Allahabad High Court
Shanti Bhushan And Others vs State Of U.P. And Others on 23 January, 2013
Equivalent citations: AIR 2015 (NOC) 95 (ALL.), 2014 (3) ALJ 207
Author: Sunil Hali
Bench: Sunil Hali
HIGH COURT OF JUDICATURE AT ALLAHABAD A.F.R. (Reserved) Court No. - 41 Case :- WRIT - C No. - 55473 of 2012 Petitioner :- Shanti Bhushan And Others Respondent :- State Of U.P. And Others Petitioner Counsel :- Anurag Khanna Respondent Counsel :- C.S.C. Hon'ble Sunil Hali,J.
The controversy involved in this writ petition is as to whether determination of the market value is dependent upon limited rights enjoyed by the owner in the property.
In order to determine this controversy, certain facts are required to be noted, which are as follows :-
Bungalow no. 19-A, Elgin Road, Allahabad was taken on rent by the father of the petitioner in the year 1939 on a monthly rent of Rs. 184/- per month. The property also consisted of a cottage which was leased out to Sri J.S.Gupta on a monthly rent of Rs. 50/- per month. The property was owned by one Sri Har Mohan Das Tandon. The landlord vide two letters dated 2.9.1966 and 10.9.1966 agreed to sell the above noted property to petitioner no. 1 or his nominee for a total consideration of Rs. One lac. As per the said agreement, Rs. 5,000/- was paid by petitioner no. 1 to the landlord as advance towards part sale consideration and remaining amount was to be paid by the petitioners at the time of execution and registration of the sale deed.
The property has two super structures which are existing on the leased land. The lease of the land from Government was renewed on a freehold basis in favour of the landlord on 19.6.2000. On landlord's failure to execute the sale deed in favour of petitioner no. 1 resulted in filing of a suit being Suit No. 516 of 2000 for specific performance in the Court of Civil Judge, Allahabad. A compromise was arrived at between the parties. As per compromise, the petitioner no. 1 agreed to release part of the land from the contract and landlord agreed to execute the sale deed for two houses with 7818 Sq. meters. The compromise was effected on 12.10.2010, which resulted in execution of new agreement to sell which was registered on 12.10.2010. In pursuance of the said compromise, a decree was passed by the Civil Court, Allahabad on 16.11.2010. A conveyance deed was executed by the landlord in favour of the petitioners and was registered by the registering authority on 29.11.2010.
An application was moved before the Collector, Allahabad, under section 31 of the Indian Stamp Act, 1899 (in short as 'the Act') along with deed of conveyance for determination of the duty which was chargeable on the instrument. The stamp duty of Rs. 6,67,200/- was appended with the conveyance deed. Not being satisfied with the stamp duty, the Collector in his opinion found that the proper stamp duty has not been paid by the petitioners. The Assistant Stamp Collector issued a notice under section 47-A/33 of the Act on 5.2.2011. Another notice was issued to petitioner no. 1 under sections 47-A/33 of the Act informing him that there was a deficiency of Rs. 1,33,07,900/- in payment of the stamp duty, as such, he was asked to appear before the authority on 28.4.2011. The petitioner no. 1 filed detailed reply to the said notices. The Assistant Collector Stamps, Allahabad vide impugned order dated 6.1.2012 directed the petitioners to pay deficiency in the stamp duty to the tune of Rs. 1,34,14,930/- under section 47-A)(1)/40(1B) and a penalty of Rs. 27,00,000/-. The petitioners were further directed to pay 1.5% monthly interest on the aforesaid deficient amount of stamp duty till the date of payment.
This order was challenged by the petitioners before the Chief Controlling Revenue Authority at Allahabad by filing Stamp Appeal No. 996 of 2011-12. The appeal was rejected by the Chief Controlling Revenue Authority, Allahabad vide his order dated 8.10.2012. It is under these circumstances the present petition has been filed before this Court.
