Allahabad High Court
M/S Active Promoters Pvt. Ltd. vs State Of U.P. And Others on 9 January, 2020
Author: Pankaj Bhatia
Bench: Pankaj Bhatia
HIGH COURT OF JUDICATURE AT ALLAHABAD Court No. - 44 Case :- WRIT - C No. - 1420 of 2010 Petitioner :- M/S Active Promoters Pvt. Ltd. Respondent :- State of U.P. and Others Counsel for Petitioner :- Yashwant Varma,Raghav Nayar Counsel for Respondent :- C.S.C. And Case :- WRIT - C No. - 1422 of 2010 Petitioner :- M/S Dove Promoters Pvt. Ltd. Respondent :- State of U.P. and Others Counsel for Petitioner :- Yashwant Varma,Raghav Nayar Counsel for Respondent :- C.S.C. Hon'ble Pankaj Bhatia,J.
Both the above referred petitions are similar in nature and as such are being decided by means of this common judgment.
The facts in Writ Petition No. 1420 of 2010 are as under:-
On 9.6.2005, the petitioner-company purchased an agricultural property by virtue of a sale deed executed in their favour. After the execution of the said sale deed, the Sub-registrar put an inspection note dated 2.2.2007 that the property purchased is an agricultural property and there appears to be under valuation, as the purchaser company has purchased the property with an object of raising buildings/shops over the property in question. On the basis of the said inspection, a notice was issued to the petitioner under Section 47-A of the Stamp Act, the petitioner put in appearance and filed its reply, objecting to the proceedings.
Vide order dated 27.6.2007, an order was passed against the petitioner holding that the property was under valued and the deficit of stamp duty was worked out at Rs. 1,44,900/- and a penalty of Rs. 55,100/- was also imposed. Thus, a total payment of Rs. 2,00,000/- was made against the petitioner, which was directed to be paid along with statutory interest. Petitioner preferred an appeal, in which the petitioner deposit 1/3rd of the amount of pre-deposit. The said appeal was heard on merits and vide order dated 2.3.2009, the same was dismissed against the petitioner.
Challenging the said two orders, the Writ Petition no. 1420 of 2010 has been filed.
The facts in Writ Petition No. 1422 of 2010 are as under:-
On 9.6.2005, the petitioner-company purchased an agricultural property and a sale deed was executed in favour of the petitioner. As the property was an agricultural property, for the purpose of calculation of stamp duty, the property was valued on agricultural rates and the requisite stamp duty was paid. After the execution of the sale deed, an inspection was carried, wherein it was observed that the agricultural land has been purchased by the petitioner-company with the object of construction of building/shops and thus the property cannot be valued as agricultural property. On the basis of the said inspection note, proceedings were initiated under Section 47-A of the Stamp Act, to which the petitioner objected by filing a reply.
The respondent no. 3 vide an order dated 5.3.2008 passed an order holding that the stamp duty was deficit by Rs. 2,45,700/- and further imposed a penalty of the same amount i.e. Rs. 2,45,700/-. Thus, the petitioner was called upon to pay a total amount of Rs. 4,91,400/- along with statutory interest at the rate of 1.5% per annum. The petitioner challenged the said order by filing a revision, in the said proceedings, the petitioner deposited 1/3rd of the amount as a pre-deposit. The said revision was heard, however vide order dated 2.3.2009, the revision was dismissed.
Challenging the above two referred orders, the Writ Petition No. 1422 of 2010 has been filed.
Counsel for the petitioners Sri Raghav Nayar arguing both the petitions has argued that future use of the land cannot be the basis for assessing and levying the stamp duty, as has been done by means of the impugned orders. He further argues that the valuation of the land for the purpose of calculation of stamp duty has to be carried out in terms of the U.P. Stamp (Valuation of Property) Rules, which do not envisage any contingency where the property can be valued on the basis of potential use. Counsel for the petitioners has placed reliance on the judgment of this Court in the case of M/s Prosperous Buildcon Pvt. Ltd. v. State of U.P. and others, Judgment dated 20.9.2017 passed in Writ-C No. 53008 of 2012.
The Standing Counsel on the other hand has tried to justify the impugned orders on the ground that the petitioners-company is a Builder Company and thus will never use the property for agricultural purposes and thus there is no error warranting interference in the present proceedings.
On the basis of the pleadings and the arguments raised, the sole question to be decided in both the writ petition is whether the property can be valued for the purposes of calculation of stamp duty solely on the basis of potential use of the land or future use of the land. It is relevant to point out that U.P. Stamp (Valuation of Property) Rules have been framed which provide for manner of calculation of valuation of land for the purposes of demand of stamp duty. The said Rules do not in any way prescribe the valuation to be done on the basis of potential use of land.
