24/01/2016
A Landlord’s Perspective
In relation to proposing the case for landlords, statistics show that a majority of the tenanted premises are no longer held by original tenants of the buildings which related to the 1940’s and 50’s. Thus, these are premises effectively transferred by landlords on the Pagdi system.
For those who propose that the rates should be decided by market forces, be informed that the entire system has evolved by market forces. Why else would landlords transfer the premises to new tenants after vacation of the earlier tenant? The reason being that not only do they retain ownership of the premises but also partake of the appreciation of the property every time the property is transferred-which till late was “appreciation sans taxation”.
On vacation, landlords have the option to sell the premises on ownership or give the same out on leave and license basis at market rents. The very fact that they do not, is adequate proof of their favouring this system. Selling the premises on ownership would involve a one time appreciation, directly taxable, and market rents rarely are more than 1% or 2 % return on the value of the premises. You do the math. Landlords already have.
As proof that this was a valid market driven transaction and seeing the loss of revenue, the government also established that extinguishment or transfer or surrender of tenancy / lease right is subject to Income Tax under the head Capital Gains. Further, various courts too have consistently taken the view that surrender of tenancy right is a capital asset.
Thus, if this is a valid asset which has been taxed in the past, the current amendment would be liable in destroying capital asset value of these tenants at one shot.
Last I checked destroying capital assets intentionally was a criminal offence….