The contention of the learned counsel for the petitioners is that the determination of the market value was dependent upon the limited right enjoyed by the landlord in the premises. It was contended that the property in question was under the tenancy of the petitioners and one J.S. Gupta. These tenancies were protected under the U.P. Urban Building (Regulation of Letting, Rent & Eviction) Act, 1972. Neither the the rents could be enhanced nor the tenants could be evicted. The rent payable for the aforesaid bungalow was Rs. 184/- per month and the rent payable for the cottage was Rs. 50/- per month. The landlord's interest in the property was a very limited one i.e. to receive an amount of Rs. 234/- per month from the two tenants. It was this interest of the landlord in the aforementioned two buildings, the conveyance deed conveyed which was executed on 29.11.2010.
What is being contended by the learned counsel for the petitioners is that the ownership is right of general use and not as absolute and unlimited use. No such right as that of absolute and unlimited use is known to law. All lawful use is either general and specific, the former being ownership, and the latter encumbrance. The right is restricted by existence of encumbrances vested in other persons. The thrust of the argument of the learned counsel for the petitioners is that since the right of user already existed in the petitioners landlord had a limited right only to receive rent, which right stands transfered in the name of the petitioners, as such, the market value of the property is determined on the basis of assessment of Rs. 33,360/- per year made by the Nagar Nigam, Allahabad. According to the said assessment, the value of the property comes to Rs. 6,67,200/- and this shall be treated as market value of the property and the stamp duty was being paid on the said amount.
The second contention raised by the learned counsel for the petitioners is that the contract to sell was enforceable even against a subsequent purchaser under section 19(b) of the Specific Relief Act and no subsequent purchaser from the landlord would be willing to pay more than Rs. One Lac for the property which was the subject matter of the contract of 1966 between the petitioner no. 1 and the landlord.
The third contention raised by the learned counsel for the petitioners is that the penalty of Rs. 27 lac is arbitrary as there was no concealment or evading of duty on behalf of the petitioners. It is contended that the petitioners filed an application under section 31/32 of the Act before the Collector, Allahabad annexing therewith a copy of the sale deed with the prayer to determine the stamp duty which is payable on the proposed sale deed. Penalty can be imposed only if the property is undervalued with an intention to evade the duty, which is not the case in hand.
On the other hand, the stand of the respondents is that Indian Stamp Act is a fiscal measure for charging the stamp duty. It is a statute in plain language. Section 47-A of the Act clearly envisages that the stamp duty is chargeable on the market value which is to be determined on the date the sale deed has been executed and registered. It is further stated that the decree for specific performance only declares right of decree-holder to transfer of property covered by the decree executed in his favour. The decree by itself does not transfer the title. So long the sale deed is not executed in favour of the decree holder either by the defendant in the suit or by the court, the title of the property remains vested in the owner and till the execution of the sale deed, vendee has no right to have possession of the property.
The contention of the learned counsel for the petitioners that the market value is determinable on the basis of interest which the landlord seeks to convey to the tenant is not legally tenable. Section 47-A of the Act does not contemplate the nature and limited right transferred by owner as the basis of determination of the market value. It clearly envisages the determination of the market value on which the stamp duty is payable, on the date the sale deed has been executed. The determination of the market value should not be confused with the nature of interest which has been conveyed to the vendee. These are two separate issues which is not relevant for the purpose of determining the stamp duty payable under the Act.
I have heard learned counsel for the parties.
In order to appreciate the controversy raised by the learned counsel for the parties, it is necessary to take note of certain provisions of the Act. For the purpose of determination of this controversy, certain definitions are noted :-
"Section 2(6) "Chargeable" means, as applied to an instrument executed or first executed after the commencement of this Act, chargeable under this Act, and, as applied to any other instrument, chargeable under the law in force in [India] when such instrument was executed or, where several persons executed the instrument at different times, first executed.
(10)"Conveyance" includes a conveyance on sale and every instrument by which property, whether movable or immovable, is transferred inter vivos and which is not otherwise specifically provided for by Schedule I. (14) "Instrument" includes every document by which any right or liability is, or purports to be, created, transferred.
(12) "Executed" and "execution", used with reference to instruments, mean "signed" and "signature";limited, extended, extinguished or recorded."
A plain reading of these definitions clearly contemplate that the duty is chargeable on an instrument which has been executed. Section-3 of Act provides that subject to the provisions of this Act and the exemptions contained in Schedule I, the instruments shall be chargeable with duty of the amount indicated in that Schedule as the proper duty therefor, respectively, that is to say that every instrument mentioned in that Schedule which, not having been previously executed by any person, is executed in 3[India] on or after the first day of July, 1899.
