PROGENIES WITH STAMP ACT

Chapter 10: PROGENIES WITH STAMP ACT The power of government depends upon the strength of its treasury. Kautilya. 339 10.1. Pertinence of Stamp Duty Stamp Duty is payable under Section 3 of The Bombay Stamp Act, 1958. Different amount of Stamp Duty is payable for different types of document as per Schedule I of The Bombay Stamp Act, 1958. Stamp Duty must be paid in full and on time. If there is a delay in payment of stamp duty, it attracts penalty. A stamp duty paid document is considered a proper and legal document and as such gets evidentiary value and is admitted as evidence in court. Document not properly stamped, is not admitted as evidence by the court. 10.2. Transfer of Property and Registration Act As per section 17(1) & Section 17(1A) of The Registration Act, 1908, various documents relating to transfer of movable and immovable properties are required to be registered. Registration is legal formality wherein the document, which is required under the law to be registered, undergoes the procedure by the Sub-Registrar of Assurance of the respective district. After completion of these procedures, the document is regarded as being registered. The combined effect of section 54 of the Transfer of Property Act 1882 and section 17 of the Registration Act 1908 is that, a contract of sale in respect of immoveable property of the value of more than one hundred rupees without registration cannot extinguish the equity of redemption. In India, it is only on 339 The political ethics of Chanakya 304

execution of the conveyance and registration of transfer of the mortgager's interest by registered instrument that the mortgagor's right of redemption will be extinguished. The conferment of power to sell without intervention of the court in a mortgage deed by itself will not deprive the mortgagor of his right to redemption. The extinction of the right to redemption has to be subsequent to the deed conferring such power. The right of redemption is not extinguished at the expiry of the period. The equity of redemption is not extinguished by mere contract of sale. The mortgagor's right to redeem will survive until there has been completion of sale by the mortgagee by a registered deed. It must also be noted that section 17 of the Indian Registration Act 1908 or the second para of the Transfer of Property Act 1882, will have no application to the agreement to recover property, being non-creation of any interest in the immoveable property. In a case Supreme Court held that the mortgagor has a right to redeem unless the sale of the property was complete by registration in accordance with the provisions of the Registration Act 1908, and therefore, the appeal was dismissed. 340 There are several documents that are not compulsorily registerable under section 17 of the Registration Act 1908. Some of them require high stamp duty and some of them do not. Even the ones that require high stamp duty, if they are under stamped, can be rectified later by paying a penal amount ten times the original amount. Non-payment of stamp duty does not make the document void or otherwise invalid. The consequences of under stamping as per the stamp act are: 1. to make the document inadmissible for the evidence before any authority capable of receiving evidence of before any public authority. 2. the document can also be impounded for enforcing the payment of full stamp value. An under stamped instrument can be admitted as evidence in court, if penal stamp duty, is ten times the value of the original amount is paid. 340 Narandas Karsondas vs. S.A. Kantam & Anr, (AIR 1977 SC 774). 305

In the light of the analysis of section 17 of Indian Registration Act 1908 and a comparative study of section 17 and section 53-A and section 54 of the Transfer of Property Act 1882, it can be fairly concluded that an incomplete deed of transfer, though not registered or even attested, is regarded, as a contract in writing but such a deed must have been signed by the transferor or his agent and an unregistered document, affecting immoveable property, required by the Transfer of Property Act 1882, or the Indian Registration Act 1908, to be registered, may be received in evidence of part-performance of a contract or as evidence of any collateral transaction not required by a registered instrument. A contract of sale in respect of immoveable property of the value of more than one hundred rupees without registration cannot extinguish the equity of redemption. 10.3. Instruments chargeable with Stamp Duty Section 3 of the Bombay Stamp Act, 1958 is a charging section of the Stamp Duty. This section provides that subject to the provision of this Act and the exemption contained in Schedule I, the instrument shall be chargeable with the duty of amount indicated in Schedule I as the proper duty therefore, hence, duty charged by the State Legislature is on the instrument and is on the execution of the instrument. The measure of the charging stamp duty may be fixed or ad valorem and that is to be determined by the legislature. The basis for computation of stamp duty can be determined by the legislature and it may be on the basis of the market value of the property transferred or it may be fixed amount. Section 3 is as under; Subject to the provisions of this Act and the exemptions contained in Schedule I, the following instruments shall be chargeable with duty of the amount indicated in Schedule I as the proper duty therefore respectively, that is to say 306

