Summary
Long-standing tenants of a bungalow property in Allahabad purchased it in 2010 under a compromise decree for the Rs. 1 lakh consideration agreed in 1966, and paid stamp duty on a market value computed by the rent-capitalisation method; the stamp authorities valued the land at the circle rate of Rs. 24,000 per sq. metre and demanded a deficit of over Rs. 1.34 crores with interest, which the High Court affirmed while setting aside the penalty. The Supreme Court held that stamp duty is payable on the market value on the date of the conveyance, not the agreed consideration or the value at the date of the agreement, but that a property in the possession of tenants fetches less in the open market, so an appropriate deduction must be made; the matter was remanded to the Assistant Stamp Collector to determine the market value on evidence.
Issues
- Whether stamp duty on a sale deed is chargeable on the consideration agreed under an earlier agreement for sale and compromise decree, or on the market value of the property on the date of execution of the conveyance.
- Whether the market value of a property sold to its sitting tenants must be reduced to reflect the encumbrance of tenancy, and how such value is to be determined.
- Whether a valuation derived from the rateable value under municipal law can be the market value for stamp duty.
- Whether interest under Section 47-A(4A) of the Stamp Act as applicable to Uttar Pradesh is mandatory on deficit stamp duty.
Provisions considered
- Article 23 of Schedule I-B, Indian Stamp Act, 1899 (as amended in Uttar Pradesh)Duty on a conveyance of immovable property is chargeable on the consideration set forth or the market value of the property, whichever is greater; as a taxing statute it must be construed literally, so the relevant value is the market value on the date of the conveyance. (¶¶ 17, 18, 19, 20)
- Section 47-A, including sub-sections (3), (4) and (4A), Indian Stamp Act, 1899 (as amended in Uttar Pradesh)Empowers the registering officer to refer an undervalued instrument to the Collector, who determines the market value after an enquiry and may impose penalty; sub-section (4A) uses 'shall' and makes interest at 1.5% per month on deficit duty mandatory. (¶¶ 5, 14, 22, 23, 29)
- Sections 2(12), 17, 31 and 32, Indian Stamp Act, 1899An instrument is executed when signed, so duty is assessed on market value at the time of sale, not at the time of the prior agreement or suit (following Khandaka Jain Jewellers); the appellants' prior application for adjudication under Sections 31 and 32 went unanswered, which led the High Court to set aside the penalty. (¶¶ 4, 12, 19, 20)
Held
- Stamp duty on a conveyance is payable on the market value of the property on the date of execution of the sale deed, unless the consideration shown is higher; the consideration or market value under an earlier agreement for sale, compromise decree or the date the bargain was struck is irrelevant. (¶¶ 19, 20, 26)
- A value derived from the method used for levying property tax under municipal law cannot be the market value for the purposes of Article 23. (¶ 21)
- Market value is what a bona fide willing buyer would offer; a property in the possession of tenants fetches less than a comparable property in the vendor's exclusive possession, so when the sitting tenants purchase, the value must be fixed either from a comparable sale of tenanted property or by an appropriate deduction from the value of comparable untenanted property, the extent of deduction depending on the nature of the tenancy and other evidence. (¶¶ 24, 25, 27, 28)
- Since the Assistant Collector, the Appellate Authority and the High Court applied the circle rate without considering the tenancy, the market value must be redetermined after permitting the parties to lead oral and documentary evidence. (¶¶ 27, 28, 30)
- Interest under Section 47-A(4A) at 1.5% per month on the deficit duty is mandatory; the High Court's setting aside of the penalty stands as the State did not challenge it. (¶¶ 29, 30)
Result
Appeal allowed; judgments of the High Court, the Assistant Stamp Collector and the Appellate Authority set aside except the finding that no penalty is payable; matter remanded to the Assistant Stamp Collector to determine the market value of the property on the date of the sale deed after taking evidence, preferably within six months. The Rs. 1 crore already deposited to abide the final adjudication, with refund of any excess at 8% per annum interest. No costs.