Section 31 of the Act provides that when any instrument, whether executed or not and whether previously stamped or not, is brought to the Collector, and the person bringing it applies to have the opinion of that officer as to the duty (if any) with which it is chargeable, and pays a fee of such amount (not exceeding five rupees and not less than 40[fifty naye paise) as the Collector may in each case direct, the Collector shall determine the duty (if any) with which, in his judgment the instrument is chargeable.
"47-A. Instruments of conveyance etc., if undervalued, how to be dealt with:- (1)(a) If the market value of any property which is the subject of any instrument on which duty is chargeable on the market value of the property as set forth in such instrument is less than even the minimum value determined in accordance with any rules made under the Act, the registering officer appointed under Indian Registration Act, 1908, shall, notwithstanding anything contained in the said Act, immediately after presentation of such instruments and before accepting it for registration and taking any action under section 52 of the said Act, require the person liable to pay the deficit stamp duty as computed on the basis of the minimum value determined in accordance with the said rules and return the instrument for presenting again in accordance with section 23 of the Registration Act, 1908.
(b) When the deficit stamp duty required to be paid under clause (a), is paid in respect of any instrument and the instrument is presented again for registration, the registering officer shall certify by endorsement thereon, that the deficit stamp duty has been paid in respect thereon and the name and the residence of the person paying them and register the same.
(c) Notwithstanding anything contained in any provision of the Act, the deficit stamp duty may be paid under clause (a) in form of impressed stamp containing such declarations as may be prescribed.
(d) If any person does not make the payment of deficit stamp duty after receiving the order referred to in clause (a) and present the instrument again for registration, the registering officer shall, before registering the instrument, refer the same to the Collector for determination of the market value of such property and the proper duty payable thereon.
(2) On receipt of a reference under sub section (1) the Collector shall, after giving the parties a reasonable opportunity of being heard and after holding an enquiry in such manner as may be prescribed by rules made under this Act, determine the market value of the property which is the subject of the instrument and proper duty payable thereon.
(3) The Collector may suo moto,or on a reference from any court or from the Commissioner of Stamps or an Additional Commissioner of Stamps or a Deputy Commissioner of Stamps or an Assistant Commissioner of Stamps or any Officer authorized by the Board of Revenue in that regard, within four years from the date of registration of any instrument on which duty is chargeable on the market value of the property, not already referred to him under sub section (1), call for and examine the instrument for the purpose of satisfying himself as to the correctness of the market value of the property which is the subject of such instrument and the duty payable thereon, and if after such examination he has reason to believe that the market value of such property has not been truly set forth in the instrument, he may determine the market value of such property and the duty payable thereon.
Provided that, with the prior permission of the State Government, an action under this sub section may be taken after the period of four years but before the period of eight years from the date of the registration of the instrument on which the duty is chargeable on the market value of the property.
Explanation- The payment of deficit stamp duty by any person by any order of the registering officer under sub section (1) shall not prevent the Collector from initiating proceedings on any instrument under sub section (3).
(4) If on enquiry under sub section (2) and examination under sub section (3) the Collector finds the market value of the property-
i) truly set forth and the document duly stamped, he shall certify by endorsement that it is duly stamped and return it to the person who made the reference;
ii) not truly set forth and not truly stamped, he shall require the payment of the proper duty or the amount required to make up the deficiency in the same together with a penalty of an amount not exceeding four times the amount of proper duty or the deficit portion thereof.
(4A) The Collector shall also require along with the deficit stamp duty or penalty required to be paid under clause (ii) of sub section (4), the payment of a simple interest at a rate of one and a half per mensum on the amount of deficit stamp duty calculated from the date of execution of the instrument till the date of actual payment.
(4B) The amount of interest payable under sub section (4A) shall be added to the amount due and also deemed for all purposes for the amount required to be paid.
(4C) Where the realization of the deficit stamp duty remains stayed by any order of any court or any authority and such order is subsequently vacated, the interest referred to in sub section (4A) shall be payable also for the period during which the order or stay remained in operation.
