Skip to main content

Supreme Court explains calculation of stamp duty on tenanted properties

Cause Title : Shanti Bhushan vs State of U.P., Civil Appeal No. 8388 Of 2017, Supreme Court Of India

Date of Judgment/Order : 25/4/2023

Corum : Abhay S. Oka., J & Rajesh Bindal, J.

Citied: 

  1. Special Land Acquisition & Rehabilitation Officer, Sagar vs M.S. Seshagiri Rao, (1968) 2 SCR 892
  2. Mangat Ram and Others vs State of Haryana and others, (1996) 8 SCC 664
  3. O.N. Talwar vs The Collector of Stamps, (1971) 7 DLT 319
  4. The Commissioner of Wealth Tax Mysore, Bangalore v. V.C. Ramachandran, (1966) 60 ITR 103
  5. State of Rajasthan vs Khandaka Jain Jewellers, (2007) 14 SCC 339

Background

The issue is the stamp duty to be paid by the Appellants for registration of sale deed on purchasing a property measuring 7818.00 sq.mts. land along with construction and super structure standing thereon where they are the permanent tenants. 

By using the rent capitalisation method, the appellants calculated Rs. 6,67,200/­ as the market value of the sale deed property and paid the stamp duty on the said market value quantified at Rs. 46,700/­. The Assistant Stamp Collector, held that the market value of the land having an area of 7818 sq. meters will have to be calculated at the rate of Rs. 24,000/­- per sq. meter or Rs.19,23,08,305/­- and therefore the deficiency in the stamp duty was to the extent of Rs.1,33,07,900/­. Appeal before the Appellate Authority against the order of the Asst. Stamp Collector was dismissed and the said valuation was agreed upon by the High Court. Hence this appeal.

Judgment

The Supreme Court held 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.

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.

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.  There is also 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.

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.

The market value can be determined by the comparison method even in case of a property in possession of tenants. 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 has been held in the judgment, the Supreme Court 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.


Comments

Post a Comment

Most viewed this month

Appellate authorities under Special Statutes cannot be asked to condone delay

Madras High Court in R.Gowrishankar vs. The Commissioner of Service Tax has held that Appellate authorities cannot be asked to condone the delay, beyond the extended period of limitation A Division Bench comprising of Justices S. Manikumar and D. Krishnakumar, made this observation while considering an appeal filed against Single Bench order declining to set aside the order made in the condone delay petition filed by the petitioner to condone 223 days in filing the appeal before the Commissioner of Service Tax (Appeals). Article referred: http://www.livelaw.in/appellate-authorities-special-statutes-cannot-asked-condone-delay-beyond-extended-period-limitation-madras-hc/
Post a Comment
Read more

'Seize assets to pay damages to accident victim'

Her story might be an inspiration for the physically challenged but justice has remained elusive for her. In 2008, a bus accident left research engineer S Thenmozhi, 30, paraplegic. In April 2013, the motor accident claims tribunal directed the Tamil Nadu State Transport Corporation (TNSTC) to provide her a compensation of 57.9 lakh. However, TNSTC refused to budge and on Tuesday a city court ordered attaching of movable assets of the transport corporation. Thenmozhi was employed in C-DOT, a telecom technology development centre in Bangalore. On July 21, 2008, she was coming to Chennai in a private bus. Around 2am, the bus had a flat tyre and the driver parked it on the left side of the road near Pallikonda in Vellore district on the Bangalore-Chennai highway. While the tyre was being changed, a TNSTC bus of Dharmapuri division hit the stationary bus. The rear part of the bus was smashed and passengers were injured. Thenmozhi who had a seat at the back of the bus suffered...
Post a Comment
Read more

Mumbai ITAT rules income of offshore discretionary trust is subject to tax in India

The Mumbai Income Tax Appellate Tribunal (ITAT) has recently determined the following issue in the affirmative in the case of Manoj Dhupelia: Should the income of an offshore discretionary trust be subject to tax in India, if no distributions have been made to beneficiaries in India? The question arose from appeals filed by individual beneficiaries in relation to a Lichtenstein-based trust, the Ambrunova Trust and Merlyn Management SA (the Trust) with the ITAT. It is important to note that the individuals in this case were amongst those first identified by the Government of India (GOI) as holding undeclared bank accounts in Lichtenstein. The ITAT ruling raises the following issues: Taxation of Trust Corpus: ITAT classified the corpus of the trust as "undisclosed income" and declared it taxable in the hands of the beneficiaries. Taxation of Undistributed Income: ITAT refused to draw a distinction between the corpus and undistributed income from the trust and declared i...
Post a Comment
Read more