provisions of the Maharashtra Co-operative Societies Act, 1960 or Maharashtra Co-operative Societies Rules, 1961

Q. 4. I am from Maharashtra. I am living in the flat which is jointly owned by my brother and mother. Recently my brother had purchased a flat. How to transfer this flat to my mother’s name. There is a Co-op society.

Ans. Your brother can release his interest in favour of your mother by way of transfer deed. This deed will have to be submitted for the Stamp duty. Transfer of the interest in the property will govern by Article 25(d) (1) (D) of the schedule I of the Bombay Stamp Act. The stamp duty levied will depend on the true market price of the share of your brother. It should be noted that the stamp duty payable on the transaction will not be attracted by Article 52 of the said Act as this Article is meant for the transaction of release. The transaction you have mentioned in your query prima facie may appear to be “release” but it is not release. The transaction is of transfer of interest in the property. Submitting the transaction under Article 52 will be illegal though it may levy you less.
The executed transfer deed should be lodged with the society. The society will put forth the transfer deed in GBM. Once the GB approves of the transfer by passing the resolution the transfer will be effective.

Q.5 . I am a member of Cooperative Housing Society situated in Thane, our building is situated on a common piece of land and other two building are also situated on the same plot. Recently few of the members have refused to pay Parking Charges on the grounds that, they do not get parking space in the premises. The said matter was raised in last AGM meeting however majority of members were willing to pay parking charges, but in the subsequent AGM meeting the MC has raised the same issue and decided to withdraw parking charges for four wheelers on the plea of few members and reference was invited to New Model Bye-laws, wherein, the society cannot charge parking charges if they cannot provide Parking space / stilt for parking of four wheelers. My question is-
i. whether society can charge parking charges for parking of vehicles in the society premises, where there are no stilts / garages are attached to the society building?
ii. Other question relates to commercial charges, where one of the MC member on the ground floor have approached the committee for obtaining commercial usage of his flat and obtained a permission from the MC and tried to sold his flat to a shop owner, for a commercial consideration. Under the circumstances whether committee can give a blank permission to a member without informing General Body, for commercial usage, and without mentioning the type of business the member can carry out?
Ans. In the first part of your query you have asked if the society can charge parking charges for parking of vehicles in the society premises, where there are no stilts / garages are attached to the society building. According to section 80 and 84 of the New Model Bye-laws (if the society has adopted) the society can allot the open spaces for parking vehicles and charge the members for such open parking space. The charges can be decided by the GB of the society.
Answer to your second query is that such practice is illegal. And such a permission though obtained will be void. A Member of the Managing Commitee can not obtain such a permission. It amounts to giving permission to your ownself. What ideally should be done is to put the issue before the General body for resolution. The member who is interested in the resolution should not be allowed to cast a vote.

Q.6. One of my friend’s mother along with her daughter are the owners of a flat (Agreement being made in their name with mother as the first name followed by the last daughter). Now the mother is keen on selling off the flat. However, due to old age, the original papers including the registration receipt, stamp duty receipt and copy of the agreements are with the last daughter. Daughter is not ready to part with the documents and the mother is keen on selling off the flat. Please let me know how to proceed with such situation. With the new amendment of the Society not required to give NOC before sale, how can the Society help.

Ans. As you have mentioned that the flat is purchased in the name of the mother and the daughter. Both of them have shares in the flat depending upon the express agreement made to that effect. As a result one person can not sell the flat and both the owners i.e. the mother and the daughter have to sell it. It should be noted that the physical possession of the original document does not give any right to the holder to sell off the property that is owned by two or more people. Even if the mother have had the original documents in her possession she could not have sold the flat without the consent of the daughter. If the mother alone is willing to sell the flat she can do it by any of the following way:-
i. The mother can offer the daughter to purchase the mother’s share in the said flat on a payment for that share in accordance with the market price.
ii. The mother can sell off her share of the flat to a purchaser who is willing to purchase it with a knowledge of such situation.
iii. In an extreme situation the mother can file a civil suit for the partition of the flat. If the flat is capable of physical partition i.e. not contradicting the Municipal laws then the physical partition can take place otherwise the court will order for the auction of the flat and the amount will be settled between the mother and the daughter according to their shares

Q.7. I have sublet/leased my shop in CHS. I was paying Non Occupancy Charges at the rate of 3 times the service charges. During the last AGM meeting held in August 2001, I brought to the notice of the General Body that I was overcharged the NOC, and gave them a copy of Government Order dated 9th. March 1995, based on this it was resolved by the General Body that effective 01/09/2001 NOC charges will be one time the service charges. I further requested for refund all the amount of NOC that was collected in excess of the specified. After discussion the G B gave consent that, this matter will be taken up at a special General Body meeting as regards to refund. I have come to know that some members are going to object as to the refund of excess amount taken. Please advice as to how I can get my refund if the GB refuses refund.

Ans. As you have rightly mentioned that the society has charged exhorbitant amount of non-occupancy charges. As per the old bye laws the non-occupancy charges were not to exceed the service charges. You are also right to ask for the refund of the excessive amount that the society has charged. You can give an option to General Body that instead of refunding the amount they can adjust the same to the future payments.
In case the society after the GBM denies to refund you as you are worried of, you can complain to the Registrar of Co-operative Societies under section 91 of the Maharashtra Co-operative Societies Act with whom your society is registered. The Registrar of Societies is competent to handle the disputes related to the Non- occupancy charges.
Secondly, it should be noted that a recent Government Circular dated 1/9/2000 orders that the Non-occupancy Charges will not exceed 10% of the Service Charges. Thus the General Body is not authorized to charge you NOC one time the service charge. [circular issued by Government of Maharashtra Dept. of Co-operation no. SGY 1904/15165/NO.317 / 14.C]

Q. 8. How much non-occupation charge can be levied by a society?
Ans. In March 1995, the state govt. issued a notification that lays down that no society can levy non-occupation charges at more than 100% of the service charges. The notification noticed that some societies charged exorbitant amount by way of non-occupation charges and said that charging non-occupation charges more than the service charge by societies is illegal and the society would be liable to refund the excess amount to the member concerned.

Q.9.. I have heard that the model bye-laws of co-operative society are in force. Do the model bye-laws make any change pertaining to the procedure of transfer of flat in a co-operative society ?
Ans. A flat owner in a co-operative society owns the flat by way of shares held by him in such a co-operative society. The transfer of such flat is done through the medium of shares.
The model bye-laws of the co-operative society have come into force from 15th day of August 2001. prior to the model bye-laws the No Objection Certificate (NOC) of the society would be necessary for transferring a flat in a co-operative society. But according to the model bye-law no.38(d) the NOC of the society would not be required for the transfer of flats.

Q:10 How is the Tax assessed in case of Common areas and facilities of a building?
Ans: Each apartment and its percentage of undivided interest in the common areas and facilities appurtenant to such apartment shall be deemed to be separate property for the purpose of assessment to tax on lands and buildings leviable under such law and shall be assessed and taxed accordingly; and for this purpose, a local authority shall make all suitable rules to carry out the provisions of this Section. Neither the building, the property nor any of the common areas and facilities shall be deemed to be separate property for the purposes of the levy of such tax.

Upon the sale of an apartment, the purchasers of the Apartment shall be jointly and severally liable with the vendor for all unpaid assessments against the latter for his share of the common expenses up to the time of the sale without prejudice to the purchaser’s or grantee’s right to recover from the vendor the amount paid by the purchaser or grantee therefore.

Q:11 Are Co-operative societies liable to pay Income-tax? On what items does income tax have to be paid? What deductions are available to Co-operative Societies? What is the amount of tax that has to be paid by the Co-operative Society? Mr. P. Dandekar

Ans: As per the provisions of the Income-tax Act, Co-operative Societies are treated as an association of persons and are supposed to file the Income Tax returns if the income is in excess of Rs.20,000/- from the below mentioned heads:-

(a) Non Occupancy charges

(b) Transfer fee

(d) Interest from members

(e) Parking charges

(f) Miscellaneous receipts

(g) Sale of water

It may be emphasized that there are conflicting judgments with regards to transfer fees. The Society should emphasize that as per the principle of mutuality contributions received from the members in any form in to the common fund of the Society for the purpose of incurring expenditure for the benefit of the contributors should not be treated as profit. The deductions that can be enjoyed by the Co-operative Society are as under:-

(a) As per Section 80P (ii) interest and dividend received from other Co-operative Society which may also include other Co-operative Banks are fully deductible items (the fixed deposit interest received from other banks for example State Bank and other Nationalized Banks, etc. cannot be claimed as an exemption under the above said section).

(b) Interest and dividend from other Co-operative Banks can be claimed as deduction under Section 80 L subject to a maximum amount of Rs.10,000/-.

Deductions under Section 80P for the income earned by the Society above Rs.20,000/- is taxable. The basic exemption of Rs.40,000/- available to individuals is not applicable to Co-operative Society. The rates of income tax payable by Co-operative Societies are as under:-

(1) Up to Rs.20,000/-
Nil

(2) Rs.20,001/ to Rs.30,000/-
10% above Rs.20,000/-

(3) Rs.30,001/- to Rs.50,000/-
Rs.1,000 + 20% above Rs.30,000/-

(4) Rs.50,001/- to Rs.1,20,000/-
Rs.3,000/- + 35% above Rs.50,000/-

(5) Rs.1,20,000/- & above
Rs.31, 000/- + 35% above Rs.1,20,000/-

Q:12 What should the Society do if a member dies without making a nomination?
Ans: If a member dies without making a nomination then the society should transfer the shares and interest of the deceased member to the legal heir of the member. However, before transferring the shares the below mentioned formalities have to be complied with. Within one month from the date of death of a member the society shall invite claims and objections to the proposed transfer of shares and interest of the deceased member. A notice to this effect has to be published on the notice board for the society. Public notices in at least two local newspapers have also to be circulated. All expenses for the same shall be recovered from the value of the shares and interest of the deceased member. Having regards to the claims and objections received, the Managing Committee may transfer the shares and interest of the deceased member to the person who in the opinion of the Managing Committee is the heir or the legal representative of the deceased member. The society should also obtain an Indemnity Bond from the legal heir that he agrees to indemnify the society for the expenses/liabilities that the society might have to incur for admitting the legal heir as a member of the society. if there are more claimants than one and if they are unable to agree mutually as to who shall be entitled to be a member of the society then the society should call upon the claimants to obtain a Succession Certificate/letter of administration from the competent court. If however, there is no claimant, the shares and interest of the deceased member in the capital/ property of the society shall vest in the society.

Q:13 Can a registrar for co-operative housing society refuse to form two different societies in two different wings of a building on the ground that these wings are connected to each other and therefore are one entity?
1)     “C” wing of our building was constructed in 1990 and the occupants formed a Co-op Housing Society in 1997.
2)     “A” and “B” wings were constructed later on in 1995 and the occupants have applied for formation of separate co-op hsg society. The water connections, water tanks, municipal property tax, terrace etc for “A” and “B” wing are all separate and have no connection to “C” wing.
3)    The members of “C” wing are unwilling to admit “A” and “B” wing in their society. Also the occupants of “A” and “B” wing are unwilling to go with “C” wing.
Ans: The Registrar of the Co-operative Society cannot refuse to form two different societies in two different wings of a building. But you will have to comply with the requirement of minimum number of the members i.e. 10 for each society.
Secondly, the original society will have to lease or sub-lease as the case may be to the newly formed society the land on which the new society is situated.

Q:14 Our society has 20 members and 22 flats. Two members having 2 flats each. How are the charges of the society apportioned. Is it according to the number of flats or the number of members?
Ans: The apportionment of the share of each member towards the charges of the Society shall be on the following basis:-
(i) Property taxes: As fixed by the local authority.
(ii) Water Charges: On the basis of total number of taps push cocks/flush etc. provided in each flat or equally from all flats (as is mentioned in the Society’s bye-laws).
(iii) Common Electricity Charges: Equally for all flats.
(iv) Expenses on repairs and Maintenance of the building/buildings of the Society: At the rate per square foot of the carpet area of each flat fixed by the general body.
(v) Expenses on repairs and Maintenance of the lifts of the Society including charges for running the lift: Equally by all the members irrespective of whether they use the lift or not.
(vi) Sinking Fund: As decided by the General Body subject to the minimum of ¼% per annum of the value of each flat, excluding the proportionate cost of land.
(vii) Service Charges: Equally divided by the number of flats.
(viii) Car Parking Charges: As decided by the General body.
(ix) Interest on the defaulted charges: At the rate fixed under Bye-law No.74 (of the Model Bye-Laws, as amended by the Society) to be recovered from defaulter members.
(x) Repayment of the installment of the loan and interest: The amount of each installment with interest as fixed by the financing agency.
(xi) Non Occupancy Charges: Maximum 100% of Service Charges, or as provided in Bye-Law No.45 of the Model Bye-Laws, if adopted and amended.
(xii) Insurance Charges: Carpet area of each flat.
(xiii) Lease Rent: The carpet area of each flat.
(xiv) Non-Agricultural Tax: The carpet area of each flat.
(xv) Any other charges: As decided by the General Body.
As mentioned above no charges are divided on the basis of members in the society. But they are divided according to number of flats.

