UNDER MAHARASHTRA RENT CONTROL ACT 1999 (A Solution to the problems created by black money) PROBLEMS & GUIDANCE BY MAHABALESHWAR MORJE |
INTRODUCTION :
The black money (pugree) always created more problems than solution. Though
approximately more than Rs.70,000/- crores were received and paid during
the period of 1947 to 1997 within 50 years or thereabout after commencement
of Bombay Rent Act 1947, however no part of the said amount could be utilised
for the purpose of construction of new buildings or for repairs or reconstruction
of old buildings. As no new building were constructed, there was shortage
of housing and as old and deliberated buildings were not repaired and reconstructed
there were house collapse resulting deaths of innocent person. This
has resulted in creating artificial shortage of housing, building collapses
and more disputes between the landlords and tenants. Under the Bombay Rent
Act 1947 rent was frozen and premium or deposit was prohibited which gave
rise to illegal premium. Some of the tenants were forcibly dispossessed
and/or false suits were filed against them only to receive the unreasonable
amount by force in the form of pugaree by harassing them.
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C O N T E N T S |
Preface by Shri. Mahabaleshwar Morje |
The objects and purpose of ligalisation of Pugree. |
Report of Joint Select Committee on rent act |
Advantages of Legalisation |
New Sec. 56 Right of Tenants and Landlords to receive premium |
Need of Guidance |
Approximate Percentage or Ratio Pugree |
Stamp Duty on Agreement of Leave and Licence |
Stamp Duty on Tenancy Agreement |
Article 5 (g-d) of Schedule 1 of Bombay Stamp Act 1958 |
Income Tax |
Whether Landlord can refuse to transfer Tenancy? |
Benefit to all |
Questions & Answers |
Stamp Duty rates for residential premises |
Market Value of properties for the year 2000 |
Agreement for payment pugaree (Premium) |
Notification regarding table of fees for registration |
The short notes on Income Tax on immoveble property by Mr. Ghia |
Most of the members of Joint Select Committee, particularly those from
the Mumbai City and suburbs debated on the question of Premium, the amount
paid in consideration for letting rental premises. In view of the existing
prohibition for charging of such premium on transactions that take place
while letting the rental premises involving huge amount of black money,
are having
serious
ramifications endangering real estate market. The Committee, therefore,
gave serious thought to this issue. The Committee observed that the "premium"
transactions take place (1) at the time of granting tenancy, (2) at the
time of renewal of lease and (3) at the time of transfer of tenancy rights
to other person. Bombay Rent Act 1947 came into force on 13th February
1947. It was noted that more than Rs.70,000/- crores have been paid or
received as "Premium" in the city of Mumbai and suburbs. But it could not
be used for any official purpose as it is not legal. As a result of the
landlords were deprived of premium or deposit which could have been used
as capital for construction of new buildings and for repairs and reconstruction
of the old and deliberated buildings and the landlords could have got reasonable
increase in the form of increase in rent. At the same time, Government
was also deprived of lawful revenue of crores of rupees by way of income
tax, and The State Government in the form of stamp duty and Municipal Corporation
in the form of additional property taxes.
It must be noted that although the charging of rent above the standard
rent and permitted increases or receiving any consideration in cash or
in kind other than the standard rent is an offence under the existing Act,
there may not be a single transaction where granting or continuation or
renewal of a lease is made without unlawful consideration (Premium).
The several properties are acquired by the
professional landlords, with in collusion with some of the politicians,
builders & developers, solicitors, lawyers, architects, social workers
and with only to make easy and quick money and unfortunately image of entire
legal and architectural profession is tarnish. Thus
the
consequences of "Premium" i.e. money received illegally has created serious
problems in real estate. Further, this black money is to a great extent
cause of several killing of professional landlords, builder, developers,
contractors, etc. Similarly, it has resulted in creation of parallel economy,
which has created imbalance in the money market. This also enables the
landlords to give handy excuses for denying repairs to the old buildings.
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The money received by way of "Premium" could be used for the construction
of new buildings by the landlords, builders and also to repair and reconstruction
of old buildings.
It
will fetch large revenue to the State exchequer by way of Income Tax and
Municipal Corporation Tax
It
will bring down the inflation in the real estate market and reduce the
black money.
It
will reduce litigation/dispute between landlords and tenants.
It
will motivate the tenant to surrender his tenancy by getting amount officially
which he can use for hiring better premises or ownership flat.
It
will provide unlocking of substantial stock of housing which has been lying
unused.
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Notwithstanding anything contained in this Act, it shall be lawful for, -
The tenant or any person acting or purporting to act on behalf of the tenant to claim or receive any sum or any consideration, as a condition of the relinquishment, transfer or assignment of his tenancy of any premises;
The landlord or any person acting or purporting to act on behalf of the landlord to receive any fine, premium or other like sum or deposit or any consideration in respect of the grant, or renewal of a lease of any premises, or for giving his consent to the transfer of a lease to any other person.
