Evasions found in joint development agreements and sale of properties
The Directorate General of Income Tax (Investigation), Karnataka and Goa, is now training its radar on the booming real estate sector, particularly in Bangalore.
The directorate has found that over 3,500 land owners have entered into joint development agreements with developers in Bangalore in the last couple of years, said S. Ravi, Director-General of Income Tax (Investigation), Bangalore. The directorate has also detected one lakh cases of devalued registration of properties between 2006 and 2011, he said.
Mr. Ravi was interacting with presspersons here on Monday along with Chief Commissioners of Income Tax, Bangalore I and III, K. Satyanarayana and I. Suresh Babu. He said there have been hundreds of instances of joint developments of properties with sellers appearing to be 'ignorant' of tax implications.
He said a valid contract for sale, with a consideration and handing over of the possession of the property to the developer, results in tax liability.
However, the tax is not paid, perhaps owing to lack of awareness, Mr. Ravi said. The year of agreement is the year of tax liability, and this proposition has been upheld by the Karnataka and Bombay High Courts.
In November, inquiries by the directorate revealed that 180 such transactions were made and the practice was rampant. In two cases alone, an evasion of Rs. 255.38 crore tax was detected, Mr. Ravi said, and added that it was an ongoing process.
Meanwhile, the directorate is also looking into devalued registration of properties, where the properties are registered below the guidance value set by the State government. “In such cases, we consider the guidance value as the sale price and compute tax liability on its basis,” Mr. Ravi said. Owners selling such lands are liable to pay capital gains tax. The directorate advises them to pay the tax, Mr. Ravi said.
The directorate had also investigated possible tax evasion in the mining sector. It has set up a mechanism at the Bengaluru International Airport to monitor and intercept the movement of unaccounted cash and valuables, including jewellery. It is also zeroing in on various financial transactions, including banking, mutual funds, investments on immovable properties and shares, without the investors quoting the PAN.
Tax collection hit
Mr. Satyanarayana said the ban on iron ore mining has brought down tax collection by about Rs. 3,000 crore and the impact was more in Goa region as compared to Hubli/Bellary in Karnataka.
The Karnataka and Goa region has stood third in tax collection, after Mumbai and Delhi. The target for this financial year is Rs. 53,000 crore and Rs. 32,830 crore has been collected so far.
Though this is higher than last year’s collection of Rs. 30,328 during the same period, it is less than the national average of 14 per cent, Mr. Satyanarayana said.
He said a large number of government departments have not been remitting tax deducted at source to the I-T department. Also large corporates are shying away from paying advance tax.