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FACT FILE
Restricted powers of attorney
N.C.S. RAGHAVAN
ARVIND RAGHAVAN
In view of the heavy stamp duty payable on powers of attorney given to persons (other than close relatives) where power to sell is given, various forms of restricted powers of attorney have come into vogue which are discussed below.
General Power of Attorney is only for a limited purpose of appearing and representing the principal before statutory authorities in respect of statutory formalities and compliances relating to rights and interest and transactions in immovable property. The stamp duty payable is only a nominal sum of Rs.100 as no power to sell is given.
Where a General Power of Attorney is also given only for the restricted purposes of entering into agreements for sale or transfer without the right or authority to finally effect the sale or transfer, such restricted powers of attorney will attract the nominal stamp duty of Rs.100 only.
In this regard, it is useful to note that the above types of restricted powers of attorney can also be given to a promoter or a developer provided the same are given separately apart from the execution of a formal development agreement.
Hence, it is to be noted that when even a restricted power is given to a promoter or a developer as above, the following stamp duty discussed in the earlier issues is leviable.
Where the market value of property
• 1) Does not exceed Rs. 1 crore — Rs. 10,000.
• 2) Exceeds Rs. 1 crore and does not exceed Rs. 2 crore — Rs. 20,000.
• 3) Exceeds Rs. 2 crore and does not exceed Rs. 5 crore — Rs. 50,000.
• 4) Exceeds Rs. 5 crore and does not exceed Rs. 10 crore — Rs.1,00,000.
• 5) Exceeds Rs. 10 crore — Rs.1,50,000.
When a Comprehensive Power of Attorney is given for consideration, such a power of attorney becomes an irrevocable power of attorney constituting an agency coupled with interest and hence the stamp duty leviable will be at the rate of 7.5 per cent (excluding surcharge and cess).
Set-off
However, it is to be noted that when once the stamp duty is paid on the power of attorney executed for consideration at 7.5 per cent of the consideration, a set-off is given to such duty in respect of the actual stamp duty payable at the time of the actual sale and registration of the property by using the powers and authority under the power of attorney.
Stamp duty
In any agreement to sell immovable property where possession is given, a stamp duty equal to the rate for conveyance i.e., 7.5 per cent (excluding surcharge and cess) vide Article 5{e}{i} of the Karnataka Stamp Act, 1957, is leviable even though it is only an agreement to sell and there is no sale of immovable property.
Further, it is to be noted even where there is an agreement to sell and there is a mention of a power of attorney in favour of the purchaser in the agreement, even though there is no specific mention of possession being given, it will be deemed that the purchaser has been given possession (because of his having the power of attorney in his favour).
The stamp duty of 7.5 per cent (excluding surcharge and cess) is payable on the same (explanation to Article 5{e} of the Karnataka Stamp Act, 1957).
The powers of attorney mentioned above can be registered with the registration authorities.
Implication of tax incidence on powers of attorney in relation to capital gains and income on property transactions will be discussed in the ‘LEGAL CHAT’ column of the subsequent issues.
(N.C.S. Raghavan is a chartered accountant and Arvind Raghavan, an advocate)
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