transfer of immovable property
This query is : Resolved
29 August 2009
Sir,
I have a doubt regarding transfer of immovable property:
1)A transfer of immovable property takes place between companies of same grp
2)a consideration has been paid which is cost itself.
3)an agreement was executed which was not registered.
4)can one company show it as a sale and another as an addition??
Please answer query as soon as possible...
I have a doubt regarding transfer of immovable property:
1)A transfer of immovable property takes place between companies of same grp
2)a consideration has been paid which is cost itself.
3)an agreement was executed which was not registered.
4)can one company show it as a sale and another as an addition??
Please answer query as soon as possible...
29 August 2009
As per Registration Act 1908, Registration of documents relating to immovable property (of value of more than Rs.100 /-) is compulsory.
Both the selling company and purchasing company must consider and give effect to the transfer of immovable property in their books of accounts, since the significant risk and rewards of ownership has been transferred to the buyer.
Further, registration is just a formality that needs to be fulfilled.
Both the selling company and purchasing company must consider and give effect to the transfer of immovable property in their books of accounts, since the significant risk and rewards of ownership has been transferred to the buyer.
Further, registration is just a formality that needs to be fulfilled.
29 August 2009
sir ,would there be any problems if both the purchasing company and selling company record an addition and deletion without the property being registered ??
02 August 2025
Great question! Here's a detailed response regarding the transfer of immovable property between companies in the same group, especially focusing on registration and accounting treatment:
---
### 1. **Registration of Sale Deed**
* As per **Registration Act, 1908**, **registration of a sale deed** of immovable property **is compulsory** if the value exceeds Rs. 100.
* Non-registration of the sale deed **makes the transfer document inadmissible as evidence in a court of law**, except to prove that the document was executed.
* Practically, this means the sale deed **must be registered to complete the transfer legally**.
---
### 2. **Accounting Treatment**
* From an **accounting perspective**, if the companies have entered into a valid agreement (even if unregistered), and the **consideration (cost) has been paid**, they **can record**:
* **Seller company:** Sale of the property (deletion from fixed assets)
* **Buyer company:** Addition of the property (capitalization at cost)
* However, this is subject to the condition that **legal ownership rights have effectively passed**. Without registration, legal ownership might not be fully transferred.
---
### 3. **Legal Risks of Non-Registration**
* The transaction may be questioned or challenged on legal grounds due to **non-registration**.
* The purchaser may face difficulties in establishing ownership rights, especially against third parties.
* Possible issues in claiming depreciation, capital gains, or other tax benefits without proper legal transfer.
---
### 4. **Case Laws / Judicial Precedents**
* **Satyadhyan Ghosal vs. Ramkrishna Ghose (1959) AIR SC 595:** Emphasized that **registration is mandatory** for sale deeds and non-registration affects the evidentiary value.
* **K.S. Viswanathan vs. State of Madras (1954) AIR SC 211:** Held that without registration, a transfer of immovable property is not complete in the eyes of law.
---
### 5. **Summary & Recommendations**
| Aspect | Position |
| -------------------- | ---------------------------------------------------------------- |
| Registration | Mandatory for sale deeds; non-registration causes legal risks |
| Accounting treatment | Sale & purchase can be recorded if agreement & payment exist |
| Legal ownership | May not fully pass without registration |
| Tax implications | May face issues in capital gains, depreciation claims |
| Best practice | Register the sale deed to avoid disputes and legal complications |
---
**Conclusion:**
While companies may record the sale and purchase in books based on the agreement and payment, **it is essential to register the sale deed** to have a legally valid and enforceable transfer. Non-registration can lead to legal complications and issues with ownership rights.
---
If you want, I can help draft a note on how to regularize the transfer or assist in understanding the tax implications related to such transfers. Would you like that?
---
### 1. **Registration of Sale Deed**
* As per **Registration Act, 1908**, **registration of a sale deed** of immovable property **is compulsory** if the value exceeds Rs. 100.
* Non-registration of the sale deed **makes the transfer document inadmissible as evidence in a court of law**, except to prove that the document was executed.
* Practically, this means the sale deed **must be registered to complete the transfer legally**.
---
### 2. **Accounting Treatment**
* From an **accounting perspective**, if the companies have entered into a valid agreement (even if unregistered), and the **consideration (cost) has been paid**, they **can record**:
* **Seller company:** Sale of the property (deletion from fixed assets)
* **Buyer company:** Addition of the property (capitalization at cost)
* However, this is subject to the condition that **legal ownership rights have effectively passed**. Without registration, legal ownership might not be fully transferred.
---
### 3. **Legal Risks of Non-Registration**
* The transaction may be questioned or challenged on legal grounds due to **non-registration**.
* The purchaser may face difficulties in establishing ownership rights, especially against third parties.
* Possible issues in claiming depreciation, capital gains, or other tax benefits without proper legal transfer.
---
### 4. **Case Laws / Judicial Precedents**
* **Satyadhyan Ghosal vs. Ramkrishna Ghose (1959) AIR SC 595:** Emphasized that **registration is mandatory** for sale deeds and non-registration affects the evidentiary value.
* **K.S. Viswanathan vs. State of Madras (1954) AIR SC 211:** Held that without registration, a transfer of immovable property is not complete in the eyes of law.
---
### 5. **Summary & Recommendations**
| Aspect | Position |
| -------------------- | ---------------------------------------------------------------- |
| Registration | Mandatory for sale deeds; non-registration causes legal risks |
| Accounting treatment | Sale & purchase can be recorded if agreement & payment exist |
| Legal ownership | May not fully pass without registration |
| Tax implications | May face issues in capital gains, depreciation claims |
| Best practice | Register the sale deed to avoid disputes and legal complications |
---
**Conclusion:**
While companies may record the sale and purchase in books based on the agreement and payment, **it is essential to register the sale deed** to have a legally valid and enforceable transfer. Non-registration can lead to legal complications and issues with ownership rights.
---
If you want, I can help draft a note on how to regularize the transfer or assist in understanding the tax implications related to such transfers. Would you like that?
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