Q.15. Can a Co-operative Housing Society refuse to admit a person as a member belonging to other religion/caste/community?
Ans. There are few Co-operative societies wherein membership to the
Co-operative Society is restricted to particular community or religion or caste. At the time of admitting the member, declarations and undertakings are taken from such intending member that the intending member belongs to particular religion caste or creed and that he will not permit or allow person of other religion, caste or creed to occupy or use the flat or premises.
1. Question arises whether such restrictions are valid. Can a Society refuse to admit a person from other religion or caste or creed to become a member of the said society? Can a Society retrained use of a flat by a member of other community or caste or religion?
2. Very interesting case arose in a case of Society whose membership and right to use and occupy the premises was restricted to only persons who are professing Zorastrian religion. As per Society’s Rules and Regulations and Bye-laws, only person who were permitted to stay therein required to be Zorastrian and they were required to file necessary declarations for the said purpose. One of the members married a women of non-Zorastrian faith. The said Society filed a suit against the member and also added after sometime the wife of the said member who was not following Zorastrian faith and took out motion for restraining non Zorastrian lady from residing or occupying the said flat. Question which arose before Hon’ble High Court of Bombay was that there was an Agreement for sale providing that flat will be used only for residence of Parsee/ Irani Zorastrian and not to be sold to person other than Parsee Zorastrian. The question before the Court was that in a case when Agreement for sale or Bye-laws and Rules a d Regulations of the Co-operative Society if such provision is made, are the members bound by them or are they valid against the persons who are claiming through such members. The Hon’ble Court rejected the Application for injunction prayed for by the society for restraining a non-Parsee/ non-Zorastrian lady using the flat. Such injunction was refused by the Hon’ble High Court of Bombay.
3. The Hon’ble Court considered the provisions of The Maharashtra Ownership Flats Act, 1963 and The Maharashtra Co-operative Societies Act, 1960. The Court stated that provisions of the said two Acts are binding on the Society concerned and any Bye-law or restriction to the contrary would be hit by those provisions. The Hon’ble Court stated that when an Agreement is contrary to the statutory provisions, its statutory provision which will prevail and one can not insist enforcement of the clauses of the Agreement which is contrary and violative of the statutory provisions. The Court did not grant any interim reliefs to the said society.
4. It was decided by Hon’ble Division Bench of Bombay High Court in a Notice of Motion No.3525 of 2000 in Suit No.4437 of 2000 (The Zorastrian Radih Society Vs. Mrs. Pervin Nariman Jogina & Anr. Reported in 2001(2) ALL MR 675.)
Note : All the answers are given on assumption that the properties are situated within Greater Mumbai, because the stamp duty payable on the instrumental for immovable properties situate at different places is different.

Q.16. Is it necessary to pay the stamp duty exceeding Rs. 20/- on an Agreement for Transfer of shares in a co-operative society which gives to the Transferee the right to use and occupy a flat in a co-operative society ? If yes at what rate ?
Ans. The stamp duty payable on an Agreement for transfer of shares in a co-operative society, which gives to the transferee a right to use, occupy and enjoy a flat in a co-operative society exceeds Rs. 200/-. In the case of non-residential premises it is at the flat rate of 10% of the true market value. However, in the case of residential premises, the stamp duty payable on the agreement is as per Article 25 of the Bombay Stamp Act as under :-
“Article 25. Conveyance (not being a transfer charged or exempted under Article 59) –
On the true market value of the property which is the subject matter of the Conveyance –
(1) if relating to residential premises consisting of building or unit.
by, or in favour of, a co-operative housing society registered or deemed to have been registered, under the Maharashtra Co-operative Societies Act, 1960; or
to which the provisions of the Maharashtra Ownership Flats (Regulation of Promotion of Construction, Sale, Management and Transfer) Act, 1963, or the provisions of the Maharashtra Apartment Ownership Act, 1970 apply; or
by such society in favour of its member or incoming member whether in consequence of purchase of its shares or not; or
by a member of such society in favour of another member and incoming member whether in consequence of transfer of its shares to another member or not; and the value of which –
does not exceed rupees 1,00,000. — NIL
exceeds rupees 1,00,000 but does not exceed rupees 2,50,000 — 0.5 per cent of the value
exceeds rupees 2,50,000 but does not exceed rupees 5,00,000 – 1,250rupees plus 3 per cent of the value of above rupees 2,50,000
exceeds rupees 5,00,000 but does not exceed rupees 10,00,000 — 8,750 rupees plus 6 per cent of the value above rupees 5,00,000
exceeds rupees 10,00,000. 38,750 rupees plus 8 per cent of the value above rupees 10,00,000.
(2) if relating to land for construction of residential premises and falling under the descriptions in items (a), (c), or (d) of sub-clause section (1). – The same duty as is applicable under sub-clause (1).

Q.17. Who is liable to pay the stamp duty in respect of the transfer of shares and flat in a co-operative society ?
Ans. The stamp duty in respect of transfer of shares and a flat in a co-operative society could be decided as regards payment by an agreement between the parties. Either one of them can agree to pay or they may agree to share in such proportion as they may agree amongst themselves. In the absence of such contract, under section 30(b) of the Bombay Stamp Act the same is payable by the transferee i.e. the purchaser.

Q.18. On an Agreement for Transfer of share in a co-operative society the parties have paid the stamp duty as per the value stated in the agreement. However at the time stated in the agreement. However at the time of registration of such agreement the sub-registrar concerned insisted for the payment of the stamp duty as per the market value calculated on the basis of ready reckoned.
Whether the sub-registrar can do so ? If the stamp duty is not paid as demanded by the sub-registrar whether he can impound the agreement ? In such case what remedies are liable to the Transferor and the Transferee ?
Ans. The stamp duty on an agreement for transfer of shares in a co-operative society is payable on the true market value of the premises being transferred. The value stated in the agreement does not determine the stamp duty payable on the same. For the sake of convenience, the State Government has introduced a Ready Reckoner as the market value of the properties in Greater Mumbai. Such Ready Reckoner is not a final word. The obligation of the party to pay stamp duty is provided under the Act on the amount of the true market value. If according to the party the market value is different than the market value calculated on the basis of the rate mentioned in the basis of the rate mentioned in the Ready Reckoner then the party cab refuse to pay additional stamp duty and the sub-registrar will be required to forward the document to the Collector under section 32 (a) of the Bombay Stamp Act for determining the correct market value and the stamp duty payable on the same. In case the party does not accept the decision of the Collector then the said party can go into appeal under section 32 (B) of the Act before the Dy. Inspector General of Registration and Dy. Controller of Stamps.

Q.19. At what rate the stamp duty is payable on the agreement for Transfer of a shop in a co-operative society ?
Ans. A shop is non-residential premises and therefore, the concessional rates prescribed under Article 25(d) for residential premises do not apply. The stamp duty payable is 10% of the true market value of a shop, in the case of an agreement for transfer of shop in a co-operative society.

Q.20. At what rate the stamp duty is payable on an Agreement for Transfer of a garage in a co-operative society ?
Ans. The stamp authorities consider a garage to be non-residential and therefore, as in the case of shop stamp duty is payable at the rate of 10% of the true market value of the garage.

Q.21. What is the responsibility of the managing committee and society when flat / shares are transferred in case the proper stamp duty is not paid.
Ans. There is no responsibility on the Managing Committee and the Society when the flats/ shares are transferred without payment of proper stamp duty or any amount. It may be, however, stated that sometime back the Registrar of Co-operative Societies had issued a circular directing the societies not to transfer shares / flats unless proper stamp duty is paid. It is submitted that the Managing Committee is neither empowered nor does it possess a skill to determine the proper stamp duty payable on such an agreement.

Q.22. Whether society is responsible for payment of stamp duty on an Agreement for transfer of shares and flat in a co-operative society ?
Ans. The Society is not responsible for payment of stamp duty on an agreement for transfer of a flat and shares in a co-operative society. The responsibility to pay the stamp duty is only that of the transferor and / or transferee.

Q.23. A co-operative society has purchased a plot for construction of residential building
for its members out of the funds contributed by its members. When such society issues allotment letters to its members for allotting flats how much stamp duty is payable on such allotment letters ?
Ans. In the case where a co-operative society has purchased a plot for construction of residential building for its members out of the contribution by its members, the allotment letter to its members for allotment letter to its members for allotment letter to its members for allotment of a flat does not attract any stamp duty.

Q.24. By an Agreement dated 1st March 1991 prepared on Rs 10/- stamp paper Mr. A. a member of a co-operative society in Bombay transferred his five shares and a flat to Mr. B for the consideration of Rs. 8,00,000/-. The said agreement dated 1st March, 1991 is not registered. The conveyance of the building and the land in favour of the society has yet not been executed by the builder and the owner of the land. The society admitted Mr. B as member and transferred the five shares and the flat to the name of Mr. B. By another Agreement dated 1st February, 1996 Mr. B transferred his said five shares and the said flat to Mr. C for the consideration of Rs. 13,50,000/-. The stamp duty amounting to Rs. 66,750/- has been paid on the said Agreement dated 1st February, 1996. The said Agreement dated 1st February, 1996 is duly registered with the sub-registrar concerned. Whether the said Agreement dated 1st March, 1991 is properly stamped ? If not who is responsible for payment of stamp duty on it ? Whether Mr. C can be called upon by the stamp authorities to pay the deficit stamp duty including the penalty if any on the said Agreement dated 1st March, 1991 ? In this case whether at the time of execution of the conveyance of the building and the land in favour of the society Mr. C will be required to pay and additional stamp duty in respect of his flat inspite of the fact that his Agreement dated 1st February, 1996 is duly registered.

Ans. The Agreement dated 1st March, 1991 which is prepared on Rs. 10/- stamp paper is not properly stamped. The agreement was required to be stamped with the amount at the rate prescribed under Article 25(d) of Schedule I to the Bombay Stamp act. On the amount of Rs. 8 lakhs being the true market value, on 1st March, 1991 for the said agreement the stamp duty payable was Rs. 33,000/-. The responsibility to pay the stamp duty was that of the transferor and / or transferee. I.e. MR. A. and / or MR. B as per their agreement with regard to the payment of stamp duty and in absence of such an agreement the responsibility was that of Mr. B, the transferee, Mr. C. who has agreed top purchase the said shares and the premises is not liable to pay any stamp duty and in absence of such an agreement the responsibility was that of Mr. B, the transferee, Mr. C. who has agreed to purchase the said shares and the premises is not liable to pay any stamp duty and / or penalty on the said agreement dates 1st March 1991. The authorities cannot recover the same from Mr. C. In the case of conveyance of property where stamp duty is paid and agreement is registered no additional stamp duty will have to be paid for the said flat.

Q.25. Whether any stamp duty is payable when flats are inter-transfers within the members of these society? Can society allows such inter-transfers without execution of proper agreement to transfer and payment of stamp duty ?

Ans. Inter se transfer of flats among the members of the society is an exchange and the stamp duty shall be paid as per Article 32 of Schedule I to the Bombay Stamp Act. The Stamp duty payable on the exchange and the stamp duty shall be paid as per Article 32 of Schedule I to the Bombay Stamp Act. The stamp duty payable on the exchange is as per conveyance i.e. payable under Article 25(d) of Schedule I to the Bombay stamp Act. It is necessary to execute a Deed of Exchange for transfer of flats among the members. The Deed of Exchange will be required to be stamped at the concessional rate under Article 25(d) of Schedule I to the Bombay Stamp Act.

Q.26. In view of the decision of the Bombay High Court in the case of Usha Arvind Dongre vs. Suresh Raghunath Kotwal whether it is necessary to pay stamp duty on transfer of shares in a co-operative society? Please also consider the judgement of the Bombay high Court in the case of Hanuman Vitamin Foods Pvt. Ltd. (AIR 1990 Bombay 204).

Ans. The judgement of the Bombay High Court in Usha Arvind Dongre vs. Suresh R. Kotwal (1991 CT). 507) was in the matter was discussed therein and decided under the provisions of section 17(1) (d) of the Indian Registration Act. The issue of stamp duty was not involved and, therefore, the provisions of the Bombay Stamp Act were not gone into in the said judgement. The said judgement was delivered by a single Judge of the Bombay High Court, whereas the judgement in the case of Hanuman Vitamin Foods Pvt. Ltd. (A.I.R. 1990 204) was specifically on the issue involving the stamp duty payable on the agreement in the case of sale of shares of the Co-operative Society and the flat. According to the said decision, the stamp duty is payable on such agreement for sale of shares wherein a right to use and occupy the flat and premises is attached to the ownership of shares. The said decision was of a Division Bench and therefore, in view of the decision in the case of Hanuman Vitamin Foods Pvt. Ltd. The stamp duty is payable on the transfer of shares in a co-operative society.

Q.27. At what rate the stamp duty is payable on a conveyance of a building and the land in favour of a co-operative society by the builder and the owner of the land ? Whether the members of the society who have paid stamp duty on their respective agreement for purchase of flats are not required to pay any additional stamp duty or whether such members gets adjustment of the amount of stamp duty paid by them on their respective agreement and are required to pay the balance stamp duty based on the market value of their respective flat on the date of execution of conveyance ?

Ans. The stamp duty payable on a conveyance of a building and the land thereunder in favour of a co-operative society by the builder and / or the owner of the land shall be paid on the true market value of each unit viz., flat, shop etc. All non-0residential units will attract stamp duty at 10% of the true market value and the documents in respect of each residential unit viz., flat, flat etc., (other than shop) will be required to be, stamped at the concessional rate as provided under Article 25 (d) of Schedule I to the Bombay Stamp Act. However, for the purpose of calculating the market value the date of the agreement will be considered and not the date of conveyance; and that the stamp duty will be at the rate prevalent at the date of the conveyance and not the date of the agreement of the flat purchased.

Q. 28. Whether direction of Commissioner not to register the society unless the stamp duty paid by all the members be challenged? Is it not against the provisions of Maharashtra Co-operation Societies Act?

Ans. It is difficult to correctly opine or reply to this query. But in my humble opinion it is an obligation and duty of every citizen to pay requisite stamp duty on the agreement to purchase a flat and therefore the agreement which is not properly stamped cannot be taken into consideration the direction given by the Commissioner not to register such Society unless all person have paid stamp duty on their respective agreement may not be invalid. The direction given by the Commissioner asking all the intending members to comply with the provisions of the Bombay Stamp Act and pay stamp duty could not be considered against the provisions of the Maharashtra Co-operative Societies Act. 1960.

Q.29. For sale of shares and flat in a Co-operative Housing Society, is it necessary to enter into any written Agreement by and between a member and the intending Purchaser?

