Housing cooperative penalised for stamp duty evasion

In a first, the Department of Stamps and Registration has slapped a penalty on a hou­s­e-building cooperative society for evading stamp duty.

The action is likely to open several such cases, with penalties running into hundreds of crores. The District Registrar (Gandhinagar) has penalised Telecom House Building Co-operative Society Rs 5.20 lakh for concealing a money transaction in an MoU to buy three acres and 38 guntas in Papanahalli near Devanahalli. For its layouts, the society has bought 800 acres at various locations by signing MoUs with developers.

According to Section 79(B) of the Karnataka Land Reforms Act, house-building societies can’t buy agricultural land directly. To circumvent the law, they appoint middlemen to buy agricultural land, convert it for residential use, and then transfer it to them. To execute this, societies enter into unregistered MoUs and agreements. They then advance money towards the purchase of land.

Committees set up

Based on a complaint, the department on January 28, 2016 set up five committees headed by the district registrars of Gandhinagar, Rajajinagar, Basavangudi, Jayanagar and Shivajinagar and three sub-registrars from each district to detect evasion of stamp duty.

In 2013, the complainant had said MoUs between the society and the seller were as good as sale agreements as the consideration was determined there. The order of the District Registrar (Gandhinagar) says middlemen or developers bought agricultural land through agents, converted it for housing, and transferred it to the society through a sale deed.

The land was then sold to the society at market or guidance value and not at the agreement value, and stamp duty evaded on the difference, he concluded.

Blackmail, says society
G Babu, president of Telecom House-building Co-operative Society, said it was appealing against the order of the District Registrar. “This MoU was done in 2005. Why didn't the department take action then if there was any evasion of duty? All these are blackmailing tactics,” he said. Members are liable to pay stamp duty and registration fees only when developed sites are registered. The MoU is unregistered and hence details can’t be revealed, he contended.