Bombay High Court
Kolte Patil Developers Ltd Through ... vs Chief Controller Revenue Authority And ... on 11 November, 2024
Author: Sharmila U. Deshmukh
Bench: Sharmila U. Deshmukh
2024:BHC-AS:43210
wp10675-2019f.doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
WRIT PETITION NO. 10675 OF 2019
Kolte Patil Developers Ltd. }
2nd Floor, City Point, Dhole Patil Road, }
Pune, Maharashtra-411 001 }
Through its authorised director, }
Mr.Milind Digamber Kolte, }
Age:-Adult, Occupation Business } .. Petitioner
Versus
1. Chief Controller (Revenue Authority) }
and Inspector General of Registration }
and Controller of Stamp, }
Maharashtra State, Pune. }
2. The Deputy Inspector General of Registration }
and Deputy Controller of Stamp, }
Pune Region, Pune }
3. The Deputy Registrar-1, }
Stamp Collector, Pune Rural, Pune }
4. The Sub-Registrar, }
Class-I, Haveli, Tal. Haveli, }
District : Pune } .. Respondents
----------
Mr. G.S. Godbole, Senior Advocate a/w. Mr.S.S.Kanetkar for Petitioner.
Ms. M.S. Bane, AGP for the Respondent Nos.1 to 4-State.
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Coram : Sharmila U. Deshmukh, J.
Reserved on : 4th September, 2024
Pronounced on : 11th November, 2024
sa_mandawgad 1 of 18
wp10675-2019f.doc
JUDGMENT :
1. Rule. Rule made returnable forthwith and heard finally with consent of the parties.
2. By this petition filed under Article 227 of the Constitution of India, the challenge is to the order dated 3 rd April, 2019 passed by the Deputy Inspector General and Controller of Stamps dismissing Appeal No.26 of 2018 thereby upholding the order dated 21 st April, 2018 issued by the Joint District Registrar. By way of an amendment, the Petitioner has sought for declaration that the Development Agreement dated 14th October, 2013 is duly stamped originally and no stamp duty is recoverable and for a direction to the Respondents to refund the amount of Rs.1,75,00,000/- recovered by the Respondents by coercive means paid under protest by the Petitioner.
FACT OF THE CASE:
3. On 14th day of October, 2013, the Petitioner executed an Indenture styled as "Development Agreement" with the owners i.e. Amar Builders and Vijay Ramesh Jasuja under which the Petitioner was granted development rights in respect of land admeasuring 74321.81 sqr.mtrs contained in various survey numbers situated at Village Bavdhan Budruk, Taluka Haveli, District Pune. The Development Agreement came to be registered on 14 th October, 2013 at Serial No.8204 of 2013. The property was valued at market 2 of 18 wp10675-2019f.doc value of Rs.38,11,89,000/- and the stamp duty was calculated and paid at Rs.1,90,59,500/-.
4. After a lapse of about three years, the Collector of Stamps issued a communication dated 19th March, 2016 to the Petitioner calling upon the Petitioner to make the payment of deficit stamp duty of Rs.3,21,15,525/-. The communication referred to earlier notice dated 25th January, 2016 by which the Petitioner had been called upon to pay the deficit stamp duty and to submit his explanation, if any, in that regard within a period of 30 days. It was stated that despite receipt of the notice of 26 th January, 2016, neither any explanation was tendered nor the deficit stamp duty was paid. The Petitioner was called upon to attend the hearing on 11th April, 2016 at 11:00 a.m.
5. The notice was responded by the Petitioner vide reply dated 11th April, 2016 stating that the procedure under Section 32A and 33 of the Maharashtra Stamp Act, 1958 (short short, "Stamp Act") has not been followed. It was further contended that there was no consideration paid or payable by the Petitioner-Developer and a joint business agreement under the heading "Development Agreement" was executed. It was further contended that as per the said agreement, the gross sale proceeds from the sale of flats will be directly receivable by the owners and not from the developer. It was further submitted that as and when the flats are sold, the 3 of 18 wp10675-2019f.doc necessary stamp duty on the sale of units will be paid on the document of unit sale and therefore, if the stamp duty is charged on revenue sharing basis and again charged on the document of unit sale, then there is double stamp duty paid on the same transaction.