Ans. Under the Contract Act there can be an oral agreement which is not in writing. Such an oral Agreement is valid and binding on the parties thereto. Under the Transfer of Properties Act also it is not necessary to enter into an Agreement in writing for the sale of the shares or rights of a member in the properties of the Co-operative Society. Such an Agreement can be an oral Agreement. The Maharashtra Co-op. Societies Act, 1960, Maharashtra Co-operative Housing Societies Rules, 1961 and the Model Byelaws of Co-operative Housing Societies, no where mention or provide that such an Agreement should be in writing.
The relevant Sections of the said Act for transfer of Membership is Section 29, which is negative in form, providing restriction on transfer. Under the said Section certain conditions are prescribed. But no where is it mentioned that there should be an Agreement in writing for the Sale of shares and the rights in property of the Co-operative Society. Rule 24 of the said Rule prescribes procedure for transfer of shares. Under the said Rule also there is no mention of any Agreement or an Agreement in writing. Clause 40 of the Model Bylaws of Co-operative Housing Societies, which provides for the notice of transfer of shares and interest in the capital of the property of the Society. Clause 40 (D) provides for the documents to be submitted along with the application for transfer. There is no reference whatsoever that any Agreement or a copy of any Agreement should be furnished to the Society. Therefore, there is no need for an Agreement in writing or furnishing an Agreement for Sale or a copy thereof to the Society. Under the provisions of Contract Act, Transfer of properties Act, Maharashtra Co-operative Societies Act, 1960, Maharashtra Co-operative Societies Rule 1961 and the Model Bye-laws of Co-operative Housing Society. it has been recently held by the High Court of Judicature at Bombay in its Judgement passed in Writ Petition No. 2094 of 1994, Shri. Harish G. Bulchani V/s. Shri. Subhash Manoharlal Arora and Others reported in 1992 (2) All Maharashtra Law Reporter, Page 349, that if a member or Intending Purchaser does not produce Agreement for Sale and if its not required under the Maharashtra Co-operative Societies Act, Rules or Bylaws then it could not be a valid the ground of refusal to transfer the shares and the rights of a member in a property of the Co-operative Housing Society. Therefore it is not necessary for a transferor or transferee to produce any Agreement or copy thereof to the Co-operative Housing Society.

Q.30 Is it necessary to Register Agreement for Sale between a member of the Co-op. Housing Society and the Intending Purchaser ?
Section 41 of the Maharashtra Co-op. Societies Act Specifically provides for exemption from compulsory registration of an Instrument relating to shares and debentures of the Society. Nothing in clause (b) and (c) of sub – section (1), of section 17 of the Indian Registration Act, 1908, shall apply to any instrument relating to shares in a society, notwithstanding that the assets of the society consist in whole or in part of immovable property. Therefore, under the said Section it is specifically mentioned that such an Agreement does not require registration. In fact it has been held by Bombay high Court in its Judgement in USHA DONGRE VS. SURESH KOTWAL reported in 1990 Maharashtra Law Journal 306 that such an Agreement does not require Registration . Therefore, such an Agreement is not required registration with the Sub-Registrar of Assurances.

Q.31 Is the second part of the Notification or Circular issued by Commissioner for Co-operation and Registrar, Co-operative Societies dated the 18th February, 1994 valid ? Are Co-op. Societies or members thereof bound to comply with it ?
As stated in answers to earlier questions the Co-operative Societies Act, Rules and Bylaws do not provide for any Agreement for Sale between a member and intending members to be in writing or payment of the stamp duty thereon. As stated in earlier answers it is not necessary to register such an Agreement between a member and the new member of the Society. If the said Act, the said Rules and Bylaws of the Society or Indian Registration Act not require such a Agreement to be in writing, then the question of payment of Stamp Duty on the same will not arise if such an agreement is not in writing. Similarly, neither the said Act nor the Indian Registration Act requires Registration of such an agreement.
In fact the 2nd part of the said circular amounts to imposing of tax on the citizens. Citizens will have to pay Stamp Duty and Registration fees even though the Acts and Rules do not provide the same. Under Article 265 of the Constitution of India no taxes can be levied or collected except by authority of Law. Stamp Duty and Registration charges can be imposed only by legislation. The Commissioner cannot levy taxes which he has purported to do through his circular. The said Circular is bad in law and against the provisions of the said Act, the said Rules, the Indian Registration Act and against the Judgements of Bombay High Court which have been referred in answers to earlier questions. It is ultra-vires of Article 265 of the Constitution of India. It is respectfully submitted that 2nd part of the same is, therefore, illegal, unlawful, invalid and not binding on the Society or the members or the intending Purchasers.

Q.32 Is Commissioner’s aforesaid Circular is valid because it is issued after the judgement of the Bombay High Court in USHA DONGRE VS. SURESH KOTWAL ?
By Circular, Commissioner cannot validate which is unconstitutional or invalid under any Act or Rules. Section 41 of the Maharashtra Co-op. Societies Act and the Judgment in USHA DONGRE VS. Suresh KOTWAL make it abundantly and absolutely clear that such an Agreement for Sale does not require registration. The Commissioner, Circular dated the 18th February, 1994 is beyond jurisdiction and it is contrary to and inconsistent with the provisions under the said Act, the said Rules, the said Bylaws, Indian Registration Act and Article 265 of the Constitution of India.

Q.33 Is it necessary to register an Agreement for Sale of purchase of a Flat from Flat Purchaser (and not builder) wherein a Society is not registered ?
The Agreement between the Flat Purchaser and another purchaser is not governed by the provisions of the Maharashtra Ownership Flats (Regulation of the Promotion of Construction, Sale, Management and Transfer) Act, 1963 and therefore, it is not necessary to have such an Agreement registered with the Sub Registrar of Assurances.

Q.34. How does the Co-operative Society apply for Permanent Account Number ?
Ans. A Co-operative Society is required to make an Application in Form No. 49A for allotment of Permanent Account Number.

Q.35. Explain the procedure with regard to deduction of tax at source by a Co-operative Society when the payment above Rs. 20,000/- have been paid to a contractor for repairs and maintenance ?

Ans. In case of payment to contractors by a co-operative society exceeding Rs. 20,000/- the tax is required to be deducted at the time of credit or payment, whichever is earlier. The rate of tax to be deducted at source is 2% in case of payment to contractor and 1% in case of payment to sub-contractor. The tax deducted at source should be deposited in Government Account within 1 week from the last day of the month in which the deduction is made.
The person deducting tax is required to file Annual return in form No. 76c by 30th June. The person deducting tax is also required to give certificate within one month from the end of the month during which credit/payment is made, in Form No. 16A to the payee.

Q.36. Which are the challans that have to be submitted by the society to the Income-tax Authorities ?
Ans. Challan No. 270 for payment of regular taxes if any. Challan No.271 for payment of the Tax deducted at source to the Central Government.

Q.37. What are the penalties on a co-operative society if, it does not deduct TDS on payments made to Contractors ?
Ans. If no tax is deducted at source on payment made to Contractors the person is liable to pay penalty U/s. 271C of 100% of the amount of tax which is required to be deducted at source.

Q.38. What are the formalities as regards deduction of tax at Source ? Within how many days the same should be deposited in the bank ? Please mention challan number in which the money has to be deposited on account of payment deducted on Contractors ? Does the society have to file an income tax return/Declaration ? if yes what is the number of the Income-tax return /Declaration ? if yes what is the number of the Income-tax return/declaration ?
Ans. Reply as regards TDS provisions is already covered in our earlier replies. As regards filing of income-tax return/Declaration it is compulsorily for all societies having taxable income to file their return of income. Return form No. 2 is required to be filed with the Income-tax officer.

Q.39. On which of the items does the co-operative society have to pay Income-tax ?
Ans. Co-operative is subject to tax on all incomes except as specified U/s. 80P of the Income-tax Act.

Q.40. What are the deductions available to a co-operative society if it has taxable
income ?
Ans. A co-operative society is eligible to claim, deduction under the following sections :
U/s. 80G & 80 GGA in respect of donations given by society.
U/s. 80HH Profits & gains from newly setup, Industrial undertaking or Hotels in backward areas.
U/s. 80HHA Profits of newly setup small scale industrial undertaking.
U/s. 80HHB Profits from projects outside India.
U/s. 80HHC Tax incentives for exports.
U/s. 80HHD Deduction in respect of earning in, convertible foreign exchange.
90HHE Profit form Export of Computer software.
80IA deduction in respect of Industrial undertaking setup on or after 1.4.91.
800 Deduction in respect of Royalties from certain foreign Enterprises
AND
80P Deduction in respect of income of a co-operative societies engaged in
Carrying on business of banking or providing Credit facilities to its members.
A cottage industry.
The marketing of the agricultural produce of its members.
the purchase of agricultural implements, seeds, livestock or other articles intended for agriculture for the purposes of supplying them to its members.
The processing without the aid of power, of the agricultural produce of its members.
The collective disposal of the labour of its members.
Fishing or allied activities, that is to say, the Catching, curing, processing, preserving, storing or marketing of fish or the purchase of materials and equipments in connection therewith for the purpose of supplying them to its members.

Q.41. Please explain with an example the tax liability with regards to the quantum of capital gains tax that has to be paid by a flat purchaser if he purposes to purchase a office in a co-operative housing society ?
Ans. Please note the question is very vague. We reply on the presumption that the flat owner has sold his residential flat. In this case the difference between sale proceeds and the cost of the flat sold would be the capital gains in the hands of the seller. In case if the flat seller has held the flat for more than 3 years then it would amount to long term capital gains and if he invests the entire capital gain in purchasing a new flat then the entire long term capital gains would be exempt from tax.
EX.
If the cost of the residential flat
purchased in 1980. Rs. 1,00,000/-
The sale proceeds of the flat
sold in 1998-99 Rs. 10,00,000/-
Investment in New Flat Rs. 10,00,000/-

The indexed cost would be worked out as under .
Since the flat is purchased before 1.4.1981 the value as on 1.4.81 is to be considered for indexation. The value as on 1.4.81 is assumed at Rs. 2,00,000/-

2,00,000 x 389/100 = 7,78,000/-

The long term capital gain would be 10,00,000- 7,78,0000
= 2,22,000/-

However he is not required to pay any capital gains tax as the entire sale proceeds is invested in purchasing a new flat.

Q.43. Please submit a specimen of computation of income for Co-operative Society having taxable income. The taxable income for the society is as under :-
Sale of well water Rs. 25,000/-
Transfer fees Rs. 2,00,000/-
Income from advertisement boarding Rs. 75,000/-
Sale of F.S.I. Rs. 25,00,000/-
Ans : Computation of Taxable income of Co-operative Society
1. Sale of Well water Rs. 25,000/-
Income from Advertisement Boarding Rs. 75,000/-
Sale of FSI Rs. 25,00,000/-

Gross total Income Rs. 26,00,000/-
Less : Deduction under section 80P(2) (c) (ii) Rs. 50,000/-
Total Taxable Income Rs. 25,50,000/-

Tax @ 35% Rs. 8,92,500/-

Note :
It is presumed that the society is a society other than consumer’s society.
Transfer fees is contribution from members for benefit of society so not taxable.

Q.45. As per the society’s Rules HUF cannot be a member of the society. What must be HUF do so that it can enjoy the tax benefit and can simultaneously purchase a flat in a Co-operative Society ?
Ans : Under the Hindu Law a Hindu Undivided family is represented by its Karta. Therefore in the society’s share certificate the name of the Karat should be given. The funds for the purchase of the flat should be given from the account of the Hindu undivided family and the flat. Should be reflected in the Balance sheet of HUF. As far as the Income-tax is concerned if the money is paid out of the funds of the HUF, the HUF becomes the owner of the flat and shares for all purposes.

Q.46 What is the Income-tax position if a Co-operative society receives amount from a builder who proposes to build additional 3 floors on the Society’s building ?
Ans. The amount received by a co-operative society form the builder who proposes to build additional 3 floors on the society’s building would be subject to capital gains tax in the hands of the co-operative society. If the construction of the building is 3 or more years old then the same would be treated as long term capital gains tax otherwise short term capital gains tax.

Q.47. A builder has approached the co-operative society with a proposal that he proposes to construct 3 additional floors and is willing to offer a sum of Rs. 50 lakhs. In such circumstances what should the co-operative society do form the tax planning point of view ?
Ans. As already replied aforesaid the amount received of RS. 50 lakhs form the builder would be subject to capital gains tax. IN case if it is short term capital gains tax the entire amount is subject to tax. However in case if it is long term capital gains tax then the society has option to invest either the sale proceeds on the gains and claim deduction U/s. 54EA/EB as the case may be, in order to avoid paying capital gains tax on the said amount.

Q.48. The co-operative society has balance F.S.I. which it proposes to sell to a developer ?
Whether the amount should be received shown by the Co-operative society ? or
Society allot coupons to members for the balance FSI and the members in turn directly sell the coupons to the builder so that the income is received directly by the member and not the society ?
Ans. The society should exercise option A only i.e. only the society can receive the sale consideration of FSI from the builder. Society has no right to allot coupons to its member.

Q.49. The accounts of a Co-operative Society have been audited by a statutory auditor. They have also been approved in the Annual General Body Meeting of the society. Thereafter certain errors have been deducted in the statement of account. What should the co-operative society as well as auditor do under such circumstances so that the accounts are rectified ?

Ans. The Auditor should prepare profit and loss appropriation account and pass the necessary rectifying entries so that the accounts stand rectified.

Q.50 The Co-operative society in exercise of the provisions of bye-laws recovered some Transfer fees. They are also charging compound interest which is not permitted by the society’s bye-laws. In such circumstances what is the liability of the auditor if he has not qualified the audit report ?

Ans. If the auditor has not qualified his report due to oversight there is not liability on him. An auditor is supposed to be a watch dog and not a blood hound.

Q.51. Can a Co-operative Housing Society be formed if the builder refuses to co-operate ? What is the minimum number of members required to form a Co-operative society ? How many members consent is required to form a Co-operative Society ?