This Court while considering the similar question in the case of M/s Prosperous Buildcon Pvt. Ltd. v. State of U.P. and others, recorded as under:-
"A Division Bench of this Court in 2015 (9) ADJ 503, Smt. Vijaya Jain vs. State of U.P. and Others has held in paragraphs 20 and 23 which read as under:
"20. Having extracted the relevant statutory provisions above, the following principles emerge therefrom. Sub-section (1) (a) of Section 47-A of the Act empowers the registering officer to call upon the person who has presented an instrument for registration to pay deficit stamp duty. This power is exercisable by the registering officer immediately after presentation of an instrument and before accepting it for registration and taking any action under Section 52 of the Act. This power is liable to be exercised in a situation where the market value of the property as set forth in the instrument is less than even the minimum value fixed by the Collector in accordance with the rules made under the Act. In distinction to the above, the power under sub-section (3) of Section 47-A is exercised by the Collector either suo motu or on a reference from any Court or from the Commissioner of Stamps or an Additional Commissioner of Stamps, Deputy Commissioner of Stamps, an Assistant Commissioner of Stamps or any officer authorized in that behalf by the State Government. This power confers jurisdiction and authority on the Collector to call for and examine any instrument for the purpose of satisfying himself as to the correctness of the market value of the property which forms the subject matter of the instrument and if upon such examination, he has reason to believe that the market value of such property has not been truly set forth in such instrument, he may proceed to determine the market value of such property and the duty payable thereon. The first distinguishing feature of sub section (3) is that it is available to be exercised even after the instrument has been registered. Secondly the Collector proceeds under sub section (3) upon finding that the "market value" of the property has not been truly set forth in the instrument as distinct from the "minimum value fixed by the Collector in accordance with the rules made under the Act" which is the benchmark for initiation of action under sub section (1).
23. From the provisions extracted above, it is apparent that the Collector proceeds under sub section (3) of Section 47-A read with rule 7 when he has reason to believe that the market value of the property comprised in the instrument has not been truly set forth and that in the opinion of the Collector, circumstances exist warranting him to undertake the enquiry contemplated under rule 7. What we however find from the notice dated 09 September 2013 is that the Collector has proceeded to record, albeit prima facie, that the instrument in question has been insufficiently stamped to the extent of Rs.8,89,000/-. The notice apart from referring to a note dated 20 May 2013, received from the Assistant Inspector General of Registration neither carries nor discloses any basis upon which the Collector came to the prima facie conclusion that the appellant was liable to pay Rs. 8,89,000/ as deficit stamp duty. In our opinion a notice of this nature must necessarily disclose to the person concerned the basis and the reasons upon which the Collector has come to form an opinion that the market value of the property has not been truly set forth. In the absence of a disclosure of even rudimentary details on the basis of which the Collector came to form this opinion, the person concerned has no inkling of the case that he has to meet. A notice in order to be legally valid and be in compliance with the principles of natural justice must necessarily disclose, though not in great detail, the case and the basis on which action is proposed to be taken against the person concerned. Not only this and as is evident from a bare reading of rule 7, at the stage of issuance of notice, the Collector has to proceed on the basis of material which may tend to indicate that the market value of the property has not been truly and faithfully disclosed in the instrument. The stage of computation of market value comes only after the provisions of sub rules (2) (3) and (4) of rule 7 come into play. At the stage of issuance of notices, the Collector calls upon the person concerned to show cause "as to why the market value of the property.... be not determined by him".
There is another aspect of the matter, which ought not to go un-mentioned, namely, the notice under Section 47-A (2) of the Act, 1899 refers to the potential value of the land as being more than the rates prescribed by the Collector for residential land. It is not denied by the authorities that the land in question was agricultural land but the authorities have proceeded for determining the stamp duty on a presumption that the said land has a potential of future user for residential purposes because the Village Shahpur Bamhaita, Pargana Dasna, District Ghaziabad has been declared as Hi-tech City and Integrated City. The Supreme Court and this Court have time and again held that the potential user of the property cannot be the determining factor for computing its market value or the consequent stamp duty payable thereon.
In (2012) 5 SCC 566, State of U.P. Vs. Ambrish Tandon and others, the Supreme Court has held that merely because the property is being used for commercial purposes at the later point of time may not be a relevant criterian for assessing the value for the purpose of the nature of user is relatable to the date of purchase and it is relevant for the purpose of calculation of stamp duty.