6. Vide order dated 21st April, 2018, the Petitioner was directed to pay the deficit stamp duty of Rs.2,44,39,280/- alongwith penalty of 2% per month within 7 days from the date of the order.
7. An Appeal came to be filed under Section 32B of the Stamp Act and the Appellate Authority vide order dated 3rd April, 2019 dismissed the Appeal upholding the findings of the Collector of Stamps.
SUBMISSIONS:
8. Mr.Godbole, learned Senior Advocate appearing for the Petitioner would submit that under the development agreement, the parties had agreed for revenue sharing where the owners were to receive 38% of the gross sale proceeds and the developers to receive balance 62%. He submits that the development agreement was stamped as per the ready reckoner land value rate and it is pursuant to an audit objection that the Collector of Stamps has raised the issue of deficit stamp duty. He points out that for the first time in the year 2015, valuation guidelines took into account 4 of 18 wp10675-2019f.doc the revenue sharing for purpose of valuation and the 2013 guidelines did not provide for factoring of revenue sharing basis for purpose of valuation. He submits that the audit objection was that the stamp duty was not calculated on the basis of consideration given by way of share in sales revenue. He submits that the consideration was calculated by taking into account the annual statement of rate in respect of the land and residential tenements based on available FSI. He submits that the office of Accountant General has considered the final finished product of the constructed tenements whereas at the stage of stamping of development agreement there were no constructed tenements. He submits that the valuation does not consider the imponderables as the agreement may not have fructified in construction of tenements, the differential market rate at time of sale of tenements, rate of residential properties etc. He submits that in fact by the said assessment, the profits to be received by the Petitioner was taxed which is solely within the domain of Central Government. He would further submit that upon the sale of constructed premises, the stamp duty would be paid on the individual sale of units and the present demand would amount to payment of double stamp duty. He would submit that on sale of constructed residential tenements, stamp duty has been paid. He would further submit that in the reply affidavit filed by the Collector of Stamps, the deponent has stated that in case the 5 of 18 wp10675-2019f.doc developer agrees to pay consideration in kind i.e. allotment of constructed area in the new building, the cost of construction would be the value of consideration and thus it is the cost of construction which would be the consideration and not profits earned from the sale of the constructed tenements. Pointing out to the additional affidavit-in-reply on behalf of the Collector of Stamps, he submits that the deponent has accepted that in the valuation guidelines for the year 2013 there was no special provision or guideline for valuation of development agreement on revenue sharing. He would further submit that it is admitted that the market value is based on ready reckoner value or the consideration and the stamp duty is payable on the higher value of these two. He submits that in the reply, there is no response to the pleading in the Petition as regards profits being taxed.
9. He would further submit that the stamp duty paid on Development Agreement was admittedly more than the annual statement of rate of land and therefore there was no question of invoking proceedings under Section 32A of the Stamp Act. In support, he relies on the following decisions:
(i) District Registrar and Collector, Hyderabad and Anr. vs. Canara Bank and Ors. [(2005) 1 SCC 496];
(ii) Prabha Laxman Ghate vs. Sub-Registrar and Collector of Stamps Pune and Anr. [2004 (2) Mh.L.J. 665];
6 of 18 wp10675-2019f.doc
10. Per contra, Ms.Bane, learned Assistant Government Pleader would submit that the stamp duty has been levied by valuing the consideration which as per the development agreement was 38% of the gross sale proceeds. She submits that the "market value" has been defined under Section 2(na) of the Stamp Act as the price which the property would have fetched if sold in open market or the consideration whichever is higher. She submits that Rule 4 of the Maharashtra Stamp (Determination of True Market Value of Property) Rules, 1995 (for short, "Rules of 1995"), determined the market value and as the consideration in the present case was higher the deficit stamp duty has been directed to be levied. She would further submit that the guidelines of 2015 were not applicable and were not followed.
11. In rejoinder Mr.Godbole would submit that the Stamp Act being fiscal statute have to be construed strictly and the benefit of any ambiguity or conflict is required to be in favour of the subject. He draws support for the said proposition from the decision of the Apex Court in the case of District Registrar and Collector, Hyderabad and Anr. (supra).