Ans. Section 10 of the Maharashtra Ownership flats (Regulations of the Provisions of Construction Sale, Management and Transfer) Act makes it obligatory on Promoter (Builder to submit proposal for registration of a Co-operative Housing Society, within a period of four months from the date on which the minimum number of members required to form such a society have purchased the flats. Yes, a Co-operative Society can be formed even if the builder does not co-operative. In such a situation a notice should be issued to the builder. A copy of such notice has also to be sent to the Dy. Registrar / Asstt. Registrar of the concerned ward with a request to call upon the builder to explain his stand on the above and matter. The minimum number of members required to form a Co-operative Society is ten. However societies can be formed with less than ten members after obtaining the permission from the Competent Authority. The Government’s Agriculture & Co-operation Department has by its Circular No. CCSH-C079-36997-1289-4c dated 01-03-1980 laid down the criteria or exempting Co-operative Housing Societies with less than ten members. The consent of a minimum of 60% of the total number of flat purchasers is required to form a Co-operative Housing Society.

Q.52. What are the formalities that have to be complied by the outgoing Managing committee/Returning Officer in the year in which elections are to be held ? Please explain the same along with a model election program duly prepared by the Returning Officer ?
Ans.. The outgoing Managing Committee has to appoint a returning officer who has to conduct the elections. The returning officer has to give a declaration that he shall not contest the elections. The returning officer has to give a declaration that he shall not contest the elections. The Returning Officer than draws up an election program.
The model election program would include : a) Publication of Provisional list of members of the Society as on 30th June/31st March on the Notice Board of the society. b) Last date for receipt of suggestions or objection to the names of members in the Provisional list. C) Publication of the final list of members eligible to vote on the Notice Board of the society. d) Issue of Notice to members in the final list inviting nominations e) Last date for receipt of nominations. f) Scrutinizing of nominations. g) (i) Publication of the list of valid nominations (ii) Communications of reasons for rejection of nominations to the candidate concerned. h) (i) Last date for withdrawal of nominations. (ii) Publication of the final list of valid nominations excluding the withdrawals if any. I) Publication on the Notice Board the date, time and place of voting j) (i) Voting (ii) Counting of votes (iii) Publication of the list of the candidates with votes polled by them on the Notice Board. K) Declaration of the result of election at the General Body Meeting.
For the above said purpose the returning officer is entitled to appoint necessary staff and shall have access to the relevant records of the society.

Q.53. Our Co-operative year ends on 30th June. What are the Statutory Obligations that have to be complied by the society at the close of the Co-operative year ?
Ans. Apart from the day to day working of the society the office bearers have to approve the statement of Accounts for the Co-operative year July to June. The date of the Annual General Body Meeting should also be fixed in the Managing Committee Meeting. The office bearers must also prepare the Annual Report of the society and must also prepare the agenda for the Annual General Body Meeting.
The Below mentioned functions will have to be carried out by Co-operative Societies at the close of the Co-operative year.
Close accounts as on 30th June.
Prepare receipts and payments statement and profit and loss account for the proceeding co-operative year and balance sheet as at 30th June before August 14.
Submit copies of statements of accounts to the Dy./Asstt..Registrar and the auditor of the society by August 31.
If the above time for finalization of accounts before August 15, with a copy of the managing committee’s resolution justifying extension of time, to the Dy/Asstt. Registrar of the Ward wherein your society is situated.
Hold Annual General Body Meeting of the society on or before November 14.
If holding of the Annual General Meeting within the stipulated period is not possible, apply for extension of time to the Dy./Asstt. Registrar of the Ward before November 14th along with a copy of the managing committee resolutions, explaining reasons for not being able to hold the meeting in time. The maximum extension of time that can be granted by the Dy./Asstt. Registrar, is upto 14th February next.
Society has no authority to convene Annual General Meeting after November 14, if no extension is sought for, but not granted or meeting is not held within the extended time.
Each member should have notice of the meeting of such period as is mentioned in the bye-law No. 166/169. A copy thereof should be sent to the Dy/Asstt. Registrar, of the Ward. Notice and agenda should be accompanied by statement of accounts and committees report . The notice with its accompaniments must be exhibited on the notice board.
Start business of the meeting if there is no quorum and you follow procedure as laid down in bye-law No.39.
Do not postpone Annual General Meeting for want of statutory audit. Place before Annual General Body Meeting statements of accounts as finalised by the Managing committee. The Annual General Meeting could accept them subject to audit. A) The bye-law Nos. 100 and 166 are for flat-owners societies. B) The bye-laws No.s102 and 169 are of open plot type societies.

Q.54. What are the rights and liabilities of members of a Co-operative Society ? Can defaulters vote at the General Body meeting ?
Ans. The Right and Liabilities of members of Co-operative Society are briefly summarised as under. A) Right of Members. (i) To sell his shares. (ii) TO exchange his flat. (iii) To get certified true copies of certain documents including the bye-laws of the society (section 32) (iv) to sub-let his flat with the permission of the Society (Bye-law No.45 (1). (v) To receive notice of AGM/SGM (vi) To participate, discuss and vote at the AGM/SGM (vii) To contest the elections and to vote at the elections. (viii) To file a nomination with the society (ix) To request the society to have an associate members name added along with his name. (x) To draw the attention of the Committee on various matters affecting the interest of the members. (xi) To apply to the society for loan. (xii) To instruct the office bearers to call a Special General Body Meeting if the requisite number of signatories sign the application (xiii) To draw the attention of the Dy./Asstt.Registrar for various acts of the Society pertaining to irregularities and/or omissions.
Liabilities of Members (i) He has to abide by the provisions of the M.C.S. Act 1960, M.C.S. Rules 1961 and bye laws of the society (ii) To pay the legitimate dues of the Society irrespective of his grievances/dispute with the society (iii) To present any record which is required for audit purpose as per section 81 & 83 of the M./C.S. Act 1960.
I would like to add that the defaulting members can definitely vote and participate at the General Body Meeting. They are however not allowed to contest the elections.

Q.55. What is the maximum amount of Transfer Fee/Share premium that can be taken by the society at the time of transfer of flat ?

Ans. The Transfer fee that can be taken at the time of transfer of Flat depends upon the type of Bye-laws that are adopted by the Society. The old Bye-laws stipulates that only a sum of Rupee 1/- can be collected as Transfer Fee. The new Bye-laws stipulates that a sum of Rs. 50/- is to be collected as Transfer Fee. If the Society has adopted new bye-laws then the premium that can be calculated by the society has to be fixed by the General Body Meeting, but the same should not exceed 2.5% of the difference between the book value and the sale price realized by the Transferor. The maximum amount of premium that can be collected in municipal corporation areas is Rs. 25,000/-. If parties want to give additional amounts then the Society may collect the same. However, it is the normal experience that Societies in posh locality collects lakhs of rupees as Transfer Fee / Premium / Donation.

Q56. Can Society collects different rates of charges from residential flats and shops ?

Ans. The definition of Flat includes residence, office show-room, shop, godown. The Charges have to be collected equally irrespective of the fact if it is a residence or a shop. However, the charges payable to local authorities like property tax, water charges have to be paid at increase rates by the members occupying the shops. It needs to be emphasized that as per Bye-law No. 71 any other charges can be recovered from members as is decided by the General Body Meeting of the Society.

Q 57. What is the impact of the amendment made in the Co-operative Act with regards to becoming an Office Bearer of a Co-operative Society ?
A. Many new amendments have been made in the Maharashtra Co-operative Societies Act, 1960, in the year 2000. Hence forward members of a Co-operative Society, who wish to become Office Bearers of a Co-operative Society will have to give a bond to the Registrar of Co-operative Societies stating that they will act as per the provisions of the Acts, Rules and Bye-laws. The modalities as regards the contents of the bonds have yet to be worked out by the Co-operative Department.

Q 58. What are the normal irregularities committed by the Office Bearers in a Housing Society ?
A. It is observed that Office Bearers of many Co-operative Society commit some of the below mentioned irregularities:
Not submitting receipt and payment accounts to members;
Not charging simple interest from defaulters . Generally compound interest is recovered from defaulters.
Not filing audit rectification report with Registrar of Co-operative Societies.
Collecting huge amounts at the time of transfer of Flat.
Not deducting Tax Deducted at Source on payments made to Contractors above Rs. 20,000/- in a Co-operative year.
Not paying water charges and debris charges to Bombay Municipal Corporation at the time of major repairs.
Cash is maintained in excess of the provisions of the Bye-laws of the Society, which is normally Rs. 300/-.
Bearer cheques are given by the Society for payments in excess of Rs. 1,000/-.
Not taking out insurance of the Society as per section 70 of the Maharashtra Co-operative Societies Act and investing the funds of the Society in nationalized banks.
Utilizing sinking fund amount to meet recurring expenses;
Recovering differential amounts from members, who have been allotted Flats and shops in the society building.
Not recovering lift maintenance charges from members residing on ground floor.
Not calling the Managing committee Meeting once in a month.
Waiving amounts of some members without obtaining Registrars permission.
No taking action against members, who have done unauthorised construction.
Not issuing passbook to members.

Q.59 A person has purchased the flat. The seller is not co-operating to comply with the registration formalities. Can the purchaser make a declaration and attach the agreement as an exhibit to the declaration ?
Ans. : Yes, the person can always make a declaration and is entitled to register the said declaration. Agreement can be attached as an Annexure to the said declaration. However, it is suggested that the correct procedure would be to compel the seller to comply with the registration formalities after following the due process of law. We have been given to understand that declaration will be of good evidence in case of dispute.

Q.60 What are the provisions relating to nomination by member of a co-operative society ? Is the society bound to transfer the shares of deceased member in the name of the nominee if the nomination form has been submitted by the member?

Ans. It is the right of the member to nominate any person he might deem fit to nominate. And the member’s share in the capital of the society must be transferred after the demise of the member. Nomination is made by executing the nomination form. There are two types of nomination forms. One, where there is a single nominee. (by law no.34, form no.15-A). Two, where there are more than one nominees (by law no.34 form no. 15-B) At the time of submission of the first nomination, no charges are payable to the society. It is the duty of the secretary to place the, nomination form at the next managing committee meeting. within seven days from the date of meeting, nomination register. If the society has received a valid nominations then after the demise of the member, the society is duty-bound to transfer the shares to the nominee, unless the society is restrained from transferring the flat by an order from a competent court.

Q.61. Who is expected to call the first general body meeting? How many days notice have to be given before calling the same ? What is the stipulated period for calling the first general body meeting and what are its functions ?

Ans. It is the responsibility of the chief promoter to call the first general body meeting with a fourteen days notice. The first meeting should be held within three months from the date of registration of the society. The function of the first general body meeting are as under :
(i) to elect a president for the meeting; (ii) to admit persons to memberships (other than the promoters) who have applied for membership of the society; (iii) to elect a provisional committee; (iv) to receive and approve the statement of accounts, as prepared by the chief promoter of the society, upto 14 days prior to the date of the first general body meeting of the society; (v) to authorise the committee to secure conveyance of the right, title and interest in the property, in the name of the society, from the promoter (builder); (vi) to fix the limit upto which funds may be borrowed; (vii) to appoint in the internal auditor of the society for the year, if necessary, and to fix his remuneration; (viii) to authorise one of the members of the provisional committee to call the first meeting of provisional committee (ix) to consider affiliation of the society as member of the housing deferation of the district and other institutions mentioned in the bye-law no.6; (x) to consider any other matter to be brought before the meeting with the permission of the chair, excepting those requiring proper notice.
The person who presides over the first general body meeting should record the minutes of the meeting, sign them and hand them over to the secretary of the society who is elected at the first meeting of the provisional committee.

Q. 62 What is the nominees expected to do in order to transfer the flat in his own name ?

Ans. After the demise of the member, the nominee must apply to the society for transfer of shares and interest of the deceased member in the capital of the society to his/her own name. To that extent, the nominee must submit the application and complete membership formalities. He must also submit and indemnity bond in the prescribed form, indemnifying the society against all claims made to the shares and interest of the deceased member in the capital/property of the society.

Q. 63 Can a member adjust any amount spent by him from the bills raised by the society ? What is the remedy available to the member if the society fails reimburse certain amounts spent by the member on behalf of the society ?

Ans. Members are not entitled to adjust any amounts spent by them against bills raised by the society. At times, members spend certain amount on jobs pertaining to leakages, breakages, etc. In case of refusal by the society to reimburse the same, then the member should file a dispute in the co-operative court for recovery of such amount from the society.

Q. 64 Is the member of co-operative society entitled to keep a paying guest in his flat ? Can the society recover non-occupancy charges from such a member ?

Ans. If a member proposes to keep a paying guest, then he/she should apply to the society. On receipt of written permission of the society, the member can keep a paying guest in the flat. The society can charge non-occupancy charges from such a member.

Q.65. It is compulsory to be Managing Committee member ?

Ans. Members of the Managing Committee do not receive any salary. They are supposed to offer their selfless services. It is my humble opinion that if a member of the society is not able to devote time than should not be a committee. I would also like to suggest that Managing Committee members are supposed to administer the property. For the above said purpose they are at liberty to appoint staff members including a manager, accountants, clerks, peons, etc. Personally I am of the opinion that societies having regards to the availability of funds should always appoint a manager. This will save the valuable time of the office bearers. Also the members of the society will be aware as whom and at what time they should approach for their grievances. Appointment of a manager also helps to maintain discipline and responsibility amongst the office staff. Societies have to work within the framework of MCS Act, MCS Rules & the Bye Laws of the society. As per the society’s bye laws, the Managing Committee has no right to take decisions or pass resolutions by issuing circulars.

Q. 66. In our society their is heavy leakage between Flat No. 401 & 301 As a result of it the members refuse to pay the dues till the problem of leakage is rectified ? Please advise us as to how we should solve the abovesaid problem?

Ans. The problem of leakage and repairs is recurring problem present in a number of societies. As per Bye Law No.155 it is the responsibility of the committee to maintain the property of the society in good condition at all times. For facilitating discharge of the abovesaid function Bye Law No. 50 (a) empowers the secretary accompanied by other members of the committee to enter a member’s flat to examine its condition .The secretary of the society should also make a report to the committee indicating the particulars of the repairs that have to be carried out by the society at its own cost and those that have to be carried out by the members at their cost. It is my humble suggestion that the expenses pertaining to leakage should be shared equally by the three parasites i.e. the member from whose flat the leakage arise , the member who is affected and the society . It has been my experience that if the abovesaid resolution of sharing is passed than the abovesaid problem can be solved in a short span of time. The reason behind it is that according to the provisions of Bye Law No. 50 ( c ). The office bearers of the society shall have authority to enter the flat and cause the repairs to be carried out. It is generally noticed that the member from whose flat the leakage organises the member residing in the top floor is reluctant to entertain member who is residing below him (i.e the member who is the suffering on account of the leakage ). However if the society intervenes the member who is suffering on account of leakage will not have to suffer for a long span of time. Whatever may be the grievance of the member, the member should not withhold dues of the society.

