1350. Ownership flats of members of tenant co-partnership societies - Whether exempt under clause (iv) of sub-section (1)
Circular No. 1 was issued by the Central Board of Direct Taxes on 27 January 1969. Its subject is 1350. Ownership flats of members of tenant co-partnership societies - Whether exempt under clause (iv) of sub-section (1).
This grants an exemption or a relief under a provision that allows one. Read the conditions attached: an exemption notification is construed strictly, and a condition missed is the exemption lost.
Allows members of tenant co-partnership co-operative societies the wealth-tax exemption under section 5(1)(iv) for their flats. Wealth-tax Officers had been refusing it on the footing that legal ownership of the flats vests in the society rather than the member. The Board accepts the representation that in the usual arrangement each purchaser contracts with the builder, pays the whole cost in instalments during construction, takes possession when the building is complete, and then joins with the others to form a society, to which the builder transfers the land and building; the society then allots tenancy in each flat to the member who purchased it. On that arrangement, the Board is advised, the legal ownership of the flat vests in the individual member and the exemption is available to him. Wealth-tax Officers are to examine each society to see whether it is only a lessee and the members are the real owners, and where that is so the exemption is not to be denied.
It was represented to the Board that such societies are usually only lessees of the flats and that legal ownership really rests with the individual members.
| Under the 1961 Act | Now |
|---|---|
| s.5 | s.5 |
1350. Ownership flats of members of tenant co-partnership societies - Whether exempt under clause (iv) of sub-section (1)
1. Under the existing instructions, the Wealth-tax Officers do not allow the exemption under section 5(1)(iv), in the cases of members of co-operative societies of the tenant co-partnership type, on the ground that the legal ownership over the flats vests with the society and not with the individual members. It has been represented to the Board that these societies are usually only lessees of the flats, the legal ownership of which really vests with the individual members. The normal procedure in such cases is that an agreement is entered into between the builder and each purchaser of flat in the building proposed to be constructed. The purchaser pays the entire cost of the flat in instalments spread over the period of construction. As soon as the building is completed, the builder gives the possession of the flats to the various purchasers, who then join together to form a co-operative society. The builder who had originally taken the land on lease or free-hold, transfers the land and the building thereon to the co-operative society. The society then allots the tenancy in the flats to the members in such a way that each member gets the tenancy rights over the flats which he has purchased.
2. The Board are advised that under this arrangement the legal ownership in the flats vests with the individual members and that the exemption under section 5(1)(iv) would be available to the members of such a society. The cases of the tenant co-partnership societies would be scrutinised by the Wealth-tax Officers to see that the co-operative society is only a lessee and the individual members are the real owners. If it is found that this is so, the owners of the flats would not be denied exemption under section 5(1)(iv).
Circular : No. 1 [F. No. 4/28/68-WT], dated 27-1-1969.
In an old wealth-tax assessment where the exemption for a flat in a co-operative society was refused.
Source: the Income Tax Department’s own published text — its page for this instrument.