REASONS AND ANALYSIS:
12. The issue which arises for consideration is whether the revenue sharing of the gross sale proceeds between the owner and 7 of 18 wp10675-2019f.doc Developer as agreed in the Development Agreement executed between the parties constitute the consideration for the purpose of determining the market value under Section 2 (na) of Stamp Act.
13. It will be apposite to have a look at the relevant statutory provisions of Stamp Act before turning to facts of present case. Section 3 of the Stamp Act is the charging section which lays down that every instrument mentioned in Schedule I, executed in this State and one executed for the first time outside this State and brought in this State and relating to any property situated, or any matter or thing done or to be done in this State and is received in this State shall be chargeable with stamp duty prescribed under the Stamp Act. Article 5(ga) of Schedule I of Stamp Act prescribes the stamp duty to be the same as is leviable on a Conveyance under clauses (b) or (c) as applicable of Article 25 in respect of an agreement relating to giving authority or power to a promoter or a developer, by whatever name called, for construction on, development of or, sale or transfer (in any manner whatsoever) of, any immovable property. Article 25 of Schedule I dealing with Conveyance prescribes stamp duty @ 5% of the true market value of the property if situated within the limits of any Municipal Corporation.
14. The development agreement executed on 14 th October, 2013 was valued by the Sub-Registrar at Rs.38,11,89,000/- and the stamp 8 of 18 wp10675-2019f.doc duty was calculated and paid. The Rules of 1995 prescribes the annual statement of rates of immovable property which shows the average rates of land and building. Under Rule 4(6) of Rules of 1995, every registering officer is mandated when an instrument is produced before him for registration to verify the market value of the land and building as the case may be, from the annual statement of rates. In the instant case, the instrument was verified by the Registering Officer by verifying the market value of land based on the annual statement of rates in respect of the subject property and by accepting the same as market value, the document was stamped based on the Annual Statement of Rates of subject land.
15. What assumes significance while assessing stamp duty under Article 5(ga) of Schedule 1 is the expression "market value".
"Market value" is defined under Section 2 (na) of the Stamp Act as under:
"2(na) 'market value' in relation to any property which is the subject matter of an instrument, means the price which such property would have fetched if sold in open market on the date of execution of such instrument or the consideration stated in the instrument, whichever is higher."
16. Section 2 (na) defines what constitutes market value on a comparison of the fetching price of property in open market on date of execution of instrument and the consideration stated in the 9 of 18 wp10675-2019f.doc instrument is the higher of the two values. Before the registration of the development agreement, the indenture was not lodged for adjudication under Section 31 of the Stamps Act and on the basis of the ready reckoner rate, the stamp duty was calculated at Rs.1,90,59,500/- and paid by considering the market value of Rs.38,11,89,000/- as per Annual Statement of Rates. The stamping of the document did not involve any exercise in order to determine the comparative value of consideration to define market value. The absence of such an exercise gave rise to the audit objection resulting in computation of the consideration for purpose of determining market value.
17. To test the valuation placed by the Authority on the consideration for the Development rights, it will be necessary to look into various clauses of the Development Agreement. By the Development Agreement, the Owners granted to the Developer the development rights of the subject property and as per Clause 2 of the Development Agreement, the Developer agreed to pay consideration for the same on revenue sharing basis i.e. 19% of the Gross Sale proceeds to each co-owner aggregating to 38% of the gross sale proceeds.
18. The Agreement further defines the Gross Sale Proceeds to include the amounts received from sale of flats or any other structures constructed on the subject property and all amounts 10 of 18 wp10675-2019f.doc received by the Developer from sale of infrastructure facilities, grant of open spaces, terraces, garden from the prospective allottees. The receivables were agreed to be deposited in the bank account opened in the joint names of the developer and owners with standing instructions to transfer 19% of the gross sale proceeds in the separate bank accounts of the each of the co- owners.
19. As per Clause 7 of the Agreement, the Developer was to acquire absolute right to develop the property by constructing the building/s thereon of ownership flats. Clause 14 of the Agreement entitles the Developer to accept consideration for sale of flats, to issue receipts for advances, deposits, installments and all monies received for sale of superstructure/s, unit/s, tenements at the time of or before of after execution of agreements.