Q.67. We are residing on the ground floor of a building consisting of six floors? After adoption of the new model bye laws the secretary of the society has insisted that the residents on the ground floor will also have to pay lift expenses irrespective of the fact that we do not use the lift. Please guide us about our liability towards lift expenses ?
Ans.. I would like to draw your attention to Bye Law No.71 (v) which clearly states that all expense pertaining to repairs and maintenance of lift including the charges for running the lift will have to be paid equally by all the members irrespective of the fact that they was the lift or not . It is my sincere advice to you and all the residents on ground floor that though you may not be using the lift you will have to pay the lift expenses.

Q.68. There are ten shops on the ground floor and the employees working in the abovesaid shops misuse the bathroom. Some of the drivers also waste water while cleaning the cars from the commercial water line? Please suggest to us the ways where by the society can have expenses on water charges? We have been given to understand that the BMC has increased the water charges? Please guide us about the amounts that have to be recovered by us from members towards the same?
Ans. It has been seen that in some societies their is one water tap from the commercial water line from which water is used for (a) Bathroom etc. for shopkeepers.(b) Watering the plants .(c)Cleaning of vehicles . (d) Washing of floors etc. There are differential water rates for residential use and for commercial use. The new rates w.e.f. 01/04/1993 for water charges are Rs. 5/- for 10,000 liters for residential use and Rs. 120/- for 10,000 liters for commercial use. By using water from the commercial water line you must have a separate water line from residential water line and watering the plants, cleaning of vehicles, etc. should be carried out from the abovesaid residential water line. The keys of the room where the water taps are installed should be given to a responsible person and if possible a push cock tap should be affixed to the commercial water tap so that substantial funds of the society can be saved. I would also suggest that the security not to allow outsiders to use the society resources for their advantage. The amounts towards residential water charges bill has to be recovered equally from the flat holders and the amounts towards commercial water charges bill has to be recovered equally from the shop keepers.

Q. 70 What is the nominees expected to do in order to transfer the flat in his own name ?
Ans. After the demise of the member, the nominee must apply to the society for transfer of shares and interest of the deceased member in the capital of the society to his/her own name. To that extent, the nominee must submit the application and complete membership formalities. He must also submit and indemnity bond in the prescribed form, indemnifying the society against all claims made to the shares and interest of the deceased member in the capital/property of the society.

75 Can the society refuse to transfer the flat if the parties have not paid the Stamp Duty? What precaution should be taken by the society before transfer of flat in the name of the purchase if the parties have no paid the Stamp Duty? Who is responsible to pay Stamp Duty?

Ans. It has been held in a number of cases that it is not that business of the society to see whether the party had paid the Stamp Duty or not. You can also cite the Judgements given ion the cases of G. Rajeshwar & other V/s. Shankar Darshan C.H.S. Ltd. as reported in 1986 C. T.J. Page 695 and Asian Paints P. Ltd., V/s. New M. P. C. H.S. Ltd., as reported in C.T. J. 697. In my opinion the society does not even have the right to compel the members to give a copy of the Agreement. No where in the MCS Act. MCS Rules or the Bye laws of the society is as mentioned that the society should ask for the copy of the Agreement . However with the view to protect the interest of the society. The society can definitely insist for an indemnity bond on Rs. 100/-Stamp paper stating that the purchaser undertakes to indemnify the society for the financial loss if at all regards to non payment of Stamp Duty. I would also like to add that the title of flat remains with the society. The member only gets the right to occupy. It is true that a number of petitions pertaining to Stamp Duty are pending before the Supreme Court, However after the Judgement of the Hanuman Vitamins & Others V/s. State of Maharashtra & Suptd. Of Stamps in Court petition No. 1820 & 1986 , the Division Branch of the Bombay High Court has no 17th February 1989 held that transfer of shares amounts to conveyance and Stamp Duty is therefore Payable . I would also like to suggest that a number of petitions pertaining to disputes . With Income Tax, etc. are pending yet arrears to pay the abovesaid taxes. In the same way I am of the opinion that Stamp duty has to be paid by the parties, As per the Section 30 of the Bombay Stamp Act 1958 it has been clearly mentioned that in the absence of an agreement to the contrary the expenses of providing the property Stamp Duty shall be Borne on conveyance by the grantee (i.e. the purchaser) With the consent of the parties while drafting a document a clause may be put that the Stamp Duty expenses will be borne by the seller. Generally it is difficult for the Stamp Authorities to trace the address of the seller. I may also add that many of purchasers have not paid Stamp Duty and their is a heavy backlog of pending work in the Stamp Office.

Q. 77 Can a society be formed with less than ten members ?

Ans. Yes, a society can be formed with less ten members. The Agriculture and Co-operation Department by its circular 14C dated 1-3-1980 has laid down criteria for registration of co-operative housing societies with less than ten members. The permission can be granted on condition that architect gives the certificate that the entire FSI is exhausted and no further construction is possible.

Q. 78 One of the members of our society has given cheque towards payment of major repairs. Hereafter he has given stop payment instructions to his baker’s. The society requires funds for major repairs. Please advise us what should be done by use ?

Ans. Members of the society should pay their dues in time As the cheque has not been honoured you should issue a notice of demand under section 138 of the negotiated Instrument Act 1881. If the member refuses to pay within a period of 15 days from the date of receipt of this Notice he becomes liable for prosecution under the penal provisions of the Negotiable Instrument Act 1881, under which a fine can be imposed for double the amount along with imprisonment. In my humble opinion the society should request the member to clear the dues. Only if the member is adamant should the society issue a legal notice.

Q. 79 What is the procedure of change of name of the society?

Ans. The proposed name should first be approved by the Deputy Registrar / Asstt. Registrar. The society should than pass a resolution at the General Body meeting with two third majority for change of name. On receipts of the approval of the change of name form the registering authority the same become effective. The necessary changes have to be made I the certificate o registration change of name shall not effect any right or obligation of the society.

Q. 80 Which are the statement of accounts that has to be prepared by the Society ? When should the same by prepared ? To whom should these copies e submitted ? Should the same be displayed on the society’s notice board ?

A. Within 45 days from the close of the Co-operative year or within such extended period as may be specified by the Dy. Registrar/Asstt. Registrar, your Committee should prepare annual statement of accounts, showing (a) Receipts & Payments Accounts (b) Profit & Loss Accounts and (c) Balance Sheet at the close of the co-operative year.
These statement of accounts shall be open for inspection to the members of your society during office hours at the office of the Society and a copy there of should be submitted with 15 days from the date of preparation to the auditor. The Balance Sheet and the Profit and Loss Account should be in Form “N”.
Yes, A copy of the Balance Sheet and the Profit & Loss Account and the Report of the Committee should be affixed on the notice board of the society at least 14 days before the date fixed by the Annual General Body Meeting.

Q. 81 I have been given to understand that the society is charging exhorbitant amount towards property tax. Please inform me what should be done by me?

Ans. Property tax is fixed in the Bombay Municipal Corporation. Your society can collect property tax from you as is fixed by the BMC. You should write to the assessor and collector of your concern wards asking for rateable value and statements of monthly rent of your flat on payment of prescribe charges the assessor and collector issues a certificate about the amount of property tax payable by you. The society does not have any right to collect charges towards property tax in excess of the amount payable to the BMC.

Q. 82 Can a proxy or a power of attorney holder attend the society’s general body meeting ?

Ans. Proxy or holder of a Power of Attorney cannot attend the general body meeting of the society. The right to attend and participate in the general body meting cannot be delegated by the member and has to be exercised by the member in person.

Q.87. At what rate the stamp duty is payable on an Agreement for Transfer of a garage in a co-operative society?

Ans. The stamp authorities consider a garage to be non-residential and therefore, as in the case of shop stamp duty is payable at the rate of 10% of the true market value of the garage.

Q.92. Please submit a specimen of computation of income for Co-operative Society having taxable income. The taxable income for the society is as under :-
a) Sale of well water Rs. 25,000/-
b) Transfer fees Rs. 2,00,000/-
c) Income from advertisement boarding Rs. 75,000/-
d) Sale of F.S.I. Rs. 25,00,000/- ?
Ans : Computation of Taxable income of Co-operative Society
1. Sale of Well water Rs. 25,000/-
Income from Advertisement Boarding Rs. 75,000/-
Sale of FSI Rs. 25,00,000/-
Gross total Income Rs. 26,00,000/-
Less : Deduction under section 80P(2) (c) (ii) Rs. 50,000/-
Total Taxable Income Rs. 25,50,000/-
Tax @ 35% Rs. 8,92,500/-
Note :
1. It is presumed that the society is a society other than consumer’s society.
2. Transfer fees is contribution from members for benefit of society so not taxable.

Q.93. Which are the documents that have to be compulsory registered ? Does one have to compulsorily register immovable properties in the below-mentioned cases :- (a) Family arrangement, (b) Lease above one year, (c) Declarations, (d) Gifts of Immovable properties ?
Ans. : Section 17 of the Indian Registration Act deals with the list of documents that have to be compulsorily registered. The said section states that the following documents should be registered if the property to which they relate is situated in district in which and if they have been executed on or after the date on which, Act. No. XVI of 1864, of the Indian Registration Act, 1866 (XX of 1866) or the Registration Act, 1871 (VII of 1871), or the Registration Act, 1877 (III of 1877), or this Act come or comes into force namely: (a) instrument of gift of immovable property (b) other non-testamentary instruments which purport or operate to create, declare assign, limit or extinguish, whether in present or in future, any right, title or interest, whether vested or contingent, of the value of one hundred rupees and upwards, to or in man immovable property; (c) non-testamentary instruments, which acknowledge the receipt or payment of any consideration on account of the creation, declaration, assignments, limitation or extinction or any such right, title or interest; (d) lease of immovable property from year to year, or for any term exceeding one year, or reserving a yearly rent, and (e) non-testamentary instrument transferring or assigning any decree or order of a court or any award when such decree or order or award purports or operates to create, declare, assign, limit or extinguish, whether in present or in future, any right, title or interest, whether vested or contingent, of the value of one hundred rupees and upwards, to or in an immovable property :
Provided that the state government may, by order published in the official gazette exempt from the operation of this sub-section any lease executed in any district, or part of a district, the terms granted by which do not exceed five years and the annual rents reserved by which do not exceed fifty rupees.
(2) Nothing in clause (b) and (c) of sub-section.
(1) applies to
(i) any composition deed; or
(ii) any instrument relating to shares in a Joint Stock Company, notwithstanding that the assets of such company consist in whole or in part of immovable property; or (iii) any debenture issued by any such company and not creating, declaring, assigning limiting or extinguishing any right, title or interest to or in immovable property except in so far as it entitles the holder to the security afforded by a registered instrument whereby the company has mortgaged, conveyed or otherwise transferred the whole or part of its immovable property or any interest therein to trustees upon trust for the benefit of the holders of such debentures ; or (iv) any endorsement upon or transfer of any debenture issued by any such company; or (v) any document not itself creating, declaring, assigning , limiting or extinguishing any right, title or interest of the value of the hundred rupees and upwards to or in immovable property, but merely creating a right to obtain another document which will, when executed, create, declare, assign, limit or extinguish any such right, title, or interest; or (vi) any decree or order of a court or (vii) any grant of immovable property by the government or (viii) any instrument of partition made by a Revenue Officer, or (xi) any order granting a loan or instrument of collateral security granted under the Land Improvement Act, 187 (XXVI of 1871), or the Land Improvement Act, 1883 (XIX of 1883); or (x) any order granting a loan under the Agriculturists loans act, 1884 (XII of 1984); or instrument for securing the repayment of a loan made under this Act or any order made under the Charitable Endowments Act, 1890 (VI of 1890), vesting any property in a Treasurer of Charitable Endowments or diversity any such Treasurer of any property; or (xi) any endorsement on a mortgage-deed acknowledging the payment of the whole or any part of the mortgage-money, and any other receipt for payment of money due under a mortgage when the receipt does not purport to extinguish the mortgage; or (xii) any certificate of sale granted to the purchaser of any property sold by public auction by a Civil or Revenue Officer. (Explanation – A document purporting or operating to effect a contract for a sale of immovable property shall not be deemed to require or ever to have required registration by reason only of the fact that such document contains a recital of the payment of any earnest money or of whole or any part of the purchase money)
(3) Authorities to adopt a son, executed after the first day of January 1872, and not conferred by a will, shall also be registered.
From the above said definition it is clear that
(a) Gift of Immovable Properties,
(b) Instruments which purport or operate to create, declare, assign limit or extinguish right in immovable property above Rs. 100/-,
(c) Lease of immovable property will have to be compulsorily registered.
However, exception has been made from compulsorily registration in instrument of below mentioned types. : – (a) Corporation Deed, (b) Shares and debentures of company, (c) Grant of immovable property by the Government, (d) Instrument made by revenue officer. Whenever with regards to immovable properties, subject to the exceptions any sought of right, title and interest in any nature, whatsoever above Rs. One Hundred is effected registration is compulsory.
Family Arrangements pertaining to immovable properties for the value above Rs. 100/- are compulsory registerable. Lease of immovable property above one year are compulsorily registrable. Gift of immovable properties are also compulsorily registrable.

Q.100. Do Non-resident Indian Citizens require permission of Reserve Bank to acquire residential / commercial property in India ?
Ans. No

Q.101. Do foreign citizens of Indian Origin require permission of Reserve Bank to purchase immovable property in India for their residential use ?
Ans. Yes. However, Reserve Bank has granted general permission to foreign citizen of Indian Origin, whether resident in India or abroad, to purchase immovable property in India for their bonafide residential purpose. They are, therefore not required to obtain separate permission of Reserve Bank.

