Stamp Act,1899 – ss.31,32, 47-A and Art. 23 of the Schedule IB – Market Value of property – Determination of – A property was purchased by the appellants under a registered sale deed from the vendor – Appellants were already in possession land as tenants – The appellants calculated Rs.6,67,200/-as the market value of the property and paid the stamp duty quantified at Rs. 46,700/- – The Assistant Stamp Collector, held that the market value of the land will have to be calculated at the rate of Rs. 24,000/per sq. meter – Thus, on the date of the sale deed, the market value of the sale deed property was Rs.19,23,08,305/- on which stamp duty of Rs.1,34,61,630/- was payable – Appellants were directed to pay a deficit stamp duty along with penalty and the interest – The appellants preferred an appeal against the order of Assistant collector, which was dismissed by the Appellate Authority – The above orders were challenged before the High Court – The High Court affirmed the market value fixed by the authorities but set aside the demand for penalty – On appeal, held: Stamp duty on a conveyance will be payable as per the market value prevailing on the date of conveyance unless consideration shown therein is more than the prevailing market value – The market value fixed by appellants was fixed by adopting method used for levy of property tax under the Municipal laws, such a value cannot be taken as basis for determining the market value for the purpose of Art. 23 – Further, a property in possession of a tenant will fetch lesser value in the open market than the market value of a similar property exclusively in possession of the vendor as the buyer will not get actual possession of the portion of the property in possession of the tenant – The market value can be determined by the comparison method even in case of a property in possession of tenants – If no comparable instances are found, the market value can be fixed of the property in possession of tenants by making an appropriate deduction from the market value of a comparable property in which there are no tenants – Even if the guidance value of Rs. 24,000/- per sq. meter is to be taken as the market value of the sale deed land, necessary deductions will have to be made from the market value as the appellants were already in possession of the sale deed land as tenants – The extent to which deduction can be made will depend upon the nature of the tenancy and other material factors – Case sent back to the Assistant Stamp Collector for determination of the market value of the sale deed land.
Stamp Act, 1899 – Interpretation of – In interpreting a taxing statute, equitable considerations cannot be applied – 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.
Allowing the appeal, the Court
HELD:1. 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. [Para 18][524-D-E]
2. In view of Article 23 of Schedule I of the Stamp Act, the stamp duty payable on a conveyance will be in accordance with the market value of the subject property on the date of the conveyance unless the consideration shown therein is more than the prevailing market value. When a sale deed is presented for registration, the registering authority must ascertain the correct market value of the property subject matter of the document on the date of execution of the document. The stamp duty is payable on the basis of such market value and not on the consideration mentioned in the document. If the consideration mentioned is AND ORS.
more than the market value, the stamp duty will be payable on the consideration shown. Moreover, the market value mentioned in the agreement for sale or the market value prevailing on the date of the agreement or the market value prevailing on the date on which the bargain was struck is of no relevance for deciding the stamp duty. The relevant market value is the one which prevails on the date of execution of the conveyance. Therefore, this Court had no manner of doubt that the appellants were under an obligation to pay stamp duty calculated on the market value of the sale deed property on the date of execution of the sale deed. [Paras 19, 20][524-F; 525-H; 526-A-C]
3. Stamp duty was paid by the appellants by taking the market value of the sale deed property at Rs.6,67,200/- . This market value was fixed by adopting method used for levy of property tax under the Municipal laws. Such a value cannot be taken as the basis for determining the market value for the purposes of Article 23. [Para 21][526-D]
4. The test for determination of the market value is very simple. The market value is the one which a bona fide and willing buyer will offer. It is apparent that if the property subject matter of the sale is in possession of the vendor himself, the bona fide purchaser will offer more price for the property than the price which he may offer for a similar property which is in possession of a tenant. There is no doubt that a property in possession of a tenant or tenants will fetch lesser value in the open market than the market value of a similar property exclusively in possession of the vendor. The reason is that the buyer will not get actual possession of the portion of the property in possession of the tenant. [Para 24][529-G-H; 530-A-B]
5. The market value can be determined by the comparison method even in case of a property in possession of tenants. For example, if there is a sale transaction of a property in possession of a tenant which is comparable to the property sought to be valued and if the said sale transaction is held to be a genuine transaction, market value can be fixed on the basis of the sale transaction. If no comparable instances are found, the market value can be fixed of the property in possession of tenants by making an appropriate deduction from the market value of a comparable property in which there are no tenants. [Para 25][530C]
6. The Assistant Collector, the Appellate Authority, and the High Court have not decided the issue in terms of what this Court have held above. Even if the guidance value of Rs. 24,000/- per sq. meter is to be taken as the market value of the sale deed land, necessary deductions will have to be made from the market value as the appellants were already in possession of the sale deed land as tenants. The extent to which deduction can be made will depend upon the nature of the tenancy and other material factors. Some tenancies may be protected under the relevant rent control legislation, whereas some may not be protected. That is all a matter of evidence. [Para 27][530-F-G]
7. The issue regarding the market value of the sale deed land on the date of execution of the sale deed is required to be decided by permitting the parties to adduce oral and documentary evidence. The Assistant Collector will have to ascertain whether a comparable sale instance of a property in possession of tenants is available. If it is not available, the Assistant Collector will have to ascertain the market value of the sale deed property on the relevant date again by comparison method by taking market value of a comparable property which does not have encumbrance of tenancy. Thereafter, he will have to determine the percentage of the deduction which should be made from the market value in the facts of this case. These questions are to be decided by the Assistant Collector on the basis of the evidence on record. Therefore, subject to what this Court have held in the judgment, this Court proposed to send back the case to the Assistant Stamp Collector for determination of the market value of the sale deed land on the date of execution of the sale deed. [Para 28][530-GH; 531-A-B] Special Land Acquisition & Rehabilitation Officer, Sagar v. M.S. Seshagiri Rao & Another [1968] 2 SCR 892; Mangat Ram and Others v. State of Haryana and Others (1996) 8 SCC 664 : [1996] 1 Suppl. SCR 634; AND ORS.
State of Rajasthan and Others v. Khandaka Jain Jewellers (2007) 14 SCC 339 : [2007] 12 SCR 105 – referred to.
O. N. Talwar v. The Collector of Stamps (1971) 7 DLT 319; The Commissioner of Wealth Tax Mysore,
Bangalore v. V. C. Ramachandran (1966) 60 ITR 103 – referred to
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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