(4D) Any amount paid or deposited by, or recovered from, or refundable to, a person under the provision of this Act, shall first be adjusted towards the deficit stamp duty or penalty outstanding against him, and the excess, if any shall then be adjusted towards the interest, if any, due from him.
(5) The instrument produced before the Collector under sub section (2) or sub section (3) shall be deemed to have come before him in performance of his function.
(6) In case the instrument is not produced within the period specified by the Collector, he may require payment of deficit stamp duty, if any, together with penalty on the copy of instrument in accordance with the procedure laid down in sub section (2) and (4)."
The import of section 31 of the Act contemplates that the power has been given to the Collector to determine the market value of the property on the date it is executed and whether the duty has been paid on the instrument or not. If he finds that the duty chargeable on the instrument has not been paid, he shall proceed to impound the document under section 33 of the Act. In such, situation, he shall refer the matter to the Collector for the purpose of determination of the market value of the property set forth in the said instrument. If he finds that the market value set forth is less than the minimum value in accordance with law/rules made thereunder the Act he will direct the person to pay stamp duty under section 29 of the Act.
The scheme of the Indian Stamp Act is to ensure that there is no evasion of the stamp duty by the parties by concealing the real value of the property. The principles are set out on the basis of which the market value of the property is required to be determined. The Stamp Act being fiscal statute has to be construed strictly and consideration of hardship and equity have no role to play in its constitution.
Emphasis is laid by Section 47-A of the Act that the duty shall be chargeable on the market value from the date the document is executed. The word 'executed' is the date which leads to determination of the market value of the property.
In view of the aforesaid discussion, the case of the petitioners is required to be considered The contention of the learned counsel for the petitioners that the market value of the property is required to be determined on the basis of limited right which is conveyed by the landlord to the petitioners. Nature of right which is transferred to the present petitioners is confined to the receipt of rent, which is payable by the petitioners. The argument is based upon premises that the landlord in this case exercise only the residuary rights whereas the right of user is with the petitioners.
In order to appreciate this argument, it is important to understand the nature of right enjoyed by an owner in respect of the property which he owns. There are two sets of rights enjoyed by a person in respect of the property. One corporeal and other incorporeal. Corporeal right is right of ownership in material things whereas incorporeal right is any other proprietary right in rem. The owner of a material object is he who owns a right to the aggregate of its uses. Some of the rights of the owner might have been transferred by way of lease, the right of user of those right is as merely encumbrancer and not as an owner. The ownership is of general use and not of absolute use. Once the certain rights are transferred for a specific purpose, the landlord enjoys residuary rights in the said property. Even if any land may be mortgaged,leased,charged, bound by restrictive covenants and so on yet it remain with the owner. If residuary use so left with the owner may be of very small dimension some encumbrancer may own rights over it much more valuable than owner, the ownership of it remains with the owner and not with the encumbrancer. No such right loses its identity because of an encumbrance vested in some one else. The right of ownership is a right to aggregate of the uses of thing and it follows that ownership is necessarily permanent. The right of ownership is essentially an inheritable right. It is capable of surviving its owner for the time being. It belongs to the class of rights which are divested by death but are not extinguished by it. The encumbrancer does not become owner of the property despite the fact that he enjoys the property to the exclusion of the ownership.
For the aforesaid discussion, the argument of the learned counsel for the petitioners that by instrument of sale, the limited right to receive rent is transferred which is the basis for determination of the market value, can not be accepted. The lessee who is encumbrancer has limited right of enjoyment of the property and nothing more than that. The landlord, even if, as in the present case, had limited right of use of property, would not dilute his right of ownership. He continues to enjoy the residuary right in the said property. Once the property has been conveyed, the landlord by virtue of this transfer conveys to the lessee the right of ownership which does not include only the right of enjoyment of the property but all the residuary rights which the owner has in the said property. It is not correct on the part of the petitioners to state that by virtue of the instrument of sale, the landlord has only transfered right to receive rent to the user of the property. The transferee has all residuary rights in the property which owner enjoyed. The transferee has all the residuary rights in the property which the encumbrancer does not enjoy.
