Builder asking for extra charges

S. C. Vasudeva

Q.I had booked a 2-BHK flat in Zirakpur in the name of my wife in September, 2012 for total amount of Rs22 lakh+service [email protected] per cent. Almost 95 per cent of the total amount along with service tax @3.09 per cent was paid within the stipulated period. The balance 5 per cent amount plus the service tax and mandatory club fees were to be paid at the time of possession along with registration fee @7 per cent . As per verbal assurance given by the builder, the possession of flat was to be given by March, 2013. Thereafter on my follow-ups, new date of December, 2013 tentatively was given through e-mail. In May, 2014, the builder sent a registered letter stating that possession can be taken subject to clearance of dues. He also raised the following additional demands:

 

• Towards net basic cost External Electrification/ Fire Fighting Charges — Rs 92,000 (basis not given)
• Labour cess@Rs12/sq.ft: 15,000
• Deposit against VAT — Rs60,000 (no basis given)
• Maintenance: Interest- free maintenance security deposit — Rs30,000
• Common Maintenance Charges for first 6 months — Rs15,000
• Capital replacement Fund for first six months —Rs3,600
• Registration Charges other than stamp duty — Registration fees of Rs21,564, Computer fees : Rs5540; Legal and other Expenses: Rs17,282 with service tax of Rs2,136.

Since the flat was not ready, I have not paid any money till date despite a reminder. My communications to the company regarding flat being incomplete have remained unacknowledged. My queries are:

a) Is the builder is justified in asking for external electrification, labour cess, VAT etc, particularly when the letter of allotment mentions that “Total unit price net of discount and including PLC, if any shall be Rs22,00,000”.

The letter of allotment says “basic price of the unit does not include any tax paid or payable by developer and/or its contractors by way of VAT, states sales tax, central sales tax etc. Cost of external electrification is not included in basic price and shall be payable by the allottee. Allottee agrees to pay government/local body rates, cesses, charges, ground rent, taxes of all and any kind by whatever name called".

b)What is the justifications for interest-free maintenance security deposit and Capital replacement Fund?

Letter of allotment obligates the allottee to enter into a maintenance agreement with any association appointed/ nominated by developer for common services.

c) Other than the stamp duty for registration of flat, what is the justification for Registration fees, Computer fees and Legal & other Expenses.

d)Since the builder has not given the possession despite assurance of December 31, 2013, are there any ramifications of this?

e)Can the builder offer possession without obtaining completion certificate from civic/govt. authority concerned.

f)After inclusion of these additional charges, cost of flat has increased substantially over and above the basic cost; what is the remedial course.

— Nishant Jain

 

A.Your queries are replied hereunder:

• The letter of allotment clearly provides that “Cost of external electrification is  not included in basic price and shall be payable by the allottee”.  The allotment letter also provides that “Allottee agrees to pay Govt./Local body rates, cesses, charges, ground rent, taxes of all and any kind  by whatever name called”. Therefore, at this stage you cannot refuse to make the payment of the charges with regard to the aforesaid items as your have agreed to the terms contained in the allotment letter issued to you.
• Interest-free maintenance security deposit shall be payable to any association appointed/ nominated by developer for common services.  You can, therefore, seek a clarification from the developer as to the name of the association which has been formed by the developer for common services and the amount of Rs30,000 may have to be paid to such an association. If the amount is being demanded by the builder, you can seek an assurance from the builder that the amount is being received by the builder on behalf of such an association. You can, however, question the demand for capital replacement fund which does not find mention in any of the clauses of the allotment letter.
• Normally, apart from the stamp duty, the registration charges are also be payable at the time of registration of property. However, there is no requirement for charging computer fee and legal and other expenses in the allotment letter.  You can, therefore, contest the demand of the builder in this respect.
• The builder can be made to pay interest on the amounts which have been paid by you as the property has not been handed over to you on the scheduled date.  However, you would have to approach the Court for this purpose. You can also take up this issue with the Consumer Court instead of a Civil Court.
• The builder cannot offer possession without obtaining completion certificate from the authority concerned.
• For the remedial measures you should approach the Consumer Court as the cost involved in such a court is minimal.