20. Clause 19 permits the Developer to mortgage the subject property and create encumbrance upto maximum of Rupees Ten Crores to be used for purpose of developing the subject property. Clause 20 makes the Developer liable for monetary and legal consequences arising out of any relationship contractual or otherwise entered into between Developer and third party and the Owners were not in any way concerned with the building or development activities or business carried out by the Developer upon the subject property.
11 of 18 wp10675-2019f.doc
21. Clause 23 makes it clear that the Indenture is not a partnership or joint venture but an independent contract of development.
22. To my mind, upon holistic reading of the various clauses of Development Agreement, the Owners granted an absolute right to the Developer to develop the property by constructing buildings thereon, to sell the constructed units and accept consideration for sale of units at mutually agreed price, subject to revenue sharing in the ratio of 38%:62%. This is a typical Development Agreement by which the Owners divested themselves of all rights in the property for consideration on revenue sharing basis for the transfer. The monetary consideration is not crystallised in the Agreement and takes the form of revenue sharing based on gross sale proceeds to be received from sale of units. The consideration is not payable in praesenti but is deferred to the time of sale of the units after they are completely constructed on the subject property. The agreement is not a joint venture agreement which is evident from Clause 23 of the Agreement and by the fact that the owners do not receive percentage of the net sale proceeds but percentage of gross sale proceeds.
23. The revenue sharing of the gross sale proceeds though deferred to a later date constitutes the consideration for the transfer of Development rights. Consideration is the price that the 12 of 18 wp10675-2019f.doc Owners receive in exchange for grant of right to develop the property. Consideration may take any form either a crystallised amount of money or in form of constructed tenements or revenue sharing. If the consideration is a specific amount mentioned in the agreement, it presents no difficulty. If, in the form of constructed tenements, the cost of construction as per the ASR would be the consideration and if revenue sharing as in the instant case, the consideration in form of gross sale proceeds on date of execution of agreement will have to be computed by considering the available FSI and ASR of land and the constructed tenements. Section 2 (na) defines market value at higher of the price of the property if sold in the open market or the consideration. The consideration in the present case being the gross sale proceeds receivable from the sale of the constructed tenements, the development potential of the subject property on the date of execution of the instrument would form the basis of the valuation of the consideration. The Authorities have rightly considered the Annual statement of Rate for the land and the residential tenements on the basis of the available FSI as the development potential of the plot and as the consideration was higher of the market value, the short levy of stamp duty has been determined accordingly.
24. The absence of valuation guidelines in the year 2013 as regards the revenue sharing for determining market value is 13 of 18 wp10675-2019f.doc irrelevant as Section 2 (na) mandates the authority to compute the market value based on the rate of property as per the ASR or the consideration stated in the instrument whichever is higher. The consideration stated in the instrument is thus required to be computed which was not done in the present case.
25. The Development Agreement cannot be stated to be devoid of consideration. If the submission is accepted, then transfer of Development rights for crystallised amount will be stamped by factoring in the crystallised amount as consideration and if deferred to a later date by way of revenue sharing would be stamped only as per ASR of land resulting in differential treatment to the same nature of document under Article 5(ga), which is impermissible. It is perhaps for this reason that in the year 2015, the guidelines for market valuation took into account the revenue sharing. Though not set out in so many words in the valuation guidelines of 2013, the same principles will apply for computation where the consideration is based on revenue sharing. The submission of Mr. Godbole that the order is vulnerable as the valuation is on a hypothecated future construction and the imponderables militates against the assessment of consideration based on the future gross sale proceeds is not acceptable, as it overlooks the fact that the parties themselves had agreed for the Consideration to constitute a percentage of the sale proceeds 14 of 18 wp10675-2019f.doc which would be received from sale of constructed units. The order cannot be faulted as the Consideration is computed on the date of instrument as per Section 2 (na) of Stamp Act. The statutory provisions of Stamp Act also provides for allowances of stamps in certain cases which includes allowance for the reason of refusal of any person to act under the instrument and totally fails of the intended purpose and therefore the imponderables will not affect the computation of Consideration of revenue sharing.
