Property laws and taxes: Individual agreements necessary in redevelopment

We have entered into redevelopment agreement between the society and developer. We, as the members want individual agreements also but the society has taken a stand that members have only right to occupancy and agreement with the society is sufficient. Can we enforce our right to individual agreements?
- Pramod Bhasin

In the process of redevelopment, execution of individual agreements in respect of each member giving complete description or details of his entitlement to  new flat under the scheme of redevelopment is absolutely necessary.  Such an agreement will become the member’s title document in respect of the new flat. Such a document would also create a locus standi for enforcement of individual member’s rights.

The view that a member in a co-operative housing society has only right of occupancy is itself a questionable view. De facto, a member is the owner of his flat and his property rights are valuable. In fact, the entire scheme of redevelopment should recognise members as the owners of the property standing in the name of the society.

Such a stand would give proper recognition to the property rights of the members and would also enable in contending that the member being a taxable entity would be entitled to various exemption benefits under Income Tax Act, 1961 available to an individual.

In the context of income tax, as of today, some societies have succeeded in claiming up to tribunal level that on the theory of no cost, no capital gains, their transactions under the development agreements in respect of transferable development rights are not taxable, whereas, some societies have been taxed depending upon structure of the scheme and documentation.

However, all these cases have reached and have been admitted at high court. If the high court confirms the view that transaction of transferable development rights is per se not taxable on application of the principle of no cost, no capital gains.

However, in a possible adverse view that no cost, no capital gains theory is not applicable to such transactions, tax will become payable and if tax becomes payable, the cases in which individual members are the taxable entities will be far better placed than the cases in which societies are held as taxable entities because of various exemption benefits available to an individual.

I have purchased a flat in a cooperative society and due to some disputes, the society is not transferring the same in my name and has been charging non-occupancy charges. What is your opinion on this?
 —V Ramprasad
A bonafide purchaser of a flat in a cooperative housing society cannot be levied with non-occupancy charges simply because of any reasons whatsoever, he has not been admitted as a member of the society.

Tarun Ghia is a chartered accountant and can be reached at ghiatarun@rediffmail.com.

Pradnya Vairale is an advocate and can be reached at advpradnyag@gmail.com