Value of inherited property

Q.My grandfather had purchased a small residential house for Rs3500 in 1953 and bequeathed the same through a registered Will to my father in 1954. My father took possession of the same in 1954 and his family started living there. The house is registered in his name in municipal council’s records. My father made a registered Will in October, 2012 and bequeathed the house to me. He expired in October 2013. I got the house registered in my name in the municipal council’s records in July 2014. i want to sell this house in 2015. My queries are:

• What will its fair market value as on 1.4.1981
• What will be my capital gain
• What will be my income tax liability as it is an ancestral property transferred in my name after the death of my father. — ravi rana

A.Your queries are replied hereunder:

• The fair market value of a property can be ascertained by an approved valuer. You will, therefore , have to approach an approved valuer for getting the fair market value ascertained as on 1.4.81.
• Apart from the amount of fair market value as on 1.4.81, the amount of sale consideration has also not been indicated in the query. It is, therefore, not possible to compute the amount of capital gain.
• No income-tax is leviable on a property devolved by inheritance.

From which date will the LTCG period start?

Q.I had purchased a 319 sq yd plot from GMADA in Mohali and paid the installments as under:

 

• Rs1,12,000 in 1999 with application as 10 per cent of the cost of the plot.
• Rs1,68,000 in 2000 on issue of LOI as 15 per cent of cost of 300 sq yd plot. Total 25 per cent.
• Rs47,440 in March, 2007 on allotment of the plot to complete 25 per cent payment.
• Rs9,51,867 in May 2007 as full balance payment at the time of taking possession.
• Rs18,500 in May 2007 as processing fee.
• Rs. 1,05,000/- in May 2007 as Registration fee/stamp duty.
• Rs2,45,312 in April 2011 as non-construction charges in three years of allotment.
• Rs35,00,000 in Apr-Jun 2011 construction cost and taken completion report.
• Rs10, 00,000 in 2013for renovation of first floor.

 

Now I intend to sell the house in 2015 for about Rs120 lakh. My queries are:

(i) From which date the LTCG period will start?

(ii)How the LTGC tax will be worked out?

(iii) How much LTGC tax has to be paid?

(iv) When the tax is to be paid? — S. Singh

 

A.Your queries are replied hereunder:

 

• Long-term capital gain in respect of land should be computed from the date of allotment i.e. w.e.f. March, 2007 in accordance with a latest decision of Hon'ble High Court. Indexation benefit should also be given for the financial year 2006-07 on the said basis.
• Long-term capital gain would be worked out by giving indexation benefit in respect of various payments made by you, thus arriving at the total cost of land. Similarly, indexation benefit for cost of construction and renovation expenditure will also be given from the date of incurrence of the expenditure.
• Long-term capital gain would work out at Rs33,79,323 on the basis of cost inflation index notified for financial year 2014-15. This computation has been made after taking into account the indexed cost of Rs86,20,677 and the estimated selling price of Rs120 lakh. In case the house is sold after March, 2015, cost inflation index for 2015-16 would be applicable. The same has not been notified so far. The amount of long-term capital gain would be reduced on account thereof as the indexed cost would increase because of the applicability of a higher cost inflation index. It may be added that the amount of capital gain has been worked out on the presumption that first floor stood constructed when construction was completed in June, 2011 and renovation expenditure is not in the nature of expenditure on the construction of 1st floor.
• The amount of tax payable on Rs33,79,323 would be Rs6,96,141. The amount of tax would be lower in case the transfer takes place after March, 2015 on account of the reasons explained in (c ) above. The amount of tax has been computed @ 20 per cent + 3 per cent education cess.

IT rebate issue

Q.I am working with a government-aided institution. I have a loan from a nationalised bank in installments (from 17.3.10 to last installment 10.8.13). As the housing society had promised to deliver the flat by the end of 2011 (plan written on a document by the society), I started taking income tax rebate from 2011 up to three years. But the construction got delayed and I got possession in October 2014 although the completion certificate issue is still pending with the HUDA authorities. Kindly tell me what should I do with regard to the income tax rebate that I have claimed for three years. — Amrita

A.It is presumed that you have claimed a deduction against your total income in respect of the repayment of principal amount borrowed for the construction of the house. The relevant assessment years should be 2012-13, 2013-14 and 2014-15. You can revise the return for assessment year 2013-14 upto March, 2015 and that of assessment year 2014-15 up to March, 2016 for rectification of the above mistake. You can, thus, pay the tax on the basis of revised return and this should settle the matter for these two years. However, the return for the assessment year 2012-13 cannot be revised at this stage and, therefore, in case the Assessing Officer so decides, he may rectify the assessment order or processing sheet for the assessment year 2012-13 under Section 154 of the Income Tax Act, 1961 (The Act) on the basis of the clarification tendered for revising the return for assessment year 2014-15 / 2015-16. The amount of tax on the basis of rectification order can be paid thereafter.

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