(a) every instrument mentioned in Schedule I, which, not having been previously 'executed by any person, is executed in the State on or after the date of commencement of this Act; 341 [(aa) every instrument mentioned in Schedule I, which not having been previously executed by or on behalf of or in favour of, the Government or any local authority, is executed by or on behalf of or in favour of, the Government or any local authority;" (b) every instrument mentioned in Schedule I, which, not having been previously executed by any person, is executed out of the State on or after the said date, relates to any property situate, or to any matter or thing done or to be done in this State and is received in this State: Provided that no duty shall be chargeable in respect of (1) any instrument executed by or on behalf of, or in favour of, the Government in cases where, but for this exemption, the Government would be liable to pay the duty chargeable in respect of such instrument; (2) any instrument for the sale, transfer or other disposition, either absolutely or by way of mortgage or otherwise of any ship or vessel, or any part, interest, share or property of or in any ship or vessel registered under the Bombay Coasting Vessels Act, 1838, or the Indian Registration of Ships Act, 1841. 10.3.1. Observations of Charging Section Every instrument executed by or on behalf of or in favour of the Government or any local authority is now specifically covered within the charging Section 3 by inserting this new clause (aa). However, where the Government is statutorily liable to bear the expense of stamp duty as provided in Section 30 341 Clause (aa) was inserted by Gujarat 5 of 2002, Section 2 w.e.f. 1/4/2002. 307

of the Act, such instrument executed by or on behalf of or in favour of Government is required to pay any duty as per Proviso (1) to this section. Instrument executed by or on behalf of or in favour of any Local authority, unless specifically exempted or remitted from payment of stamp duty, is required to pay stamp duty as per charging section 3. Instrument covered within the scope of clause (b) is chargeable with stamp duty as provided in the scheme of Section 18 and Section 19 of the Act. In absence of such original instrument received in the State, its counterpart, duplicate or copy is chargeable with stamp duty under Section 7 of the Act. In proviso (2) in last two lines "any ship or vessel registered under the - Bombay Costing Vessels Act, 1838, or the Indian Registration of Ships Act, 1841" are mentioned. The Indian Registration of Ships Act, 1841 has already been repealed by the Merchant Shipping Act, 1958 and, therefore, proviso (2) to Section 3 requires appropriate amendment by the authority. 10.3.2. Important Definitions and Charging Section It is worth observing certain definitions, given under section 2 of Bombay Stamp Act, 1958, to understand correct and clear interpretation of charging section. 10.3.2.1. Chargeable: Section 2(d) "chargeable" means, as applied to an instrument executed or first executed after the commencement of this Act, chargeable under this Act, and as applied to any other instruments, chargeable under the law in force in the State when such instrument was executed or, where several persons executed the instrument at different times, first executed; 308

10.3.2.1.1. Observation on Chargeable Here, first part of the definition applies to an instrument executed or first executed in the State and chargeable as provided for in Section 3, clause (a) of this Act and second part applies to an instrument executed out of the State and chargeable as provided for in Section 3, clause (b) of this Act. Where an instrument is executed outside the State and the same is received in this State it will be chargeable with stamp duty as per the scheme laid down in Sections 18 & 19 of the Act. Where, in lieu of an original instrument executed out of the State, a counterpart, duplicate or copy of any such instrument is received in this State it will attract stamp duty same as original instrument as provided for in Section 7 of this Act. 10.3.2.2. Conveyance: Section 2(g) "conveyance" includes, - (i) (ii) (iii) (iv) (v) a conveyance on sale, every instrument, every decree or final order of any civil court; 342 [XXX], every order made by the High Court under Section 394 of the Companies Act, 1956 in respect of 343 [reconstruction or amalgamation of companies, or] 344 any writing or letter of allotment in respect of the premises, given to its members or allottee by a co-operative society registered or deemed to have been registered under the Gujarat Co-operative Societies Act, 1961 or 345 [a corporation or an association formed and registered under the Bombay Non-Trading Corporation Act, 1959] or the Gujarat ownership Flat Act, 1973, as the case may be". 342 The word "or" was deleted by Gujarat 19 of 2001 Section 2(i), w.e.f. 1/09/2001 343 These words were substituted for the words "amalgamation of companies" by Gujarat 19 of 2001 Section 2(ii) 344 sub-clause (v) was inserted, ibid, Section 2(iii) w.e.f. 1/9/2001 345 The Bombay Non-Trading Corporation Act, 1959 was repealed by the Bombay Non- Trading Corporation (Gujarat Repeal) Act, 2005 (Act No.6 of 2005) For details of Repeal Act No.6 of 2005. 309

