How should property be divided among three sons?

S.C. Vasudeva

Q. Our father owned 276 sq yd-plot the sale deed for which was registered in his favour in 1972. The sale deed was registered between Improvement Trust Amritsar and our father. The mutation of this property has not been got entered in revenue records as our father was under the impression that since the sale deed has been signed and registered between him and a government autonomous body there was no need for mutation in revenue records.

We have now got Khasra No. from the Improvement Trust, Amritsar, and have also come to know that mutation can be done now also — first in his name and thereafter on the basis of a registered Will in the name of three sons. He has written a registered Will and willed as under

• During his lifetime he will be the owner of the plot
• After his death his wife will remain the owner
• After the death of his wife all three sons will get equal share (@33.3%)
• His two married daughters or any other relatives will not have any right.

As our parents are no more, we three sons wish to get the property (Plot of 276 sq yard) 33 sq feet width x 76 sq feet length) in three equal shares, as per the Will.

Our queries are:

1. How to get the property divided in three equal shares legally with a purpose to sell it in future, if need be, and each one should have the right to sell his share?
2. Whether we have to write any deed/agreement among ourselves and get is registered with the sub registrar or any other legal procedure is to be adopted?
3. How to get the mutation done after division of the above said plot/property  in equal share? Is mutation possible thereby entering in revenue records i.e. three names ( i.e. around 90 sq yard each).
4. We wish to complete all formalities/legal requirements at the time of partition/division/transfer in the name of each one so that in future all get a valid title.
5. Kindly clarify whether for constructing residences on 90 yard plot any permission from Municipal Town Planner is required as this plot is situated in Improvement Trust planned scheme that has now been transferred to municipal corporation for maintenance and all others purposes. 

— Jajpat Rai Thakral

A. Your queries are replied hereunder:

The facts given in the query indicate that the plot of 276 sq yard was allotted to your father  by Improvement Trust, Amritsar. It has also been stated that at present the area in which the plot is situated has been transferred to Amritsar Municipal Corporation (Corporation). The plot in my opinion in the first instance, would be mutated on the basis of the registered Will in the joint name of three brothers.  The issue with regard to sub-division of the plot into three earmarked  equal shares can be done with the permission of the Corporation. Normally, development authorities do not permit sub-division of plot which has been allotted by a development authority. 

The procedure for the division of  the plot in earmarked shares as stated above, would depend on the permission being granted by the Corporation. An agreement may be drawn up between three brothers allocating 1/3rd shares to each of the brothers with clear marking on the plan of the plot which should be filed with the corporation so as to seek its permission.

In case the Corporation permits sub-division of the plot, the house plan for construction of building by each of the brothers must be obtained from the authority authorised to grant such approval.  It seems the authority will be the Corporation and if so permission be obtained from the Corporation.

Is LTCG determined on the basis of stamp duty value?

Q.I had sold some land in September 2016. The fair value of the land as at 01-04-1981 was Rs 80,000 and it was sold for Rs 53 lakh. However, the valuation for stamp duty for the said land is Rs 65 lakh. My queries are:

• LTCG will be determined on the basis of Rs 53 lakh or Rs 65 lakh and can it be used partially in purchase/construction of a house and partially in purchasing Capital Gain bonds? 
• Since consideration received is only Rs 53 lakh, do I have to invest up to Rs 65 lakh?
• Can I invest in more than one house also to claim exemption?
• Presently the sale proceeds are kept in FDR with a bank. The last date of filing the Return in my case was July 31, 2016. Which are the last dates upto which bonds can be purchased and the amount be deposited in a Capital Gain A/c scheme for future investment in purchase/construction of house?
• If for any reason, I am not able to invest in a house before the specified date then what will be the consequence? — Shivraj

A.Your queries are replied hereunder:

The amount of long-term capital gain will be determined with reference to the stamp duty valuation i.e. Rs 65 lakh. Please note that in case of sale of capital asset other than a residential house, net consideration (consideration accruing for the sale of such capital asset less expenditure incurred wholly and exclusively for the sale of the capital asset) is required to be utilised for purchase or construction of a residential house within the specified period so as to seek exemption from the levy of income-tax on long-term capital gain.  As against this, the amount of capital gain arising on the sale of capital asset is required to be utilised for purchasing tax-saving bonds so as to seek exemption from the levy of income-tax on the amount of capital gain.  The issue of partial utilisation on the basis of the facts given in the query may, therefore, not to be relevant.  

However, the issue raised by you may be relevant where part amount of net consideration is utilised for purchase or construction of a residential house and part amount of capital gain is utilised for purchase of tax-saving bonds so as to seek exemption from the levy of tax on the amount of capital gain. Such a proposition would be permissible under the existing provision of the Act.

As pointed out in (a) above you are required to utilise the amount of net consideration towards the purchase/construction of a residential house within the specified period. However, the investment in capital gain tax-saving bonds can be made in respect of the amount of capital gain.  

There are decisions in favour of the fact that it is the amount of actual consideration which is required to be utilised for purchase or construction of  house within the specified time. Therefore the issue raised by you would not be relevant. 

The applicable provisions of the Act require that the amount of net consideration should be utilised for the purchase/construction of a residential house other than one house which the assessee owns at the time of such purchase/construction.

Tax-saving bonds are required to be purchased within six months of the date of sale of the capital asset.  

In case you intend purchasing/constructing a residential house so as to claim exemption for taxability, you will have to deposit the amount of net consideration in the capital gain scheme account before the due date of filing tax return for the financial year in which the capital gain arose.  The amount so deposited can be utilised for purchase/construction of a residential house within the specified period. 

No penalty would be leviable in case you have not purchased/constructed the house within the specified period. The amount deposited in capital gain would be brought to tax as long-term capital gain in the year in which the specified period expires.