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Stamp duty cannot be revised arbitrarily

The Tamil Nadu Police Housing Corporation, a Government of Tamil Nadu undertaking, allotted apartments and executed lease-cum-sale agreement with the alottees in 1985. After the instalments were paid in full, the sale deeds were registered in the Office of the Sub-Registrar at Thiruverumbur, Trichy District as early as 1999.

All of a sudden, in 2000, the Deputy Registrar issued notices to the allottees demanding additional stamp duty. He evoked the powers sanctioned under Section 47-A of the Indian Stamp Act and claimed that the market value of the property as on the date of the registration had not been taken into consideration by the Sub Registrar, Thiruverumbur while registering the sale deeds and hence additional duty had to be paid.

The allottees represented that the power under Section 47-A of the Stamp Act could only be exercised by the Registering Officer when he had reason to believe that the market value of the property, the subject matter of conveyance, had not been truly set forth with a view to fraudulently evade payment of stamp duty and that mere lapse of time between the date of agreement and the execution of document would not be the determining factor that the document is under value. When the above request was rejected, the allottees approached the court contending that the transaction of sale between the Corporation and the allottees was a sale between the Government of Tamil Nadu undertaking and the allottee and there cannot be any undervaluation or mala fide attached to such transactions.

The Judge, on consideration of the materials available on record, held that there was no material on record either to suspect or to hold that the conveyance by the Tamil Nadu Police Housing Corporation in favour of the allottees is either attracted by alleged undervaluation or fraudulent evasion of stamp duty. In addition, since the sale deeds were executed by the Corporation it can be presumed that it is a bona fide transaction. The Judge held that unless there is any substantial and material evidence and reasons to believe that the market value of the property conveyed has not been truly set forth in the instrument, with an object to commit a fraudulent evasion of stamp duty to cause loss of revenue, it cannot be presumed that the power conferred under Section 47-A of the Indian Stamp Act is a routine one in respect of each and every transaction and ordered in favour of the allottees.

Aggrieved by this order the department appealed to the division bench of Madras High Court. The counsel for the department submitted that in the absence of exemption notification under Section 9(1)(a) of the Indian Stamp Act, the deeds of conveyance executed by the Tamil Nadu Police Housing Corporation in favour of the allottee are liable for stamp duty as on the date of registration of instruments. The powers conferred under Section 47-A(1) and 47-A(3) of the Indian Stamp Act can be invoked when there is a reason to believe that there is loss of revenue. The Division Bench agreed with the reference made by the single judge. It quoted the case reported in AIR 1974 (Mad.) 117 - State of Tamil Nadu vs. Chandrasekharan . This case considered the rationale behind Section 47-A of the Stamp Act and observed that " the object of the Act being to avoid large scale evasion of stamp duty, it is not meant to be applied in a matter of fact fashion and in a haphazard way.”

Market value itself is a changing factor and will depend on various circumstances and matters relevant to the consideration. No exactitude is, in the nature of things, possible. In working the Act, great caution should be taken in order that it may not work as an engine of oppression. “Having regard to the object of the Act, we are inclined to think that normally the consideration stated as the market value in a given instrument brought for registration should be taken to be correct unless circumstances exists which suggest fraudulent evasion." The court upheld the decision of the single judge and dismissed the appeal made by the Registration Department.

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