Q & A:purchase of Land in the name of the director (no proper guidance received)
P.D.RUNGTA
QUERY:
purchase of Land in the name of the director (no proper guidance received)
Dear All,
Please guide me for the following issue with proper back up of case laws : -
Case :
A Company had purchased a plot of Land and registered the same in the name of one of its Director.
However, the payment for the same was made by the Company and the said Asset is also appearing in the Balance Sheet of the Company.
Now the Director is claiming ownership of the Land. Whether the Company can prove or stake claim on the ownership of the Asset.
Thanks & Regards
CA. Harsh Jain M.Com., A.C.A.
Harsh Jain & Co.
Chartered Accountants
Kharagpur (W.B.)
(+91) 99323-31587
ha...@writeme.com
The Director concerned remains the owner of the property registered in his
name. The company can claim the amount paid for acquisition of land from the
Director as it would be treated as unsecured loan extended to the Director
by the company. The registered owner remains the owner of the property and
not the company. You can consult an advocate on Benami properties law
regarding further actual legal position as these cases have been decided by
Supreme Court in the recent past.
Hemant Singhal
REPLY:2
This query ha been answwered earlier.The director cannot claim ownership although lnd is in his name.
regards
kalidas
REPLY:3
Dear All,
First, we should see if the plot of land has been registered in the name of the director, in his capacity as a director of the said Company. If so, it is easier for the company to prove that actually, the plot of land belongs to the Company (though registered in the name of the director in his capacity as a director of the said company) as the said asset is appearing in the books of account of the said company. Accordingly, the company can stake claim on the ownership of the asset. Situation may be slightly different if the said plot of land is registered in the name of the said person (in his individual capacity). In this case, the said director can always claim that the land has been purchased by him and the payment by the company for this, is the loan given by the company to him. Here, onus is on the director to prove that the payment made by the company is actually the loan taken from him, by providing documentary evidence to this effect which he may not succeed in absence of any documentary proof.
Therefore, the case is strong for the company to stake claim on the ownership of the plot of land in view of what has been explained above.
With warm regards,
CS K. Krishnamoorthy
Bangalore
9980744334
Pramod Dayal Rungta
M.Com.,LL.B.,AICWA.,DISA(ICAI).,FCA
Member EIRC ICAI (2010-12)
P.D.Rungta & Co.
Chartered Accountants
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P.D.RUNGTA
QUERY:
purchase of Land in the name of the director (no proper guidance received)
Dear All,
Please guide me for the following issue with proper back up of case laws : -
Case :
A Company had purchased a plot of Land and registered the same in the name of one of its Director.
However, the payment for the same was made by the Company and the said Asset is also appearing in the Balance Sheet of the Company.
Now the Director is claiming ownership of the Land. Whether the Company can prove or stake claim on the ownership of the Asset.
Thanks & Regards
CA. Harsh Jain M.Com., A.C.A.
Harsh Jain & Co.
Chartered Accountants
Kharagpur (W.B.)
(+91) 99323-31587
ha...@writeme.com
I would reiterate that the director cannot lay claim to ownership of the land in the given facts.Section 22 of the Income Tax Act,recognises the concept of a deemed owner.as held by the supreme court in Jodha Mall Kuthiala vs CIT(82 ITR 570)the owner of the property must be one who cn exercise the rights of the owner ,not on behalf of the owner but in his own right.please also refer to Supreme Court in podar Cements(P)ltd(226 ITR 625).
In this case the director has not paid for the land.It is the company which has done so.Hence the Director cannot be the owner.
regrads
kalidas
Dear All,
I would just like to add one or two more points to what the previous replies mention.
1) As you mentioned, the Company had bought the land. In which case the company would have shown the same in the Balance Sheet each year (after such a purchase) as its Assets. The Auditor too would have mentioned in the Audit Report that the said Asset is held in the name of the Director.
2) The Director who claims the land to be his, would have been a signatory to the Balance Sheet, and Statements of Account, where it has been shown as belonging to the Company. If he is not a signatory, he would have been on the Board where the board has passed the Accounts as such and presented for Audit.
3) At the time of purchase of the Land, a Resolution would have been passed in the Board Meeting mentioning the fact and that the "Land be bought by the Company and the same shall be registered in the name of the Director."
The above poits, if considered, will pave way for the Company to claim the ownership of the said property.
SATISH C SHAH
136/4, N.S.C.BOSE ROAD,
SOWCARPET,
CHENNAI 600001
lalit kumar agarwal
Property Act and Benami (prohibition of transactions) Act. the company
has to file a civil case in a proper court to claim the ownership in
case the director claims the ownership of the land.
Lalit Kumar Agrawalla, FCA
On Wed, 18 May 2011 19:37:35 +0530 wrote
>
QUERY:
purchase of Land in the name of the director (no proper guidance
Please guide me for the following issue with proper back up of case
laws : -
Case :
A Company had purchased a plot of Land and registered the same in the
name of one of its Director.
However, the payment for the same was made by the Company and the said
Asset is also appearing in the Balance Sheet of the Company.
Now the Director is claiming ownership of the Land. Whether the Company
can prove or stake claim on the ownership of the Asset.
Thanks & Regards
CA. Harsh Jain M.Com., A.C.A.
Harsh Jain & Co.
Chartered Accountants
Kharagpur (W.B.)
(+91) 99323-31587
is in his name.
regards
>
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