Pioneered by Delhi to get round the stifling restrictions on sale imposed by the DDA on allottees of flats that are in short supply, the practice has assumed notoriety over the years. Briefly, the agreement to sell is notarised without registration which simply cannot be done, thanks to the restrictions on transfer.

And for good measure, the seller hands over his ‘last and final’ Will to the credulous buyer along with a power of attorney (POA) that vests him with full ownership rights besides possession of the property.

The Supreme Court has not minced words in condemning such transactions as being disruptive of law and order, corrupting and spoiling civil society besides causing loss of revenue to the exchequer.

It is in fitness of things that the apex court has advised the State governments of the national capital region as well as Maharashtra to take steps to end this menace. Gullible buyers are duped by sellers who have the temerity to sell the same property again to another gullible person when the price shoots up. The anonymity conferred by POA transactions helps shelter black money by keeping the properties bankrolled by it away from public and official gaze.

Parliament has taken some steps on the direct taxes front impinging on POA transactions. With effect from April 1, 1988, POA sales are as much amenable to capital gains tax as registered transactions are. In other words, the fig leaf of non-registration cannot be an excuse for non-payment of capital gains tax by the seller.

By the same token, the buyer on POA basis is deemed to be the owner of the property for computation of income from house property. For wealth tax purposes too, a POA holder is deemed to be the owner of the property.

These moves are but a feeble attempt at checking POA transactions because as the apex court has alluded, it is the land sharks and land mafia that resort more and more to POA transactions. And they are outside the pale of the capital gains taxes regime.

Delhi has taken the lead in mandating payment of stamp duty even on sale on POA basis.

But all these are piecemeal and feeble attempts at addressing the problems engendered by what is admittedly the most opaque mechanism of consummating real estate deals.

What perhaps the apex court has hinted at is removal of restrictions on flat and land sales by the beneficiaries of allotment by housing authorities in the country. Such restrictions have proved to be futile as evident from the mushrooming POA transactions invented to get round them.

The housing development authorities can as an alternative introduce some disincentives like demanding a heightened share of unearned increase in the value from the seller on premature sale which of course would produce its own side effect — more and more consideration being paid outside the books.

Be that as it may, nobody can possibly disagree with the Supreme Court’s perception of POA — it fosters tax evasion, crime, social unrest and sleaze. The sooner we eschew it, the better.

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