I have a piece of land that I wish to sell at a premium to the guidance value as the buyer intends to use the land for quarrying purposes. I want to register at a premium above the guidance value as I do not want any cash component in the sale. However, the buyer wants to register at the guidance value. His contention is that if the land is registered at a premium value, then he will not be able to sell it (or register) at a value below that in future. Is that right?
—Name withheld on request
The guidance value or ready reckoner value or circle rate of an immovable property is prescribed every year by the concerned state government and may be revised on an yearly basis considering various factors. Most state governments either maintain or increase the guidance value on an yearly basis and generally there have not been many instances where the guidance value decreases substantially.
Generally, if the monetary consideration under the registered sale deed of an immovable property is at a premium to the prescribed guidance value, and a subsequent sale deed of the immovable property is lower than the purchase price but the guidance value remains the same, the seller (who is the buyer here) would lose the advantage of increasing the consideration at least to the extent of the previous sale consideration.
However, since you have stated that the buyer intends to use the land for quarrying purpose, which generally involves reduction in the natural resources of the property, it could be possible that the buyer could justify the subsequent sale of the immovable property at lower than the buyer’s purchase consideration but higher than the guidance value prevailing at that point in time.
Though it is not necessary, it is advisable to maintain higher than guidance value as the consideration of the immovable property than at the lower rate as sale below the prescribed guidance value may invite the attention of the statutory authorities, including the income-tax authority, depending on the facts and circumstances of the case.
Aradhana Bhansali is partner, Rajani Associates.