Q.102. In what manner the purchase consideration of residential immovable property should be paid by foreign citizens of Indian Origin under the general permission ?
Ans. The purchase consideration should be met either out of inward remittance in foreign exchange through normal banking channels or out of funds from NRE/FCNR accounts maintained with banks in India.

Q.103. What are the formalities required to be completed by foreign citizens of Indian Origin for purchasing residential immovable property in India under the general permission?
Ans. They are required to file a declaration in Form IPI 7 with the Central Office of Reserve Bank Mumbai within a period of 90 days from the date of purchase of immovable property or final payment of purchase of consideration alongwith a certified copy of the document evidencing the transaction and bank certificate regarding the consideration paid.

Q.104. Can such property be sold without the permission of Reserve Bank?
Ans. Yes. Reserve Bank has granted general permission for sale of such property. However, where the property is purchased by another foreign citizen of Indian Origin, funds towards the purchase consideration should either be remitted to India or paid out of balance in NRE/FCNR account.

Q.105. Can Sale proceeds of such property if and when sold be remitted out of India
Ans. In respect of residential properties purchased on or after 25th May, 1993, Reserve Bank considers applications for repatriation of sale proceeds up to the consideration amount remitted in foreign exchange for the acquisition of the property for two such properties. The balance amount of sale proceeds if any or sale proceeds in respect of properties purchased prior to 26th May 1993 will have to be credited to the ordinary non-resident rupee account of the owner of the property.

Q.106. Are any conditions required to be fulfilled if repatriation of sale proceeds is desired?
Ans. Applications for repatriation of sale proceeds are considered provided the sale takes place after three years from the date of final purchase deed or from the date of payment of final installment of consideration amount, whichever is later.

Q.107. What is the procedure for seeking such repatriation?
Ans. Applications for necessary permission for remittance of sale proceeds should be made in form IPI 8 to the Central Office of Reserve Bank Mumbai within 90 days of the sale of the property.

Q.108. Can foreign citizens of Indian Origin acquire or dispose of residential property by way of gift?
Ans. Yes. Reserve Bank has granted general permission to foreign citizens of Indian Origin to acquire or dispose of properties up to two houses by way of gift from or to a relative who may be an Indian citizen or a person of Indian Origin whether resident in India or not, provided gift tax has been paid.

Q.109. Can foreign citizens of Indian Origin acquire commercial properties in India?
Ans. Yes. Under the general permission granted by Reserve Bank properties other than agricultural land/farm house/plantation property can be acquired by foreign citizens of Indian Origin provided the purchase consideration is met either out of inward remittances in foreign exchange through normal banking channels or out of funds from the purchasers’ NRE/FCNR accounts maintained with banks in India and a declaration is submitted to the Central Office of Reserve Bank in form IPI 7 within a period of 90 days form the date of purchase of the property/final payment of purchase consideration.

Q110. Is the confirming parties Income Tax Clearance Certificate required while registering an agreement?
Ans.No, the confirming parties Income Tax Clearance Certificate is not required while registering an agreement. The said fact has also been confirmed by the Bombay High Court in the judgement given in Writ Petition No. 734 of 1993 on 13-6-95 in the case of Freight Wings & Travels Pvt. Ltd. & other v/s.
Sub-Registrar of Mumbai & others.

Q.111 In what circumstance is Income Tax Clearance Certificate of the seller required while registering the document?
Ans . Income Tax Clearance Certificate of the seller is required if the apparent consideration exceeds Rs. Five Lakhs. The limit till 30th June, 1995 was Rs. Two Lakhs but the Finance Act 1995 increased the limit to Rs. Five Lakhs. All earlier agreement/s below Rs. Five Lakhs will therefore not require Income Tax Clearance Certificate.

Q.112 A document has been registered in the year 1990, the consideration mentioned in the agreement was Rs. Three Lakhs. Are the Income Tax Clearance Certificates of the seller required?
Ans. The limit for obtaining the Income Tax Clearance Certificate for the year 1990 was Rs. Two lakhs . However , now and the said limit has been increased to Rs. Five Lakhs . As the document will be indexed now, and since the consideration is less than Rs. Five Lakhs , the vendor’s Income Tax Clearance Certificates will not be required . From 1.6. 2001 income tax clearance certificate is not required as per the finance bill 2001.

Q.113 Within how much time should one register the document/s ?
Ans. The document /s should be registered within a period of four months from the date of execution of the document/s . If for any reason ,the document/s could not be registered within a period of four months then the same can be registered within an additional period of four months after making an application to the Sub-registrar and paying penalty as suggested by the Sub-Registrar . The reasons for the delay must also be mentioned in the application .

Q.114 What should one do if more than eight months have passed and one is desirous of registering the agreement?
Ans. If more than eight months have passed and if one is desirous of registering the agreement then one should prepare the Deed of Confirmation should be signed by all the parties . The original documents should be attached as exhibit to the said Deed of Confirmation .One should register the Deed of Confirmation to which the original agreement has been attached as an Annexure .

Q.115 What should be done if the Income Tax Officer is not taking a decision with regards to the issue of I Income Tax Clearance Certificate?
Ans. If the party has complied with all the statutory formalities and if the Income Tax Officer is not granting the Income Tax Clearance Certificate then the Assessee should make an application to the Commissioner of Income Tax and forward the copy of the same to the Central Board of Direct Taxes (C.B.D.T).This should be done only after giving at least two or three reminders to the Income Tax Officer.

Q.116 What can be done if the person who has executed the document is hospitalised . In such circumstances how can one register the document ?
Ans. In such circumstances a representation has to be made to the Sub Registrar explaining the difficulty being faced by the person who has executed the document .
The Sub Registrar is duty bound to visit the premises (i.e the hospital) and complete the registration formalities .

Q.117 Is the presence of two witnesses necessary for registering the document?
Ans. Yes , two witness are required at the time of completing the registration formalities , basically the witnesses are required for the purpose of identifying the persons who have executed the document. However, if the parties produce their passport then the problem of identification is solved . In such circumstances the Sub Registrars Office does not insist for the presence of witnesses. Even incomplete. It is observed that in some areas , some Sub Registrars are registering the document with the presence of one witness only .

Q.118 Can the Sub Registrar refuse to register a document if the document is written in a language that is not commonly prevalent in the said State?
Ans. Yes, the Sub Registrar can refuse to register the document if the same is written in a language that is not commonly understood by the people residing in the said State. In Mumbai , documents executed in English , Hindi , Marathi & Gujarati only are accepted . The reason why documents in Gujarati are accepted is perhaps in the earlier years , the state of Gujarat was also following . The Bombay Stamp Act. Of course now The Gujarat Stamp Act is applicable for the State of Gujarat only.

Q.119 Is it necessary to register a will?
Ans. No, under Sec. 18 of The Registration Act, registration of will is optional . However, there is no harm if one registers a will. In fact, registration of a will is strongly recommended, as one naturally gets an impression that the same is more authentic. Even courts accept the fact as an additional evidence. No time limit is applicable with regards to registration of the will.

Q.120 What are the precautions that should be taken by the parties before registering a document ?
Ans. The parties should as far as possible :-
Obtain an Income Tax Clearance Certificate of the seller for all properties above Rs. Five Lakhs and the NOC from the Appropriate Authority if applicable (if the consideration exceeds Rs. Seventy Five Lakhs for the city of Mumbai then the permission from the Appropriate Authority will be required) .
Get the documents adjudicated from the Collector stating that proper stamp duty has been paid .
Comply with the formalities of Urban Land Ceiling and Registration Act,1975 (if applicable ) if the area exceeds 500 sq. Mts. If the above formalities are not complied then the original agreement will not be received by the parties after registration . Their are instances of documents registered in 1950 & onwards which have not been received by the parties .

Q.121 What should be done if one of the signatories is not willing to attend the office of the sub Registrar for completing the registration formalities?
Ans. If one of the signatories is not willing to complete the registration formalities then an application has to be made the Sub Registrar of Assurances under Sec. 36 of the Indian Registration Act,1908. Thereafter the Sub Registrar of Assurances will issue summons, and after giving an opportunity to the person who has not remained present can proceed with the registration formalities .He shall make a noting in the document stating registration refused with regards to the party who has not remained present and can also deliver the document to the party who has applied for registration .

Q.122 What is the amount of registration fees that has to be paid by the parties ?
Ans. Registration fee has to be paid @ 1% of the market value of the property or Rs. 20,000/- whichever is less.

Q.123 which are the documents that have to be compulsorily registered ? Does one have to compulsory register immovable properties in the below mentioned cases:-
Family arrangement ,
Lease above one year,
Declarations,
Gifts of Immovable properties ?

Ans. Sec.17 of The Indian Registration Act, 1908 deals with the list of documents that have to be compulsorily registered . The said Section states that the following documents should be registered if the property to which they relate is situated in district in which and if they have been executed on or after the date on which , Act. No. XVI of 1864, of The Indian Registration Act, 1866 (XX) of 1866) or The Registration Act, 1866(III of 1877), or this Act come or comes into force, namely:
instrument of gift of immovable property ;
other non-testamentary ,whether in present or in future , any right , title or interest , whether vested or contingent , of the value of One Hundred Rupees and upwards , to or in an immovable property;
non-testamentary instruments, which acknowledge the receipt or payment of any consideration on account of the creation , declaration , assignment , limitation or extinction of any such right, title or interest ;
lease of immovable property from year to year ,or for any term exceeding one year ,or reserving a yearly rent; and
non-testamentary instruments transferring or assigning any decree or order of a court or any award when such decree or order award purports or operates to create, declare, assign ,limit or extinguish, whether in present or in future ,any right, title or interest , whether vested or contingent, of the value of One Hundred Rupees and upwards ,to or in an immovable property.
[1] Provided that the State Government may, by order published in the official gazette exempt from the operation of this sub-section any lease executed in any district, or part of a district, the terms granted by which do not exceed five years and the annual rents reserved by which do not exceed Fifty Rupees.
[2] Nothing in clause (b) of sub-section (1) applies to:- ( I ) any composition deed;or
any instrument relating to shares in a Joint Stock Company , notwithstanding that the assets of such company consist in whole or in part of immovable property ; or (iii) any debenture issued by any such company and not creating ,declaring , assiging , limiting or extinguishing any right , title or interest to or in immovable property except in so far as it entitle the holder to the security afforded by a registered instrument whereby the company has mortgaged , conveyed or otherwise transferred the whole or part of its immovable property or any interest therein to trustees upon trust for the benefit of the holders of such debentures ; or;
(iv) any endorsement upon or transfer of any debenture issued by any such company ; or
any document not itself creating , declaring , assigning , limiting or extinguishing any right , title or interest of the value of the hundred rupees and upwards to or in immovable property , but merely creating a right to obtain another document which will , when executed , create , declare , assign, limit or extinguish any such right , title, or interest; or
any decree or order or a court or
any grant of immovable property by the government or
any instrument of partition made by a Revenue Officer ;or
any order granting a loan or instrument of collateral security granted under the Land Improvement Act, 1871 (XXVI of 1871), or the Land Improvement Act, 1883 (XII of 1883);or
any order granting a loan under the Agriculturists Loans Act, 1884 (XII of 1884); or instrument for securing the repayment of loan made under this Act; or any order made under the Charitable endowments Act,1890(VI of 1890), vesting any property in a Treasurer of charitable Endowments or divesting any such Treasurer of any property ; or
any endorsement on a mortgage-deed acknowledging the payment of the whole or any part of the mortgage -money , any other receipt for payment of money due under a mortgage when the receipt does not purport to extinguish the mortgage ;or
any certificate or sale granted to the purchaser of any property sold by public auction by a Civil or Revenue Officer . [ Explanation -A document purporting or operating to effect a contract for the sale of immovable property shall not be deemed to require or ever to have required registration by reason only of the fact that such document contains a recital of the payment of any earnest money or of the whole or any part of the purchase money]
[3] Authorities to adopt a son , executed after the first day of January 1872, and not conferred by a will, shall also be registered .
From the above said definition it is clear that
Gift of Immovable Properties .
Instruments which purport or operate to create , declare , assign limit or extinguish right in immovable property above Rs.100/-,
Lease of immovable property . Will have to compulsorily registered .
However, exception has been made from compulsory registration in instrument of below mentioned types:- (a) Corporation Deed.
Shares and debentures of Companies .
Grant of immovable property by the Government .
Instrument made be Revenue Officer .Wherever with regards to immovable properties subject to the exceptions any sought of right , title and interest in any nature , whatsoever above Rs. One Hundred is effected registration is compulsory.

Q.124 At which office should the document be present for registration ?
Ans. As per Sec. 28 and 29 of The Registration Act the document should be presented for registration at the office of the Sub-Registrar of Assurances within whose sub district the whole or some portion of the property to which such document relates is situated or in the office of the Sub-Registrar situated at Mumbai, Delhi, Madras or Calcutta.

Q.125 Within how much time should one expect to receive back the original documents?
Ans. There have been a number of incidents that the documents have been registered in 1970’s and 1980’s and the same have not been received . In some cases as per the information made available to us, the documents have been lost in transit . It has been observed that there has been a lack of accountability . Even a Public Relation Officer is not appointed by the Office of the Inspector General of Registration . This has increased the hardships of the purchaser/s. Innumerable complains have been lodged against the above said delays .Realising these difficulties the dynamic Chief Minister has given a verbal assurance that the document registered with the Office of the Sub-Registrar will be delivered back within a period of 15 days . Now as per the rules made by the Office of the Sub-Registrar , the Sub-Registrar can even refuse to register the document . The promise of Chief Minister if implemented by the registering authorities will definitely be a boon for the person/s registering the document .

Q.126 Normally how much time does it take to register a document with the Sub-Registrar ?
Ans. The parties are supposed to comply with a set of formalities which have already been discussed. It is our experience that it can take more than one hour to complete all the above said formalities after one’s turn comes . Normally it takes about 2 to 3 hours for completion of the registration formalities .

Q.127 Is it advisable that some of the signatories may go at a later date to sign at the Sub-Registrar’s Office ?
Ans. Suppose a documents has been signed by four parties, for certain reasons one of the parties is not able to attend registration on the specified date. In such circumstances the remaining parties can go and register the document . The other party can go and register the document at a later date. However , the registration formalities have to be completed within the specified time limit .i.e. within four months.