The word 'Sale' has been defined under section 54 of the Transfer of Property Act. The definition says that sale is a transfer of ownership in exchange for a price paid or promised or part-paid and part-promised.
Ownership is defined as the relation between a person and an object forming the subject matter of his ownership. It consists in a complex of rights, all of which are right in rem, being good against all the world and not merely against specific person. Owner will have a right to possess the thing which he owns. He may not necessarily have possession of the property or he may have been wrongly deprived of it or may have voluntarily divested himself of it. The owner normally has the right to use and enjoy the thing and right to manage it i.e. the right to decide how it shall be used. Whereas the right to possession is a right in the strict sense. The position of an owner differs from that of a non-owner in possession in that the latter's interest is subject to be determined at some future set point. Lastly, the ownership has a residuary character. He might have divest his position by creating lease or mortgage, still his ownership would consist of residuary rights, i.e. the right which remains when all these lesser rights have been given away.
By virtue of a sale deed executed in favour of the petitioner, ownership has been transferred in his name. It can not be said that by execution of the sale deed limited rights have been transferred to the petitioner. As a result of said sale deed, all the rights of the owner, described herein above, stand transferred in the name of the petitioner. While enjoying these rights, he can not claim that a limited right of receipt of rent alone has been transfered, which would become basis for determination of the market value. If the argument is to be accepted, he shall not have any right to decide how it shall be used nor can he destroy or alienate the property. He shall not have any right to transfer his property to any other person. These are some of the rights which have flown with the instrument of sale executed in his favour.
Second question raised by the petitioners is that the date of agreement to sell will determine the market value of the property. According to the petitioners the date of agreement is year 1966 and not the date of execution of the sale deed. He further contended that by virtue of a decree passed by the court for specific performance of the contract, sale deed was executed on 29.11.2010. It is on the failure of landlord to execute the sale deed, the agreement could not be enforced. The question which calls for consideration is as to whether under the Stamp Act, such a position is conceived or not,. As already discussed herein Supra an instrument is chargeable to duty on the date it is executed. Section-3 also contemplates that the duty is chargeable on every instrument mentioned in the schedule which has not been previously executed. The emphasis has been laid on the word 'executed'. The word execution used with reference to instrument means 'signed' and 'signature'. It shows that the document which is sought to be registered has to be signed by both the parties and till that time, the document does not become an instrument for registration. This view has been expressed by the Apex Court in State of Rajasthan and others versus M/s. Khandaka Jain Jewellers, AIR 2008 SC 509. The following view has been expressed by the Apex Court :-
" The expression "execution" read with Section 17 leaves no manner of doubt that the current valuation is to be seen when the instrument is sought to be registered. The Stamp Act is in the nature of a taxing statute, and a taxing statute is not dependent on any contingency. Since the word "execution" read with Section 17 clearly says that the instrument has to be seen at the time when it is sought to be registered and in that if it is found that the instrument has been undervalued then it is open for the registering authority to enquire into its correct market value. The learned single Judge as well as the Division Bench in the present case had taken into consideration that the agreement to sell was entered into but it was not executed. Therefore, the incumbent had to file a suit for seeking a decree for execution of the agreement and that took a long time. Therefore, the Courts below concluded that the valuation which was in the instrument should be taken into account. In our opinion this is not a correct approach. Even the valuation at the time of the decree is also not relevant. What is relevant in fact is the actual valuation of the property at the time of the sale. The crucial expression used in Section 17 is "at the time of execution". Therefore, the market value of the instrument has to be seen at the time of the execution of the sale deed, and not at the time when agreement to sale was entered into. An agreement to sell is not a sale. An agreement to sell becomes a sale after both the parties signed the sale deed."
It may further be observed that in the present case, there is no written agreement executed by the parties in the year 1966. It is on the basis of a compromise arrived at in the year 2010, a fresh agreement to sell was executed on 12.10.2010. An agreement to sell was executed in the year October 2010. The date of execution of agreement to sale in the present case is October 2010 which, according to the petitioners, could be the determining factor for determination of the market value of the property if not the date of execution of the sale deed. On the basis of a compromise application, the suit was decreed on 16.11.2010 and on 29.11.2010 conveyance deed was executed by the landlord in favour of the tenant which was registered by the registering authority. Even if, it is assumed that agreement to sell also conferred some right on the petitioners, a formal agreement in this behalf was executed in October, 2010. Even then, the market value will be determined on the date the agreement to sell was executed which in the present case is October, 2010. As already stated herein supra, the stamp duty is chargeable only on the date the document is executed, as in the present case has been done in October, 2010.