Though the premium (pugaree) is legalised at the time of granting renewal
or at the time of surrender, the people do not have sufficient guidance
for drafting any agreement to this effect. Some of the people have
made inquiries with the Hon'ble Minister of Housing or Department of Housing
or Department of Law. However they are yet to receive any guidelines.
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The landlords and tenants need guidance on the following points :
PERIOD | LANDLORD |
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50 years or more |
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40 years or more |
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30 years or more |
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20 years or more |
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10 years or more |
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10% |
It will be kept in mind that the longer period of possession, more percentage
of premium subject to adjustment and effects in each case.
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Under
the existing practice though there is no specific circular, the Stamp Duty
is collected on the basis of 12.5 years and rent without tenancy right
being converted into ownership.
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Article 5 (g-d) of Schedule I of Bombay Stamps Act, 1958 read as below :-
Agreement or its records or Memorandum of Agreement relating to transfer of tenancy of immovable property, for every square meter of the area of the tenanted property the right of tenancy which is the subject matter of transfer and situated within the limits of -
The
Municipal Corporation of Greater Bombay
for
the purpose of non-residential premises - One thousand rupees
for
the purpose of residential premises - One hundred rupees
The
Municipal Corporation of the Cities of Thane, Pune, Nagpur and Navi Mumbai.
For
the purpose of non-residential premises - Five hundred rupees
For
the purpose of residential premises - Fifty rupees
The
Municipal Corporations of the Cities of Kalyan, Pimpri-Chinchwad, Amravati,
Nashik, Aurangabad, Kolhapur and Solapur.
For
the purpose of non-residential premises - Two hundred rupees
For
the purpose of residential premises - Twenty rupees.
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"In absence of clear and unambiguous legal provisions to the contrary, it will not be in public interest nor in the interest of commerce to impose a ban on sale ability of these flats by a tortuous process of reasoning. The prohibition if intended by the legislature, must be in express terms (1974) 76 BOM LR 375 Reversed (Para 18,19)" Ref. Ramesh Himmatlal Shah vs. Harsukh J.Joshi AIR 1975 SC 1470.
There is no absolute prohibition in the Act or in the Rules or in the Bye-laws against transfer of a member in the property belonging to the Society. The only transfer which is void under the Act is one made in contravention of sub-sec. (2) of Section 17.
The Flat is owned by the Society and the alottee has a right or interest to occupy the same. There is nothing in the language of Section 31 to indicate that the right to be sold in auction is not attachable in execution of the decree. There is nothing in Section 31 to even remotely include a prohibition against attachment or sale of the aforesaid right to occupation of the flat (Paras 17,18)
The only restrictions under Section 29 (2) are that the member may not transfer his interest in the property prior to one year and the transfer is made to an existing member of the Society or to a person whose application for membership has been accepted by the Society. It is true that by-law 71D says that a member to whom a tenement is allotted shall to whom a tenement is allotted shall not assign or underlet, vacate or part with the possession of the tenement or any part thereof without the previous consent in writing of the Managing Committee, but there is nothing to show that contravention of this by law makes the assignment void under the Act unlike in the case of a transfer being void under Section 47 (3). There is no impediment to ratification of the assignment by the Committee particularly in view of the legal position arising out of the conjoint effect of Section 29, rule 24 and by-law 9. Section 29 read with rule 24 shows that there is no prohibition as such against transfer of a share to a member or even to a non-member if he consent to be a member and makes an application for membership by purchasing five shares as provided under by-law 9.
In case landlord cannot accept the part of his share the both the tenants
can said that amount to the Chief Minister or Housing minister bringing
to their notice that the amount is being refused by landlord without reasonable
cause. Under no circumstances landlords cannot refuse the amount. At the
most we can demand additional amount if the circumstances so warrant
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Let us hope that the people of Maharashtra should try to get maximum benefits
of this new Act and fulfill the object of converting the black money into
real money to achieve the real object of life that is peaceful co-existence
and better houses at affordable cost and affordable rent.
