LEGAL CHAT
Ownership rights
N.C.S. RAGHAVAN
ARVIND RAGHAVAN
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A look at the legal angle of benami transactions, lease and tenancy
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GET IT RIGHT: Make sure there are no grey areas in matters of property ownership
This section is a continuation of a series that we started on ‘Rights, Claims and Titles’ on vital factors and usage procedures that one needs to be familiar with for any kind of dealings in realty.
Let us first deal with the Benami Transaction (Prohibition) Act, 1988. Under this Act, the following main points have to be noted:
Benami ownership arises when a person only lends his name to own a property with the real ownership vesting with another person.
The Act does not apply to property held in the benami names of wife or unmarried daughter, or held under a trust by a trustee for the benefit of another as a beneficiary.
The real owner loses all his rights and remedies to recover his property from his benamidar.
The government is vested with the power to acquire the property from the benamidar without paying compensation. After the passing of the Act, to own a property in the name of a benamidar will constitute an offence.
Till the passing of the above enactment, the benami transactions were covered by Section 82 of the Indian Trusts Act, 1882.
Deemed ownership
Under Section 27 of the Income Tax Act, 1961, and under Section 2(m) explanation of the Wealth Tax Act, 1957, the following persons will be deemed to be the owners for certain purposes of taxation, even though under the general law it may not be so:
Member of a cooperative society being allotted a building or part thereof belonging to the cooperative society, by virtue of his being a member.
Member of a company allotted a building or part thereof belonging to the company by virtue of his being a member.
Similar membership of an Association of Persons.
A person allowed to retain possession of any building or part thereof, in part performance of a contract to sell as envisaged to Section 53A of the Transfer of Property Act, 1882.
A person acquiring lease rights of a building or part thereof for a period in excess of 12 years.
The definition of the term “transfer” under Section 2 (47), 269UA, etc., of the Income Tax Act, 1961, also confirms this view.
Lease rights
A “Lease” as defined in Section 105 of the Transfer of Property Act, 1882, as follows:
A lease of immovable property is a transfer of rights to enjoy such property, made for a certain time, express or implied, or in perpetuity, in consideration of a price paid or promised, or of money, a share of crops, service or any other thing of value, to be rendered periodically or on specified occasions to the transferor by the transferee who accepts the transfer on such terms.
Long lease
In certain cases of long lease, the lessee is allowed to construct a building on the land leased out, and own the same, during the period of lease. The building is to be surrendered to the lessor free of cost on the termination of the lease. The above concept of dual ownership is applied in such cases. A number of cinemas in Bangalore have been built by lessees and owned by them during the lease period.
Sub-lease
Where a lessee transfers his lease rights of a property either wholly or in part to and in favour of another person or persons, there is a sub-lease. The person to whom the rights of such lease are created becomes a lessee in relation to the lessee of the property.
Lease by holding over
Where a lease period is over and the lessee continues to be in occupation with the consent of the lessor, the lease is called “Lease by Holding Over” and it becomes a lease from year to year terminable with a notice of six months on either side.
Tenancy
Where a lease of a property is given without any specific period being stipulated, there is a monthly tenancy in favour of the lessee.
Statutory tenancy
Even after the period of lease is over a tenant is permitted to continue to use and occupy the rented premises and the only remedy open to the lessor is to get such a tenant vacated through the competent courts having jurisdiction relating to rent control matters. Such a tenancy is called the “Statutory Tenancy”.
(N.C.S. Raghavan is a chartered accountant and Arvind Raghavan, an advocate)
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