Q.128 A flat has been purchased from the builder, the builder has suggested that the purchaser should go and register the document/s and the builder shall go and sign the document/s at later date. Is the same permitted ?
Ans. With a view to save their time, builders normally do not go with the purchasers at the time of registration . The purchasers may register the document/s and give the copy of the registration receipt to the builder. The purchaser should ensure that the builder has gone and signed the document/s with the Sub-Registrar within the specified time limit.

Q.129 What should be done if the Sub-Registrar refuses to register the documents?
Ans. An appeal should be filed against the order of the Sub-Registrar refusing to admit the document/s for Registration to the Registrar under whose jurisdiction the Sub- registrar is working . The appeal has to be filed within a period of 30 days from the date of the order . The Registrar has power to issue summons to the party and for the purpose of enquiry also summon and enforce the attendance of witnesses and can also compel them to give evidence . The power enjoyed by the Registrar is that of a Civil Court and it also authorized to direct by whom the whole or any part of the cost of the inquiry should be recovered / paid . The powers are enjoyed by the Registrar under Sec. 74 of The Indian Registration Act, 1908.

Q.130 What should the parties do if the Registrar refuses to register the document/s?
Ans. On refusal of the registration of the document by the Registrar , the parties or their representative/s u/s. 72 &73 of The Indian Registration Act,1908 can within 30 days from the date of order of refusal institute proceedings in the Civil Court in whose jurisdiction the office of the Registrar is situated.

Q.131 What are the normal grounds for non-registration of document/s?
Ans. The normal grounds for non-registration of document/s are:-
Document is opposed of public policy/
Parties have not complied with the formalities as laid down by The Registration Act and by any reasons by which registering authority is not satisfied .
The Survey No. of the property is not mentioned in the document/s.
The language in which the document is executed is not in the language that is normally prevailing in the area where the office of the registering authority is situated .

Q.132 What is the effect of non-registration of the document/s which has to the compulsory registered?
Ans. The title of the purchaser who has purchased the property will be defective . Any document /s requiring compulsory registration u/s 17 or by any provision of the Transfer of Property Act,1882, if not registered, no document/s shall:-
affect any immovable property comprised therein ,or
confer any power to adopt ,or
be received as evidence of any transaction affecting such property or concerning such power , unless it has been registered . Provided that an unregistered document affecting immovable property and required by this Act or The Transfer of Property Act,1882 to be registered may be received as evidence of the contract in a suit for specific performance under Chapter II of The Specific Relief Act, 1887 or as evidence as part performance of a contract for the purpose of Sec. 53 A of The Transfer of Property Act,1882 or as evidence of any collateral transaction not required to be affected by a registered instrument.
Also u/s. 50, every document/s requiring compulsory registration or optional registration , if duly registered takes effect as regards the property comprised therein against every unregistered documents/s be of the same nature as the registered document/s or not

Q.133 How is the title of the property verified?
Ans. Normally the person purchasing the property has to ensure that the seller has a good and marketable title. In order to find out if the title of the seller is clear and marketable ,one has to take search of the property .The search of the property has to taken at the offices of the relevant Sub-Registrars, normally 30 years search has to be taken . The purchaser can also ask copies of the documents lodged with the office of the Sub-Registrar to the seller . The objections pertaining to the title of the property can be easily verified after taking the search, for example: if the party has mortgaged and registered the documents with the Sub-Registrar of Assurances then it can be known only after taking the search of the property . After satisfying the title of the property the party should proceed with the transaction.

Q.134 Is it advisable to register the document/s at the time of purchase of immovable property ?
Ans. Yes, it is always advisable to register the document/s at the time of purchase of immovable property . In some cases it is compulsory to register the document/s but then also registration of document/s is strongly recommended because :-
The title gets additionally secured .
If you propose to obtain a loan in future then, banks or financial institutions might insist for registration of document/s.
Even if you propose to register the document/s in future there is a possibility that the seller may not co-operate with you .
The certified true copy of the document/s can be obtained from the registering authorities after completion of index formalities . If at any point of time if you lose the document/s you call still establish your bonafides to the property .
Q.135 Is advisable to make additional copies of the agreement on stamp paper of Rs.20/-at the time of purchase of immovable property ?
Ans. Yes, there is no harm if one makes additional copies of the document on Rs.20/-stamp paper and takes the signatures of the parties executing the document/s . The advantages of the same are as under :-
In case of loss of the document you will have another singed agreement on a stamp paper .
If you are proposing to obtain loan from different financial institutions then there is a possibility that you can submit the original copies and can quicken the loan sanctioning formalities . (Of course , it is presumed that you won’t take loan from two different banks for the same property).
At the time of selling your premises you can give the signed copy to the other party .(And still retain the agreement with you).

Q.136 What is the object of payment of Stamp Duty and what is the object of registration of a document/s?
Ans. Registration of a document/s is done because it is compulsory . In some cases registration is not optional .The government’s object of collecting registration charges is for keeping the records of the document/s and are covered as per the provisions of The Indian Registration Act, 1908 which is Central Act. Stamp Duty is a sort of taxing statute and its main aim is to collect revenue for the State Government.

Q.137 At the time of registration should the area in the agreement be mentioned as carpet area, built up area or super built-up area?
Ans. The Registering Authorities insist that the area must be mentioned as built up area. If the vendor has mentioned the area as carpet area then the registering authorities compel the persons to mention the area on built up basis on the rubber stamp which is affixed by them at the time of registration of document/s is as under:-
Number of Floors,
Built-up Area,
City Survey No. (for the city of Mumbai) C.S.No.(for suburbs in Mumbai),
ward,
Village &
Taluka

Q.138 Can the Registration Fee be paid by order or cheque?
Ans. Registration Fee has compulsorily to be paid in cash only .

Q.139 What should one do to get back the documents which is registered but the proper Stamp Duty has not been paid/
Ans. If the proper stamp duty has not been paid then one must approach the Sub-Registrar’s Office and should request the registering authorities to send the documents to the Town Planner . The Town Planning authorities will assess the quantum of stamp duty and shall recover the deficit stamp duty . The parties can expect the original agreement that too after completion of the other formalities .

Q.140 A person has purchased the flat. The seller is not co-operating to comply with the registration formalities .Can the purchaser make a declaration and attach the agreement as an annexure to the declaration ?
Ans. Yes, the person can always make a declaration . However , it is suggested that the correct procedure would be to compel the seller to comply with the registration formalities after following the due process of law. We have been given to understand that declaration will be of good evidence in case of dispute .

Q.141 The agreement value of the property is Rs.4,75,000/-. The market value of the property is Rs.5,50,000/-. Will the party have to obtain the Income-Tax Clearance Certificate of the seller?
Ans. Yes , since the market value of the property exceeds Rs.5,00,000/- the Vendor’s Income Tax Clearance Certificate u/s. 230A of The Income Tax Act,1961 will have to be obtained .

Q.142 Can one obtain Provisional Income Tax Clearance Certificate before signing the agreement ?
Ans. It is a common belief with regards to property dealings that some percentage of the amount is given in cash is not reflect in the transaction . At the time of sale of property the seller is always afraid that if he signs the papers & gives the same to the purchaser then there is a possibility that the purchaser may not pay the balance cash amount . Therefore the seller is reluctant to sign any paper unless he receives the total cash amount . Similarly , the purchaser is also afraid that in case there is a dispute then the seller will not return the amounts collected by the seller in cash .

Yes, application under section 230A of The Income Tax Act, 1961, can be filed & submitted before signing the agreement . It may be emphasized that while filing Form No-34A the purchaser’s name , price and unsigned agreement has got to be submitted to the authorities . However, there is a tendency amongst the professionals that the Income Tax Clearance Certificate formalities should be undertaken only after the execution of the document.

Q.143 When is the certified true copy issued by the Sub-Registrar?
Ans. In the past the certified true copy of the document/s was issued by the Sub-Registrar any time after the date of Registration . However, it had been observed that in some cases the parties after obtaining certified true copies got the records in government transactions transferred in their name inspite of the fact that the Registration formalities has not been completed . That led to disputes and conflicts . As the stakes in property matters are very high and with a view to take cautious approach a policy decision has been taken that certified true copy of the document/s should be issued only after the formalities pertaining to indexing are completed .

Q.144 Within how much period should an Income Tax Officer decide the Income Tax Clearance Application?
Ans. Within a period of sixty days from the date of submission ,the Income Tax Officer is duty bound to decide the matter with regards to Income Tax Clearance Certificate Application.
If all the earlier tax dues have been cleared then the Income Tax Officer must issue the Income Tax Clearance Certificate . The abovesaid fact is clearly mentioned in Rule 44-B of The Income Tax Rules.

Q.145 How can the seller find out the C.T.S. No./C.S. of the property proposed to be sold by him?
Ans. The C.T.S. No./C.S. No. of the property can be obtained from the builder , or his architect . It is also mentioned in the first agreement executed by the builder with the flat purchaser . In case the abovesaid information is also not available then the C.T.S. No./ C .S. No. can also be obtained from the office of the Superintendent of City Survey Department (City area) situated at Old Custom Housing , Mumbai . If the property is situated in suburbs then the C.S. No. details can be obtained from the office of the City Survey office of the concerned taluka i.e.
Kurla Taluka for Central Suburbs,
Andheri Taluka and / or
Borivali Taluka for Western Suburbs

Q.146 We have recently received intimation from the Bombay Municipal Corporation that the rateable value of the property has been increased. We state that the property tax demanded by the Municipal authorities is much higher than what had been collected by them for the year 1999-2000. Please guide us what has to be done by us?

Ans. We all are aware that the Bombay Municipal Corporation has increased its expenditure. The pinch is felt more after the increase of the salaries to its staff members. With a view to generate more revenue they have carried out survey of the properties and have increased the rateable value of the property. You should compliant against the abovesaid increase of the rateable value under section 163 of the Bombay Municipal Corporation Act within a period of fifteen days from the day of receipt of the intimation to you.

Q.147 How should the service charges be recovered by the Co-operative Societies from its member?

Ans. Earlier the service charges were recovered equally by the societies from its members. Now as per notification dated 26/05/99 issued by Shri S. D. Dhekene Secretary, Maharashtra State Co-operative Department service charges have to be recovered by Co-operative Societies on the basis of the rateable value of the flat.

Q.148. Is it necessary to pay Stamp Duty on tenancy agreements? Is it necessary to register the tenancy agreements?

Ans. Yes, as per Section 55 of the Maharashtra Rent Control Act 1999 which has become effective from 31/03/2000 tenancy agreements must be in writing and must be compulsorily registered. One has also to pay Stamp Duty on tenancy agreements.

Q.149. Our Co-operative Society has a Telephone? Will our Co-operative Society have to file Income Tax returns?

Ans. Yes, as per the Stipulation laid down by the Income Tax Department all persons including Co-operative Societies having Telephone will have to file Income Tax returns.

Q. 150. Please inform us about the proposed amendments/changes related to real estate?

Ans. The Registration Act is proposed to be amended. As of date a document can be registered at the four metros cities apart from the place where the property is situated. After the proposed amendment this facility may not be available. There is proposal for recovery of uniform amount towards registration fee. As of date the registration fee varies from state to state. I have been given to understand that there is a proposal that the photographs of the party executing the document should be affixed on the instrument proposed to be executed.

Q.151. Is Stamp Duty is payable on lease deeds?

Ans. Yes, as per article 36 of the Bombay Stamp Act 1958 Stamp Duty has to be paid on lease deeds.

Q.152. Is it necessary to register a marriage? What are the formalities that have to be complied with by the parties if both of them are Hindus i.e. of the same caste?

Ans. Registration of marriage is compulsory. Both the bride and the bridegroom have to fill up a form, which should be verified by three witnesses. The priest’s name and address and signature have also to be mentioned in the form. The Sub Registrar of Assurances (i.e. Marriage Office) takes the signature of the bride & the bridegroom in his records and then issues the marriage certificate.

Q:153. I have taken home loan back from a financial institute. I have come to know about other financial institute that gives loan on lower rate. Can I change the institute now ?
Ans. Yes, you definitely can change the financial institute and take the loan at lower rate. This is called Refinance Loan, where the new financial institute will repay your remaining loan and you will have to repay the loan on the new rate that the next financial institute offers you. But this facility is available only if the loan is not over six months.
But in this case you will have to pay pre-payment penalty to the institute that has given you the loan.

Q:154. Is ready reckoner available for arriving at the Stamp Duty?

Ans: The ready recknor can be used for arriving at the stamp duty. It should be noted that the ready recknor is not conclusive for deciding the stamp duty. The ready recknor is not binding and it’s merely a guideline for the Stamp Authorities to determine the stamp duty. The stamp duty will depend on the market value of the property or the agreement value of the property whichever is higher.
The market value of the property will depend on the locality of the property, time of construction and number of other factors. An assessee is entitled to apply to officer if the stamp duty is higher.

Q:155. How is an apartment under the Maharashtra Apartment Ownership Act the any different from a flat under the Maharashtra ownership Flats Act, 1963?
Ans: Under The Maharashtra Ownership Flats Act, 1963, the land and the building including, flats/ premises or apartments are conveyed to and owned by a Co- operative Society or a Limited Company, both of which are persons or incorporated bodies in Law. An association of Apartment owners under the Act is an incorporated body. Further, under the Maharashtra Ownership of Flats Act, the legal title to the land or building vests in the society or company as the case may be and the flat or premise holders have a right to occupy and use to use their respective flats/ premises as shareholders and members of the Society or company but no independent or exclusive ownership of any portion of the land or building. In case of an apartment under the Act, each Apartment owner is entitled to the exclusive ownership and possession of his Apartment and an undivided interest in the common areas and facilities in the percentage specified in the Declaration.
An apartment is a part of the property intended for any type of independent use, including one or more rooms or enclosed spaces located on one or more floors( or part or parts thereof) in a building,( intended to be used for residence, office, practice of any practice of any profession, or for carrying on any occupation, trade or business or for any type of independent use) and with a direct exit to a public street, road or highway or to a common area leading to such street, road or highway.