26. The other submission of Mr. Godbole is that the assessment based on the gross sales would amount to taxing the profits and and would be out of purview of the State Legislation. Apart from general submission, there was nothing further canvassed to substantiate the same. It needs to be borne in mind that the Consideration was required to be calculated for determining the market value under Section 2(na) of Stamp Act and cannot amount to taxing of profits. If the Consideration in Development Agreement was a crystallised amount in exchange for transfer of development rights, the amount would have been factored in for purpose of Section 2(na) of Stamp Act. If that be so, I see no reason, why the gross sale proceeds would assume character of profit merely by reason of not being a crystallised amount. Merely because the consideration takes form of deferred payment the same will not clothe the receivable as profit 15 of 18 wp10675-2019f.doc incapable of being considered for purpose of Section 2(na) of Stamp Act. The consideration is computed only for determining the market value based on which the instrument would be stamped and would therefore not amount to taxing the profits in hands of the transferor.
27. The next submission of Mr. Godbole is that after sale of the constructed units, the flat purchasers agreement would be duly stamped and therefore the stamping of the Development Agreement on basis of the gross sale proceeds would amount to payment of double stamp duty. The fallacy of the said argument is that upon sale of the constructed units, there is further transfer of the property which would be liable to be stamped accordingly.
28. In Shanti Bhushan (D) Thr Lr. vs State of U.P. [2023 SCC OnLine SC 489], the Apex Court has held as under:
"20. At this stage, we may note that the Stamp Act is a taxing statute. In interpreting such a statute, equitable considerations cannot be applied. A taxing statute has to be interpreted in accordance with what is clearly expressed therein. While interpreting such a statute and determining the liability to pay tax, the provisions are required to be construed strictly. In other words, the rule of literal construction must be applied while interpreting a taxing statute. It must be interpreted in terms of the natural construction of the words used. There is no scope to imply anything which is not expressly provided."
29. The consideration thus has to be determined by the 16 of 18 wp10675-2019f.doc Authorities for purpose of ascertaining the market value of the subject property in accordance with Section 2 (na) of Stamp Act. Clause 2 of the Development Agreement states that the consideration is 38% of the gross sale proceeds and the same has accordingly been computed based on available FSI and the ASR for land and the constructed units.
30. Coming to the decision cited by Mr. Godbole, the Apex Court in case of District Registrar and Collector, Hyderabad and Anr. (supra) has reiterated the well settled position that the Stamp Act is piece of fiscal legislation and there is no scope for equity or judiciousness. If the letter of law is clear and unambiguous, benefit of any ambiguity or conflict in different provisions of statute shall go to the subject. There is no such ambiguity or conflict demonstrated in present case which would enure to the benefit of Petitioner.
31. The decision in Prabha Laxman Gate (supra) was a decision prior to the introduction of Article 5(ga) of Schedule I of Stamp Act. In that background, this Court considered the development agreement and held that the development agreement is not a Conveyance. The said decision is inapplicable to the issue arising for consideration herein.
17 of 18 wp10675-2019f.doc CONCLUSION :
32. Under Section 2 (na) of Stamp Act, it is the higher of either the price which the property would fetch if sold in market or the consideration which forms the basis for stamping the instrument. In the instant case, under the Development Agreement, the parties had arrived at a revenue sharing agreement by which the Owners were to receive 38% of the gross sale proceeds received from sale of constructed units as consideration for transfer of development rights. In my view, the consideration for purpose of Section 2 (na) of Stamp Act is the Owner's share of the gross sale proceeds, which consideration on the date of execution of the instrument is required to be computed based on the available FSI on the subject property by considering the ASR of land and the constructed tenement.
33. In light of the above, I do not find any infirmity in the impugned orders dated 21st April, 2018 and 3rd April, 2019.
Resultantly, Petition fails and stands dismissed. Rule stands discharged.
[Sharmila U. Deshmukh, J.]
34. At this stage, request is made for continuation of the stay which was granted by order dated 4th October, 2019. The stay is extended for the period of eight weeks from today.
[Sharmila U. Deshmukh, J.] 18 of 18 Signed by: Sachin R. Patil Designation: PS To Honourable Judge Date: 11/11/2024 20:29:11