The judgment of the Supreme Court in the case of Ambrish Tandon (supra) has been followed by the Full Bench of this Court reported in 2015 (3) ADJ 136 (Smt. Pushpa Sareen Vs. State of U.P.) wherein the Full Bench has also held that the nature of the user is relatabe to the date of purchase which is relevant for the purposes of computing the stamp duty. Where however the potential of the land can be assessed on the date of execution of the instrument itself by referring to exemplar or comparable sale instances that is clearly a circumstances which is relevant and germane to determine the true market value. Paragraph 27 of the said judgement reads as under:
"27.The fact that the land was put to a particular use, say for instance a commercial purpose at a later point in time, may not be a relevant criterion for deciding the value for the purpose of stamp duty, as held by the Supreme Court in State of U.P. and others vs. 23 Ambrish Tandon and another, 2012 (5) SCC 566. This is because the nature of the user is relatable to the date of purchase which is relevant for the purpose of computing the stamp duty. Where, however, the potential of the land can be assessed on the date of the execution of the instrument itself, that is clearly a circumstance which is relevant and germane to the determination of the true market value. At the same time, the exercise before the Collector has to be based on adequate material and cannot be a matter of hypothesis or surmise. The Collector must have material on the record to the effect that there has been a change of use or other contemporaneous sale deeds in respect of the adjacent areas that would have a bearing on the market value of the property which is under consideration. The Collector, therefore, would be within jurisdiction in referring to exemplars or comparable sale instances which have a bearing on the true market value of the property which is required to be assessed. If the sale instances are comparable, they would also reflect the potentiality of the land which would be taken into consideration in a price agreed upon between a vendor and a purchaser."
A Division Bench of this Court in 2016 (2) ADJ 533 (DB) Sumati Nath Jain Vs. State of U.P. and another has held in paragraphs 18 and 19 as under:
"18. We may note that on the date of execution of the instrument the land was admittedly recorded as agricultural. In fact the Khasra of the property remained unchanged throughout and continued to represent the land as recorded for agricultural purposes. The respondents were in our opinion wholly unjustified in initiating proceedings based on an unsubstantiated assumption that the property in future was likely to be put to non-agricultural use.
19. The perceived or presumed use to which a buyer may put the property in the future can never be the basis for adjudging its value or determining the stamp duty payable. The Act, we may note is a fiscal statute. The taxable event with which it concerns itself is the execution of an instrument which is chargeable to duty. The levy under the statute gets attracted the moment an instrument is executed. These propositions clearly flow from a plain reading of the definition of the words "chargeable", "executed" and "instrument" as carried in the Act. In the case of an instrument which creates rights in respect of property and upon which duty is payable on the market value of the property comprised therein, since the tax liability gets fastened immediately upon execution it must necessarily be quantified on the date of execution. The levy of tax or its quantum cannot be left to depend upon hypothetical or imponderable facets or factors. The value of the property comprised in an instrument has to be adjudged bearing in mind its character and potentiality as on the date of execution of the instrument. For all the aforesaid reasons we fail to find the existence of the essential jurisdictional facts which may have warranted the invocation of the powers conferred by section 47A (3). We are therefore of the firm opinion that the initiation of proceedings as well as the impugned order based upon a presumed future use of the property for residential purposes was wholly without jurisdiction and clearly unsustainable. Dealing with this aspect of the matter and after noticing the consistent line of precedent on the subject the Division Bench in Smt Vijaya Jain observed: -
"This Court on more than one occasion has held that the market value of the land is not liable to be determined with reference to the use to which a buyer intends to put it in future. The market value of the property is to be determined with reference to its character on the date of execution of the instrument and its potentiality as on that date.
xxx xxx xxx The above principles of law enunciated in the aforementioned judgments have been consistently followed by this Court. We however find that the order of the Collector relies upon no evidence which would support imposition of residential rates on a property which was stated to be agricultural on the date of execution of the instrument."
Considering the Rules which provide for determination of valuation for the purposes of stamp duty as well as the judgment of this Court in the case of M/s Prosperous Buildcon Pvt. Ltd. v. State of U.P. and Others, I have no hesitation in holding that the impugned orders in both the writ petitions are liable to be quashed, as the same have been passed solely on the ground of potential future use of the land and not on the nature of the land, as on the date of execution of the instrument.
Accordingly the orders dated 27.6.2007 and 2.3.2009 impugned in Writ Petition No. 1420 of 2010 as well as orders dated 5.3.2008 and 2.3.2009 impugned in Writ Petition No. 1422 of 2010 are quashed. The amount deposited by the petitioners in terms of the orders of the Revisional Court as well as the order passed by this Court on 19.1.2010, shall be refunded to the petitioners on their moving an application before the respondent no. 3 within a period of three months from the date of filing of the application.
Both the writ petitions are disposed off in terms of the said order.
Order Date :- 9.1.2020 SR