Next question which calls for determination is what is date on which the market value of the property has to be determined. The determination of the market value depends on different situations relating to the property, which ultimately means what a willing buyer pays for purchase of the property. The Stamp Act is a taxing statute. What is clearly said is that there is no room for intendment. There is no equity about a tax. There is no presumption as to tax. Nothing is to be read in, nothing is to be implied. While construing the provisions of Section 47-A of the Act and other provisions, the duty chargeable on the instrument is the date of its execution. Consequently, the market value has to be determined on the date the said document has been executed/registered. The stand of the learned counsel for the petitioners is that the agreement to sell came into existence in the year 1966 on account of failure on the part of the landlord to execute the sale deed. The suit had to be filed by the petitioners. It is none of his fault, as such, the value given in the instrument should be taken into consideration while determining the market value of the property. The delay in execution of the sale deed was on account of failure on the part of the owner to execute the sale deed. Even if, during this period, the value of the property has shoot up that should not impel the petitioner to pay the stamp duty on the market value to be determined on the date the said sale deed was executed. It is true that no one should suffer on account of litigation. Learned counsel for the petitioners invited attention of the Court to the principle that no person shall suffer on account of litigation for a long time. There is no dispute with the principle that the person should not suffer on account of litigation going on for a long time. However, the fact remains that the market value of the property is to be determined on the date when the sale deed was executed. The Act clearly provides that market value of the property has to be determined on the date the document was executed and registered.
I am fortified with the Full Bench decision of this Court in the case of Ramesh Chandra Srivastava vs State Of U.P. And Others, AIR 2007 All 39, where the identical question of fact and law were involved. The Full Bench after a detailed discussion has observed as under :
"In view of the above discussion we answer the second question by holding that the relevant date for determining the market value of the property for being subject-matter of the sale deed is the third i.e. January 3, 1985 when the Court executed the sale deed in question on behalf of the vendors."
Coming to the last question regarding imposition of penalty, learned counsel for the petitioners has stated that the penalty can be imposed only when the market value of the property, which is the subject of conveyance, has not been truly set forth, with a view to fraudulently evade payment of proper stamp duty. Mere lapse of time between the date of agreement and the execution of the document will not be the determining factor that the document is undervalued and such circumstance by itself is not sufficient to invoke the power under Section 47-A of the Act, unless there is lack of bona fides and fraudulent attempt on the part of the parties to the document to undervalue the subject of transfer with a view to evade payment of proper stamp duty.
In the present case, there is nothing to suggest that the petitioners had not truly set forth the market value of the property which is subject of conveyance. Petitioners are bona fide purchaser of the property, relying upon the market value which was determined by the landlord and the petitioners. It is also not disputed that one of the principles for determining the market value is what a willing buyer would be willing to pay to the seller.
The petitioners are the bona fide purchasers and had correctly determined the market value of the property as existed in the year 1966 which was determined by the landlord and the petitioners. It is also not in dispute that one of the principles of the market value is that willing buyer will be willing to pay to the seller.
In the present case, it has not been disputed that the market value was determined on the basis of the aforementioned principles. It would be a serious error to hold that the petitioners have come to this Court with an intent to defraud the State Exchequer by undervaluing the property. I am of the view that the penalty imposed against the petitioners is arbitrary and uncalled for and as such, the same is liable to be set aside.
In view of this, the orders passed by respondent nos. 2 and 3 dated 08.10.2012 and 06.01.2012 respectively are modified to the extent it impose penalty of Rs. 27 lacs on the petitioners, as a consequence of which, the imposition of penalty is hereby quashed. The writ petition is dismissed to the extent as stated herein above. Consequently, the orders passed by respondent nos. 2 and 3 are upheld to that extent. There shall be no orders as to costs.
(Sunil Hali, J.)
Dated: January 23th, 2013.
SU.