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Q-1 | What happens when the Original landlord who has taken Pugaree or Deposit is dead, whether the landlord who has subsequently purchased the property is liable to pay the premium or refund the deposit? |
Ans. | As the subsequent landlord get certain rights he will also has to shouldier certain responsibilities. If it is proved that original landlord has taken premium or deposit, The tenant Old or New can insist upon him to refund the premium or deposit. Before the New Rent Act when premium was taken, it was nothing but substantial price was accepted without receipt; now the difference is that it is accepted under the written and registered agreement with receipt. |
Q-2 | When the deposit is paid at the time of creating Leave and Licence or Agreement of Lease, if the Landlord or Licensor refuse to return the amount at the time of vacating the premises, what is the remedy to the Licensee or tenant ? |
Ans. | When the deposit is paid it must be kept in the joint account i.e. of landlord or tenant jointly and that interest payable should be shared equally or by consent Landlord should be allowed to have entirely, and that if the landlord failed to return the deposit after the expiry of the Licence or Lease, he should be prosecuted for criminal breach of trust and that he should be held liable to pay penal interest which may be at the rate of 24% on the deposit. |
Q-3 | Whether instead of taking money in the form of pugaree, when premises are required to be surrendered, whether it can be done by converting tenancy right into ownership by paying the share of pugaree payable to the landlord ? |
Ans. | It must be noted that very object of receiving and paying pugaree is to acknowledge the legal rights for possession as a tenant and that either the tenant or occupant can take money in the form of pugaree or deposit. Some of the tenants and occupants from Girgaon, Lalbaug, Parel or such areas have vacated the premises and have gone to Dombivli, Kalyan and other places. Instead of taking money in the form of pugaree and going away, tenants or occupants can pay the amount of paguree payable to the landlord as a balance payment and convert the tenancy right into ownership. |
Q-4 | Under the Old Bombay Rent Control Act, the Landlord himself or any person acting or purporting to act was liable for imprisonment and fine on conviction if he has taken or received any fine premium or a like sum. However in view of the fact now that this provision is deleted and new Section 56 is included whether the landlord is liable for acquittal? |
Ans. | According to New Section 46 since the premium or deposit was prohibited, it will be a technical offence and the accused is liable for punishment. However, in view of the fact that under Section 56 of the New Act, the right is given to the tenant and landlord to receive any amount in the form of premium or deposit etc. In view of the said facts and in view of judgement of Supreme Court reported in Mohanlal Kotharu Vs. Tribhuvandas 1963 SC 358. |
Q-5 | Whether it is mandatory for the new tenant and landlord to have agreement in writing and have it registered under the New Maharashtra Rent Control Act 1999? |
Ans. | Under the new Act, it is stated that notwithstanding anything contained in the Act 1999, it will be lawful for the tenant or any person acting or purporting to act on behalf of the tenant to claim or receive any sum or any consideration as a condition of relinquishment, transfer of assignment of tenant of any premises. It is also in the interest of both to have written agreement in respect of old tenants also |
Q-6 | Whether the landlord has right to receive lawful charges under the new Act? |
Ans. | It must be noted that under the old Rent Act 1947, the landlord either himself or through any person acting or purporting to act on his behalf was prevented from taking any fine, premium or lumsum or deposit in respect of grant of renewal or lease of the premises. Now right is given to him under Section 56, of M.R.C.Act 1999, and it is not an offence. |
Q-7 | What is the advantage of the legalising the Pugaree? |
Ans. |
|
Q-8 | Whether the landlord or licensor can insist upon the old tenant or old occupant to pay additional premium or deposit after the commencement of the new Act? |
Ans. | The new act has conferred certain rights and duties on landlord and tenant. There are tenants who having the commercial premises are benefited by the use of the premises and on their own they may give some deposit to the landlord on their own. However, it may not be possible or legal to force an old tenant to pay premium or deposit |
Q-9 | What are the advantages of giving deposit at the time of receive tenancy rights or renewal interest? |
Ans. | There may be tenants or occupants who may like to convert the black money into white money and by virtue of adding it as a part of tenancy document. It becomes a document of title referring to the value of the property and like agreement of ownership flat, which is duly stamped and registered. This agreement of tenancy right also furnished as a security when the tenant occupant tries to get some loan. |
Q-10 | Is it mandatory to have a written agreement and have it registered in respect of old tenancy or in case of old licenses? |
