Dispute in spite of father’s Will

Q. My father owned a freely acquired house in Chandigarh for which he left an unregistered Will. As per the Will the house has been given to my mother for her life interest and after her it shall go to her two children i.e. myself and my younger brother. Last year I had taken the top floor of her three-storey house on rent and it being in bad condition, I had spent a lot of money ( approx. Rs 10 lakh) in its renovation. Within one month of my moving in, my mother executed a Transfer Deed in my brother’s name and he also applied for full ownership of the house to the Estate office without any notice to me. I have come to know (through RTI) that this Transfer Deed has been rejected by the Estate Office as mother has life interest ownership only of the house. I have been paying her rent and she also gets rent from first floor . Now she has filed an application under Section 21 and 23 of the Maintenance and Welfare of the Parents and Senior Citizen Act 2007 read with rule 20(3) (1) & (2) of the Chandigarh Maintenance of Parents & Senior Citizen Rules, 2009, seeking my eviction from the house on the allegation of harassing or torturing her. The Magistrate hearing is next month. Meanwhile, she and my brother are pressurising me to sign papers and relinquish my right in the house in lieu of which she would withdraw this application against me. Do I have any right in this situation? — A reader

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A. According to the provisions of the Registration Act 1908 the registration of a Will is optional and it is therefore not necessary to register a Will. In view thereof, an un-registered Will is as valid as a registered one. You should go through the copy of the Will and confirm that the Will had been signed by your father and his signature had been attested by two or more witnesses each of whom has seen that your father had signed the Will and that they have attested his signature in the presence of your father.  It is not necessary that each one of the said witnesses had been present at the same time.  In case the Will is perfect as far as the aforesaid aspects are concerned, you have a good case, and can approach the court for getting a probate of the Will which would clearly indicate the succession aspects in accordance with the Will.  You may also discuss the matter with your lawyer who is defending you in respect of the cases filed under  various Acts by your mother and seek his opinion on this issue.  

How much capital gain tax should I pay?

Q. I had purchased a plot in 1997 for Rs 1,60,000 (incl uding registration) and had spent about Rs 20,000 for filling for which I have vouchers of payment to Tractor-Trailerwalas on plain paper. In 2008  I paid Rs 2.5 lakh as non-construction charges to PUDA. I made a verbal contract with a contractor with Rs 30,000 as supervision charges plus actual cost of material and labour with a firm deadline to complete construction before 31-3-08. I paid about Rs 1,80,000 in parts for material and  labour for construction of a dwelling unit and this unit was completed in time but  the contractor expired before he could hand over the bills and vouchers of payment. A payment of  Rs 30,000 was still pending and has not been paid till now as his family could not provide bills etc. If I sell this plot for Rs 30 lakh now then what would be capital gain tax liability? — Harjit Singh

A. On the basis of the facts given in the query the amount of capital gain would work out at Rs 14,76,204.  The income ax payable on the said amount of capital gain @20.6 per cent would be Rs 3,04,098.  This computation is based on the following presumptions:-

a) The cost of plot has been taken at Rs 1,80,000 and that the same was incurred during the financial year 1997-98.

b) The construction cost of Rs 2,10,000 (cost of materials & supervision charges) was incurred during the financial year 2007-08. This is on account of the reason as you have not mentioned various years in which above payment was made.

c) The amount of Rs 2,50,000 as non-construction charges was paid to PUDA in the financial year 2008-09.

d) The amount of Rs 30,000 payable to the contractor has not been taken into account as the construction bills thereof are not available with you.

Is VAT payment justified?

Q. My son had booked a flat in Gurgaon in 2010, but the possession has not been not given so far. Now the builder is demanding VAT . Does my son need to pay this tax? — Amarnath

A. According to the provisions of the applicable law a builder is liable to pay VAT on the building material purchased from the unregistered dealers. He can recover the amount so payable by him from the buyers of the flat in case the agreement into with you so provides.

Can my mother overlook brother’s claim in property?

Q. I live in Chennai; my father had purchased an independent house on the outskirts in 1985 and the property is in my mother’s name. My father passed away in 2001. We are two brothers — legal heirs having right over the property. Now, my mother wishes to transfer it in my name. What is the process involved for ownership transfer? Will there be any legal complications in future from my  brother who is also a legal heir? — Russel r

A. It is presumed that the funds for independent house purchased by your father in the name of your mother were provided by him. The house for all intent and purposes would be treated as her house except that income thereof would have been clubbed with the income of your father. After his death she being the owner of the house, has a right to transfer the property in the name of any of his sons.  She can gift the property to you by executing a gift deed in your favour or make a Will in respect thereof in your favour.  Your brother may contest the gift deed as well as the Will but in my opinion it may be  difficult for him to disprove the bonafides of the documents. 

Terms of non-construction clause

Q. I sold a plot in October 2013 and the capital gain arising from the sale was Rs 10 lakh. So I purchased a plot within a month i.e in November 2013 and decided to construct it within three years. But I have not been able to start construction till now. Can I get any further extension for construction by paying some fine or penalty? — gurinder singh

A. It is presumed that the capital gain of Rs 10 lakh was a long-term capital gain.  The reply to your query is based on the said presumption. No further extention is allowable for the period specified in Section 54F of the Income Tax Act 1961 (The Act) dealing with the exemption from the taxability of the capital gain arising on the sale of a capital asset other than the residential house.  According to the provisions of said Section in case the amount of net consideration (consideration accruing on the sale of the plot less expenditure, if any, incurred wholly and exclusively in connection the sale) is not utilised for construction of a residential house within three years after the sale of the capital asset before the date of filing the income-tax return for the financial year in respect of which the capital gain is taxable, then, the unutilised amount is required to be deposited with a bank under capital gain scheme  account before the aforesaid date.  Presuming that it has been done, the amount of capital gain would be taxable as income of the previous year in which the period of three years from the date of sale of the original asset expires.  The amount of Rs 10 lakh would, therefore, be taxable as income of the financial year 2016-17.  In case the unutilised amount was not so deposited, the amount of capital gain would be taxable for the financial year 2013-14.

Sale of agri land outside MC limits

Q. I want to sell my agricultural land which is away from municipal corporation or council limits. This is an ancestral property which our family has been holding for a long time. If I sell this property for Rs 1 crore then what will be the tax liability? — Harminder Singh

A. You have not indicated in the query the distance of the place where the agricultural land is situated from the municipality etc. Reply to your query is based on the presumption that agricultural land was situated  beyond the area specified in section 2(14) of the Act. 

It is not possible to compute the amount of capital gain as you have not indicated the cost of the agricultural land or in case the agricultural land was purchased prior to 1.4.81,  the fair market value of such agricultural land as on that date.  The cost of the agricultural land or the fair market value as on 1.4.81 will have to be indexed on the basis of the notified cost inflation index.  

The indexed value so ascertained will be deducted from the sale price i.e. Rs 1 crore.  The balance amount would be taxable @20 per cent plus education cess of 3 per cent thereon.