Q:156. Can the common property in an apartment be insured under the Apartment Ownership Act?
Ms. R. Bhattacharya
Ans: Yes. The Manager or Board of Managers, if required by the Declaration or the bye-laws or by a majority of the apartment owners, or at the request of a mortgagee having a first mortgage covering an apartment, shall have authority to, and shall obtain insurance for the common property against loss or damage by fire, and such other hazards under such terms and for such amounts as shall be required or requested. Such insurance coverage shall be written on the property in the name of such Manager or Board of Managers as trustee for each of the apartment owners in the percentages established in the Declaration. Premium shall be common expenses. Provisions for such expenses shall be without prejudice to the right of each apartment owner to insure his own apartment for his own benefit.

Q:161. Can a housing finance Company sell a property financed through legal mortgage without the intervention of Court? How is a legal mortgage created? What are the cost implications, stamp duty etc. What are the cost slabs for creating an equitable mortgage through Memorandum of Entry?
Mr. G. Dasgupta

Ans: A mortgage deed taken by the Housing Financial Company would normally contain the provision that it can sell the property in the event of default in payment. In such a case if the document does contain the power to sell, then it will be entitled to sell without the intimation of a court.

A legal mortgage would be created by a deed of mortgage or by deposit of title deeds. There could be a registered mortgage which would require stamp duty to be paid under Article 40 of the first Schedule to the Bombay Stamp Act, 1958. This states presently that the stamp duty would be 2% of the amount secured by such deed subject to a maximum of Rs.2/- lakhs. Such a document would normally be lodged for registration.

An alternative to a legal mortgage is an equitable mortgage or by deposit of title deeds. Article 40 of the first Schedule to the Bombay Stamp Act itself states “mortgage deed, not being an agreement relating to deposit of title deeds, bond or pledge or hypothecation (Article 6)”.

Article 6 provides that the stamp duty would be upto Rs.50, 000/-

Q:162. I am purchasing a flat on a second sale. Flat was constructed in 1996. Now I am buying the flat from the owner directly but the society has not been formed yet. Therefore I believe I will have to take No Objection Certificate (NOC) from the builder. Now as a buyer please guide me necessary precautions to be taken while buying the flat. Secondly with the flat I am getting the stilt parking area also belonging to the flat owner. Will I have to sign a separate agreement for the stilt parking or a copy of allotment of parking to the first owner is O.K. Will I have to register the buying of parking area also? Please guide.
Mrs. R. Baroacha

Ans: As you have rightly pointed out you should take NOC from the father and in addition, you should also take an NOC from the society for the transfer of the flat and the stilt parking space. However it would not be necessary to have two separate agreements of purchase you could have one single agreement for purchase of the flat as well as the stilt parking space.

Q:163. A builder had entered into two agreements with two different parties for the same flat. One party which had not paid any stamp duty or registration went to High Court and got an injunction. The other party paid stamp duty and got his document registered. How can this party get the stay vacated from the High Court? What action can be taken against the builder?
Mr. S. Sengupta
Ans: You can get the stay vacated from the High Court after presenting complete facts of the case and after the Honourable Court hears your arguments. In the event your document is registered and the document of the opponent is not so registered you would have a proper right on the premises than your opponent. Legal proceedings also can be adopted against the builder.

Q:164. How many flats can we purchase in one person’s name? After selling the flat is capital gains payable?
Mrs. B. Chaturvedi

Ans: You can purchase any number of flats. However if the flat is in a co-operative society the bye-laws provide that no member should be permitted as a member if he or his family members own another flat in the area of the operation of the society i.e. to say in the same city. However this restriction can be waived by the Managing Committee under the new model bye-laws. Capital gain arise out of the flat depending upon the price received and the year in which the flat was purchased etc.

Q165. I intend to purchase land in Nasik. When I inquired in the Talathi office I was told that the land falls with in the jurisdiction of two different sub-registrars. I want to know about the procedure of the registration in this case?
Mr. N. Patil
A document should be registered with a sub-registrar of a sub-district in which the whole or some portion of the immovable property is situate. The sub-registrar has a jurisdiction only in case the whole or any part of the immovable property is situating in the area of the sub-district. A document registered with a sub-registrar who does not have jurisdiction is null and void.
So in your case you can execute the sale document and then register it with any of the two sub-registrars under whose jurisdiction the land falls. It is not necessary that to you should register the document with a sub-registrar who has substantial portion of the land under his jurisdiction. But you can even register the document with a sub-registrar under whose jurisdiction a small portion of the land falls.
It is advisable to register the document with the sub-registrar under whose jurisdiction a small portion of the land falls. Even if a document is registered with a sub-registrar within whose jurisdiction some portion of the property that is described in the
document is situate, the registration also applies to the remaining part of the property that is not situated in the jurisdiction of such sub-registrar.
It should be noted that the Sub-registrar of Bombay has all India jurisdiction. As such, the Deed of Sale pertaining to the immovable property located in Nasik can be registered with the Sub-registrar of Assurances, Bombay, also.

Q. 166. I had entered into a leave and license agreement with the owner of a
flat who had taken advance money from me. When the contract period was over he did not return my advance money inspite of being asked for it. What are my legal remedies?
Mr. Madhav Menon
Ans. In the event the owner does not refund the advance taken after the contract period is over, the following steps may be taken:
1. A notice be sent to the license or:-
i. inviting attention to the agreement between the party, the material terms and conditions thereof ; the agreement having come to an end by efflux of time; that you are ready to hand over the possession in exchange for the refund of the advanced money which we supposed must be the security deposit;
ii. That the possession will not be handed over but it will be withheld till the deposit along with the interest therein is duly refunded;
iii. That all your i.e. licensee’s obligations under the agreement including the payment of the license fee and the and the other periodical dues etc. have come to an end;
iv. That the licensee will not be responsible for any damage or depreciation to the premises and the thing lying therein;
v. That if the payment is not made forthwith, the deposit ( which under the agreement presumably would not carry any interest will now with effect from the expiry of the agreement and in any event from the date of the notice will carry interest liability, say of 12% per annum ;
vi. That if the requisitions of the notice are not complied with, the licensee will take legal steps for the recovery of the deposit amount for preventive reliefs including restraining the licensor from any manner interfering with the licensee’s possession of the premises etc.

Q 167. How do I save capital gains tax on the a sale of my flat?
Mrs. P. Thakkar
Answer: -The capital gains proceeds of sale of the property must be re-invested within two years if you are buying a ready flat. However if your monies are not utilized by the due date of your filing of your Income-Tax returns you will have to invest the capital gains in the Capital Gain Accounts until such time as you have purchased another property. This would have to be done in order to save the Capital Gain Tax.
If you do not wish to invest in a flat you would have to purchase certain bonds as prescribed under the Income Tax Act. However it has to be done within six months of the sale.

Q.169. Recently, I purchased a flat on loan basis in Ahmedabad. With the recent earthquake one of the four buildings in the colony came down. The remaining three have cracks. Since the time of the earthquake, no one is staying in the colony. The builder is arrested. I am paying installments of my loan. What do I do?
Mr.G. V. Melparambil – Bombay
Answer:-Although you are not currently staying in the building of the said colony, you will still have to repay the loan taken by you.
If the buildings in the said colony or your premises are insured, then you might be able to claim the insurance amount.
Another option would be to appeal to the Government to help to enable you to repay your loan or waive the same in view of the circumstances.
Lastly a suit could be filed against the builder in the Consumer Disputes Forum if he has the capacity to pay for claiming compensation and other related costs.

Q.170. I live in a rented property. I want to know whether a landlord is
entitled to increase rent?

Ans. The Maharashtra Rent Control Act 1999 under section 11 permits a
landlord to increase rent. But the landlord can increase the rent as
prescribed by the Act and not otherwise. The Act provides for the following
conditions in which the landlord can increase rent:
* The landlord will be entitled to increase the rent by 4% per
annum in respect of premises let for purpose of residence, education,
business, storage or trade.
* The land lord can also increase rent reasonably for any
improvement or structural alterations to premises carried out with the
written consent of 70% of the tenants.
* The land lord is also entitled to increase the rent by an
amount not exceeding 15% per annum of the expenses incurred due to special
alterations or additional amenities provided.

Q.171. We are 12 friends who have purchased a piece of land. My questions to you
are:
i. Do we need to get a separate title certificate?
ii. We together intend to construct a building. Please guide us
as to how we should go about it?

Ans. i. As you have jointly purchased the land all of you become joint
owners. It is advisable to have a separate title certificate for all the
joint owners describing shares of respective partners in the said property.
ii. If you have to construct a building you have following options:
a. You can have it on a co-operative basis. In which case you
will have to pay registration charges and stamp duty.
b. you can also go ahead without a co-operative society then
there is no need for any further conveyance as the co-owners will be the
co-owners of the buildings also. However on the formation of the building
the Apartment Ownership Act will govern and the concessional rate of stamp
duty will not be applicable for the resale as in case of a co-operative
society.

Q.172.: I am an Indian living in the U.S. I inherited a house in Delhi last year from my Grandfather and now I wish to sell it. Do I need to keep it for a minimum of 3 years to avail of the benefit of the concessional rate for long-term capital gains?

Ans: Yes. The law requires that an immovable property must be held for at least 3 years for it to qualify as a Long Term capital asset which attracts a concessional rate of tax.

Conversely if an immovable property is held for less than three years it is classified as a short-term capital asset which is charged to tax at the normal rate

However you do not need to keep the house in your name for three years before you can avail of the beneficial rate for long-term capital gains.

Since the house has been inherited by you (please note that the position is the same if it was gifted), then the period of ownership by your grandfather (who was the previous owner) is taken into consideration and therefore it will qualify to be treated as a long term capital gain.

Q:173. I live in a rented premises. The flat needs repair. I have been complaining the landlord about the need for repairing the premises. But the landlord is not paying attention at all. Do I have any remedies for this conduct of the landlord?
Ans: The law specifically provides that the landlord has a duty to keep the premises in good repair. This obviously means that the premises must be maintained in such a manner as to be livable.

If the landlord fails to do so, the tenant has a right under the Act to carry out the repairs himself and then obtain the money from the landlord later. This spent money can be recovered in two ways:

The tenant can either deduct the amount from the rent to be paid to the landlord or he may recover the amount directly at a later date both with interest.

However the amount that can be recovered must not be more than one-fourth the rent payable by that tenant for that year.

The tenant who has carried out such repairs can furnish proof of his expenses by submitting the accounts and vouchers maintained by him in this regard. Such accounts and vouchers shall be conclusive evidence of the amount to be recovered and will be binding on the landlord.

Q:174. What are the duties of Apartment Owners under the Apartment Ownership Act?

Ans: The Apartment Ownership Act encumbers the owners with several duties, namely:-

Each apartment owner must comply strictly with the bye-laws and with the administrative rules and regulations. Failure to comply with any of the same shall be a ground for an action to recover sums due for damages or injunctive relief or both.
No apartment owner shall do any work which would jeopardize the soundness or safety of the property, reduce the value thereof or impair any easement or heriditament.
No apartment owner can add any material structure or excavate any additional basement or cellar without in every case obtaining the unanimous consent of all the other apartment owners.
Subsequent to recording the Declaration as provided in this Act, and while the property remains subject to this Act, no encumbrance of any nature such as mortgage etc. can be made effective against the property.
The common profits of the property must be distributed among, and the common expense must be charged to, the apartment owners according to the percentage of the undivided interest in the common areas and facilities.
No apartment owner can exempt himself from the liability for his contribution towards the common expenses by waiver of the use of enjoyment of common areas and facilities, or by abandonment of his apartment.

Q:175. What are the conditions for qualifying for higher FSI for tenanted property which is cessed particularly in respect of the maximum and minimum size of units for re-housing the tenants stipulated by MHADA?

Ans: Higher F.S.I. for tenanted property:

Provisions in this behalf are contained in the Maharashtra Housing and Area Development of 1976. The relevant provisions are contained in Appendix III of the Schedule to the notification dated 25-1-1999 issued by Urban Development Department under the M.R.T.P. Act, 1966. It deals with the Guidelines for Enhancement for F.S.I. in Greater Bombay. This higher FSI is granted when the cessed buildings in Bombay Island are taken up for re-construction or redevelopment by the landlord and/or by Cooperative Housing Societies. Broadly speaking, the said guidelines relevant to the subject herein could be summarized as under:-

a) The new building may be permitted to be constructed in pursuance of an irrevocable written consent by not less than 70 per cent of the occupiers of the old building;

b) All the occupants of the old building shall be reaccommodated in the redeveloped building.

3. Each occupant shall be rehabilitated and given carpet area occupied by him for residential purpose in the old building subject to the minimum, carpet area of 20.90 sq. mts. (225 sq.ft) and/or maximum carpet area upto 70 sq.mts (753 sq.ft) as provided in the MHADA Act, 1976. In case of non-residential occupier the area to be given in the reconstructed building will be equivalent to the area occupied in the old building.

4. The list of occupants and area occupied by each of them in the old cessed building shall be certified by the Mumbai Repairs and Reconstruction Board and the irrevocable written consent as specified in II (a) above shall be certified by the Board.

5. The tenants in the reconstructed building shall be allotted by the landlord/occupants cooperative housing society to the occupiers as per the list certified by the Mumbai Repairs and Reconstruction Board.

6. The FSI for rehabilitation of existing tenants/occupiers in a reconstructed building and incentive FSI that will be available shall be as under:

(a) in case of redevelopment of ”A” category cessed building undertaken by landlord and/or Cooperative Housing Societies of landlord and/or occupiers, the total FSI shall be 2.5 of the gross plot area or the FSI required for rehabilitation of existing occupiers plus 50% incentive FSI, whichever is more.

(b) In case of redevelopment scheme of “B” category cessed building undertaken by landlord and/or Cooperative Housing Societies of landlord and/or occupiers, the total FSI shall be the FSI required for rehabilitation of existing occupiers plus 50% incentive FSI.

[Courtesy: Accomodation Times]

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