Ans. | The agreements which are executed in writing and registered are beneficial to both the parties. In the countries all over the world, the agreements are entered into writing. This helps parties to know their rights and duties. The execution of an agreement in writing will help both the parties and in no way it will cause any difficult or disadvantage to any of the party and therefore even assuming that it is mandatory under the new law, it is in the interest of both the parties to do so. |
Q-11 | What happens when the original tenant is dead and rent receipt is not in the name of living person? Whether the living person who is a heir or legal representative can claim damage when he transfer his tenancy right or is surrounder his tenancy right or possession? |
Ans. | The possession of the terminated premise is considered as a nine point in law. It is the courts right in favour of tenant and occupant. He is the court's right in favour of tenant and occupant. He is entitled for premium when he transfer the premises or surrounder the premises. However, he will not get the same percentage as ratio of the package, which the living person would get. |
Q-12 | Whether advisable to take premium (pugaree)and vacate or surrender the premises or it is better to pay because amount and converted into ownership? |
Ans. | The Pugaree is reward for the length of possession that the tenancy or occupant is in possession of the premises, e.g. If the market value of the premises is Rs.15,00,000/-. And as account of transfer original tenant get 10,00,000/- and landlord get 5,00,000/- as pugaree. It is better that old landlord pays the landlord Rs.5,00,000/- and get tenancy right converted into ownership rights, let me keep "Paguree" over "Paguree" in real term. |
Q-13 | Whether the pugaree or deposit is officially received in other countries like U.K., U.S.A. and refunded it at the time of vacating it? |
Ans. | Yes, when the new tenancy is created premium or deposit is officially accepted and the amount is refunded when the premises are vacated. |
Chargin Section 45(1) : Prerequisites : Capital Asset u/s.2(14) and transfer u/s.2(47).It is reproduce from the note prepared by T.J. Ghia (Chartered account) at his lecture meeting on 5th June. 2000.Transfer inter alia includes :
Relinquishment (example : release deed)
Compulsory acquisition : (examples : by appropriate authorities under chapter XXC By BMC of plot coming under reservation for cash or TDR)Taxability of Tenancy rights cost of acquisition whereof is NII :
Before 01 04 1994 : Ratio laid down in B.C. Srinivasa Setty 128 ITR 294 (SC) would apply From 01 04 1994 : Capital gains would arise as Section 55 (2) amended.Taxability of alternative accommodation received in place of tenanted premises when transferred : Capital gains would arise cost of acquisition = fair market value as on date of its acquisition this view supported by case law in 7 ITD 160 BOM.
Another view : Not taxable as cost of acquisition of alternate accommodation was nil no decided case law to support this view In any case this view not be possible in respect of alternate accommodation received after 01 04 1994
Taxability of TDR : When TDR is received in place of land acquired by BMC : taxable as capital asset has been transferred date of possession to BMC is the date of transfer fair market value of TDR is the consideration received
Another view : Not taxable as no transaction of commercial nature development potential in the land acquired has been transformed in DRC no gains or profits have arisen to the assessee Fair market value of TDR not easily determinable as will be dependent upon the buyer and in which suburban area he intends to use
Transfer of TDR will attract capital gains
Analysis of relevant judgements
ANALYSIS OF VARIOUS CASE LAWS IN RESPECT OF COST OF ACQUISITION COST OF IMPROVEMENT EXPENSES IN CONNECTION WITH TRANSFER PURCHASE/CONSTRUCTION U/S. 54 :
Interest received on unpaid sale price : (1999) 239 ITR 489 (MAD)
Discharging Mortgage on property (1997) 93 Taxman 389 (SC) 227 ITR 222 (SC) 222 ITR 211 KER
Interest on borrowal for acquisition of property : 152 ITR 247 KAR
Amount paid to tenant for vacating : (1998) 234 ITR 95 AP
Renovation work : (1997) 224 itr 414 (sc)
Legal expenses in compulsory acquisition : 127 ITR 810 KER
Expenses to realize consideration : (1999) 107 Taxman 544
Leasehold rights and valuation : 176 ITR 417 (SC)
Time limit for investment in new residential house wording u/s. 54 (2) can be beneficially used in favour of assessee
Remodelling a house : (1997) 138 Taxman 243
Flats in self financing type of co-operative societies and institutions : Circular 672 dtd. 16 12 1993
Supreme Court on word purchase u/s. 54 : 120 ITR 46
Date of construction : 165 ITR 571 KAR ITA No. 5937 BOM 56 TTJ 417 MAD
New house partly purchased and partly constructed : 129 ITR 218 GUJ
Purchase of more than one house : 16 ITD 195 BOM
Completion Certificate of building : 32 ITD 798 DEL
SEC.230A : Share of co-owner less than Rs.5 lacs : 225 ITR 10 BOM Application by transferor : (1999) 104 Taxman 653 KER
SEC.195 : Payment of consideration to NRIs
SEC.139 : Submission of PAN/GIR in case transaction above Rs.5 lacs
Thursday, July 08, 2000 Part 4 A REVENUE AND FOREST DEPARTMENT Mantralaya, Mumbai 400 032, dated the 8th June 2000 NOTIFICATION REGISTERATION
ACT, 1908
In
the said TABLE OF FEES, after Article III, the following Article shall
be interested, namely:-
in
the area of limits of a
By order and in the name of the Governor of Maharashtra, P.G.
CHHATRE
Under Secretary to Government |
In case, one need further guidance please contact the Secretary, Flat Owners Association, at the address given below:
© Copyright 2000, The
Flat Owner's Association, Mumbai.
Updated on 1st May 2002