I purchased a commercial apartment in one of the earlier high-rise, multi-unit, multi-ownership buildings in New Delhi in 1968 and the purchasers subsequently organised themselves into a cooperative housing maintenance society. As the building is nearly 30 year old and has been badly neglected by the builder-developer during the initial 25 years of its occupation, it is in constant need of repairs both in terms of structure and exteriors. There are also heavy demands to replace the internal wiring, electrical switch gear, lifts, pumps and DG sets, etc. These have not been replaced since inception. In this background, the existing management of the flat buyers society has been placing heavy financial demands on the members.Whenever the members have sought to discuss the utilisation of funds deposited by them in the past, the requests have been stonewalled by the management of the society on one pretext or the other.
Is there any way in which members can seek the appointment of an independent agency toaudit the day-to-day working of the management committee and to look into the complaints of the members pertaining to erroneous billing for work not done?
R S Dahiya, Mumbai
If your building is managed by a Registered Co-operative House Building Society, then there are Memorandum and Articles of Association and the approved bye-laws prescribed by the Registrar of Co-operative Societies.
These bye-laws contain a provision for the appointment of a three-member Committee of Control whose specific role is to monitor the day-to-day working of the management committee, particularly with regard to financial matters and in the event of irregularities pointed out by them not being attended to by the management committee in a time-bound manner. They also have the right to submit their report to the Registrar and seek his intervention in the matter. This committee under the co-operative law is vested with full authority to scrutinise the budget and the books of accounts (including vouchers for paymentseffected and contracts entered into by the society) and lay down procedures to ensure transparency and accountability in day-to-day dealings.
Please check your society's memorandum of association and bye-laws to see if such a provision exists. And if it is not there, like-minded members could jointly insist that the Committee of Control be constituted and their members be given representation on it. However, in the unlikely event of the provision for the constitution of the Committee of Control having been omitted in the approved bye-laws of your society, members, with the help of the Registrar of Co-operative Societies, can move for the amendment of the bye-laws also and the suggestion for amendment can be initiated by the Registrar himself.
My mother-in-law owns a house at Kanpur, where she had been living since 1961. However, due to old age and indifferent health, she has been living with us since 1995. She is now desirous of selling her Kanpur house and has received an offer for Rs 25 lakh. Theproperty was valued by the chartered valuer as of 1.4.1981 at Rs 6 lakh. What would be her capital gains tax liability and how best should she invest the sale proceeds to minimise current and future income tax liabilities? Her current income from taxable investments in bank fixed deposits and units of the Unit Trust of India under US-64 Scheme is Rs 1.2 lakh PA. She does not pay any income tax at present as she invests Rs 1,000 per month in the PPF Account.
S P Srivastava, New Delhi
If your mother-in-law's property was valued at Rs 6 lakh on 1.04.81, then after availing the benefit of indexation under the Income Tax Act, the deemed cost of acquisition in the current financial year would be approximately Rs 21 lakh (assumption index for 1998-99 will be around 350).
It, therefore, follows that she would make a long-term capital gain of approximately Rs 4 lakh on which she could either pay the capital gains tax of Rs 80,000 or else she could avoid this payment by investing in approved instruments asfollows:
Place the entire receipt of Rs 25 lakh in infrastructure or other bonds that specifically offer Section 54 benefits under the Income Tax Act. The minimum lock-in period for such an investment is three years. Any interest that she would earn on such an investment would be subject to income tax.Alternatively, she could invest only the capital gain component of Rs 4 lakh in securities offering Section 54 benefits with a lock in period of seven years. As in the earlier case, the interest earned would be subject to income tax.
Assuming that she does not increase her investment in securities entitling her to additional benefits under section 88 of the Income Tax Act and also assuming that she only places Rs 4 lakh in specified securities, any further taxable income that she may earn would be subject to 30 per cent income tax (assumed that investment of Rs 4 lakh in infrastructural bonds would earn her an additional income of Rs 50,000 per annum, which would fully exhaust herentitlement under the 20 per cent tax slab).It would, therefore, be preferable for her to place the remaining receipt of Rs 21 lakh in the Relief Bond Scheme of the Reserve Bank of India with a lock-in period of five years. The scheme offers a tax-free return of 10 per cent payable half yearly which is comparable to a taxable YTM of 14.65 per cent. Furthermore, your mother-in-law, if she so desires, will also be able to make a gift of bonds worth Rs 5 lakh without having to pay gift tax (present rate: 30 per cent of gift amount in excess of Rs 30,000) under this scheme. She is, of course, free to invest the deemed indexed cost of acquisition in any other manner that she may choose, including purchasing another house.
G P Khungar is a real estate consultant and a former director (corporate affairs) of Ansals Ltd
(Readers are requested to send in their queries to the Features Editor, The Financial Express, Express Building, 9&10 Bahadur Shah Zafar Marg, New Delhi-110 002)
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
