Property registration in the past and the present.

Hi Srsubramanian,

Your queries touch on legal, stamp duty, registration, and income tax aspects related to construction agreements and property sales, especially with agreements from 10-15 years ago. Here’s a detailed explanation:

1. Is Construction Agreement Registrable under Stamp Duty and Registration Act?

• Construction Agreement (between buyer and builder) is generally considered a contract for construction services.

• Registrability:

  • In many states, such agreements are not compulsorily registrable under the Registration Act because it is not a conveyance of immovable property.

  • However, Stamp Duty may be applicable as per the Stamp Act of the state on the agreement as a contract.

  • Some states may require registration for such agreements or may have specific guidelines — this varies.

2. Impact if Construction Agreement Not Registered (10-15 Years Back)

• Historically: It was common for such agreements to be unregistered; no strict enforcement then.

• Legal Effect:

  • Non-registration does not invalidate the agreement but may limit its evidentiary value in disputes.

  • It cannot be used as proof of ownership transfer or title.

  • The ultimate sale deed transferring ownership (after construction) must be registered for valid transfer.

• Stamp Duty Non-payment:

  • If stamp duty was not paid, there could be penalty or interest if challenged later.

  • But for agreements executed long ago, statute of limitations may protect you unless caught in audit or investigation.

3. Income Tax Act - Meaning of Property Sale & Registration

• Under Income Tax Act (Section 2(47)), “transfer” includes sale, exchange, etc., of capital assets.

• For Long-Term Capital Gains (LTCG):

  • Sale must be reflected by a registered sale deed to be valid for property ownership transfer.

  • Registered document is key for claiming exemption or proper capital gains calculation.

  • If construction agreements were unregistered but sale deed was registered, sale is valid.

  • Land value and construction cost are considered for calculating capital gains.

• If the construction agreement is unregistered but sale deed is registered:

  • Income tax department will consider the registered sale deed as evidence of transfer.

  • Construction cost from unregistered agreements can still be considered for cost of acquisition, if supported by evidence.

4. Investment in Another Property & Objection on Unregistered Agreements

• If you sell a property and invest in another property, claiming exemptions under Section 54/54F of the Income Tax Act, the following are checked:

  • Whether sale deed of the old property is registered (key requirement).

  • Proof of purchase/ construction cost.

  • Stamp duty and registration of new property purchase deed.

• Objection on unregistered construction agreements is rare if:

  • The sale deed is registered.

  • Capital gains and cost of acquisition can be reasonably supported.

  • Tax is declared properly in return.

• However, if cost proof is weak or disputed, IT department may scrutinize cost claims on unregistered agreements.

Summary:

Recommendation:

• Retain all related documents (receipts, bank statements) to substantiate construction costs.

• For future transactions, always get agreements registered and pay applicable stamp duty.

• If under scrutiny, consult a tax professional or lawyer to handle documentation and explanations.