--K N Jain, New Delhi

Additional FSI available under the Unified Building Bye-Laws is related to the plot area and its location-that is whether the development faces a 24-metre road or less. The number of storeys that can be constructed also depends on the height restrictions specified in the bye-laws. Under the circumstances, it would be wrong to assume that just because you own the third-floor flat and the top floor terrace at the fourth-floor level, you are within your rights to build an additional floor.

Firstly, a fourth storey is only permitted on plotsabutting a 24-metre road. It has also to be checked whether the existing building foundation can withstand the load of an additional floor. Wherever there are multiple owners of a building involving common services and common areas, it would be advisable to seek an NOC from the builder-developer so as to not jeopardise the safety of the building and to prevent the various owners from taking the law into their own hands.

If every owner were to interpret the law to his singular advantage, then the possibility of the building bye-laws being given a go-by and excessive coverage being undertaken cannot be ruled out. In any case, a close perusal of the Flat Buyers Agreement would also underline the fact that flat buyers are prohibited from undertaking any structural modifications to their premises without first securing an NOC from the prescribed authority. I would suggest that you honour this covenant and do not undertake any additional coverage without securing an NOC from DDA first.

I and my son jointlypurchased a plot of land measuring 800 square metres in Nagpur from a private developer in 1981. Whereas I built a house there on an area approximating 500 square metres my son fenced his part of the property and used it for gardening purposes. He now wishes to sell his part of the land and use the proceeds partially for business rejuvenation. The money not immediately required for business purposes will be reinvested into either a piece of land or a built apartment.

Since the property is held in our joint names, can the cost of construction of the house be added on to the cost of acquisition of the land as a whole to determine the base cost of acquisition of the property, which would then be indexed as per the subsisting rules to arrive at the deemed cost of acquisition for determination of the capital gains tax liability? Having determined the capital gains component, we would like to invest the entire quantum of capital gains in real estate and the balance amount in our other businesses. Will such aninvestment plan attract any capital gains tax liability?

--S R Bhide, Nagpur

As stated by you, the part of the land that you wish to sell is unconstructed and, therefore, it would be inappropriate to apportion any part of the cost of construction except the boundary wall that was specifically constructed to protect this part of the land from encroachers.

You should take the base figure of the proportional cost of the land--i.e. the 300 sq metres specifically assigned as your son's share-at the 1981 cost of acquisition, which includes the proportional cost of land, brokerage paid if any and the cost of stamp duties and registration charges as also the legal costs if incurred and add on to it the fencing/boundary wall costs in the year in which the plot was fenced and subject the cumulative cost thus determined to indexation to arrive at the deemed cost of acquisition. This cost will then be reduced from the net sales proceeds that you may receive to determine your capital gains tax liability under theIncome-Tax Act. You are allowed a period of six months to either pay the capital gains tax at the rate of 20 per cent on the quantum of capital gains so computed or else invest the entire component of capital gains in investments qualifying for tax benefits falling under Section 54E (b) of the Income-Tax Act or else place the entire gained amount in a special Capital Gains Tax Account that you may open with any nationalised bank. The amount lodged in such an account will be exempt from payment of capital gains tax, provided it is entirely utilised for either the purchase of a plot of land or a dwelling unit during the succeeding two financial years and provided the account-holder does not already own any other property in his name. In case only part of the funds are utilised, then the unutilised amount shall be released to the account holder after proportional deduction of capital gains tax.

I am not aware whether in your previous income-tax returns, you have clearly established individual ownership of thetwo plots of land. If this has not been done to the satisfaction of the assessing authority under the I-T Act, then the possibility of a part of the capital gains tax liability devolving on to you also can not be ruled out. You may, however, secure expert advice from your income-tax consultant with regard to this.

G P Khungar is a real estate consultant and a former director (corporate affairs) of Ansals Ltd.(Readers are requested to send in their queries to The Associate Editor, The Financial Express, Fortune Towers, 2nd Floor, 198/2/1, Ramesh Market, Near Sapna Cinema, East of Kailash, New Delhi-110 065.)