by which property, whether movable or immovable, or any estate or interest in any property, is transferred to, or vested in, any other person, inter vivos, and which is not otherwise specifically, provided for by Schedule I; Explanation I: For the purpose of this clause, an instrument whereby a co-owner of any property transfers his interest to another co-owner of the property and which is not an instrument of partition shall be deemed to be an instrument by which property is transferred inter vivos; 10.3.2.2.1. Observation on Conveyance The term "conveyance" normally connotes a deed whereby the title to land is transferred from one person to another. 346 In the context of Section 2 (xxiv) of the Gift Tax Act, 1958 it is observed that the word "conveyance" means transfer of ownership. 347 The word "conveyance" basically relates to transfer of property. The preamble to the Transfer of Property Act, 1882 reads as under: Whereas it is expedient to define and amend certain parts of the law relating to the transfer of property by act of parties, it is hereby enacted as follows: Section 2, clause (d) of the Transfer of Property Act, 1882 provides thus: But nothing herein contained shall be deemed to affect- (d) save as provided by Section 57 and Chapter IV of this Act, any transfer by operation of law or by, or in execution of a decree or order of a Court of competent jurisdiction. Section 57 of the Transfer of Property Act, 1882, deals with the "Provision by court for encumbrances and sale freed there from". In short the words "by act 346 Chalker v. Chalker, 1 Conn. 79 347 CGT v. N.S. Getti Chettier, (1971) 82 ITR 599, 606 (SC). 310

of parties" used in the Preamble of the Transfer of Property Act, 1882 exclude transfers by operation of law. Prior to amendment made by Guj.13 of 1994 with effect from 4/4/1994, and amendment made by inserting clause (v) by Gujarat 19 of 2001, the definition of the word '"conveyance''' included (i) (ii) (v) conveyance on sale and every instrument Any writing or letter of allotment in respect of the premises, given to its members or allottee by a Co-operative Society etc., by which property, whether movable or immovable, is transferred inter vivos and which is not specifically provided for by Schedule I; the aforesaid definition included transfer of property "by act of parties" only. Amendment made by Gujarat 13 of 1994 in the definition of the word "Conveyance," enlarged its scope by including therein the transfer of property by "operation of law" also. The enlarged and amended definition of the word "conveyance" by inserting sub-clause (iii) and (iv) as reproduced below covered within the meaning of "conveyance" (iii) (iv) every decree or final order of any civil court; or every order made by the High Court under Section 394 of the Companies Act, 1956 in respect of reconstruction or amalgamation of companies. The Bombay High Court in a case held that the State Legislature has jurisdiction to 'levy stamp duty under entry 44, List III of the Seventh Schedule of the Constitution of India and prescribe rates of stamp duty under entry 63, List 11. By sanctioning of amalgamation scheme, the property including the liabilities are transferred as provided in sub-sec. (2) of Section 394 of the Companies Act, 1956 and on that transfer instrument, stamp duty is levied. In view of the Constitutional provisions as aforesaid, it cannot be said that the 311

State Legislature has no jurisdiction to levy such duty on an order of the High Court sanctioning a scheme of compromise or arrangement under Section 394 of the Companies Act, 1956. In the same judgment the Bombay High Court has also observed that in enacting provisions for levy of stamp duty on an order passed by the High Court under Section 394 in Section 2(1) of the Bombay Stamp Act, the legislature has not made any direct or indirect inroads into the judicial powers. It has only provided that if an instrument including an order passed by the court transfers movable or immovable property, then on the same instrument, stamp duty as provided under the Act is required to be paid. This cannot be stated to be in any manner making a direct inroad into judicial function of the High Court or of the Supreme Court. It cannot be said that Article 261 (3) of the Constitution, which provides that final judgments or orders delivered or passed by civil court, in any, part of the territory of India, shall be capable of execution anywhere within that territory according to law, is violated. 348 Letter of Allotment in respect of the premises given to its members or allottee; (i) by a Co-operative Society registered or deemed to have been registered under the Gujarat Co-operative Societies Act, 1961; or (ii) by a Company registered. under the Companies Act, 1956 constituted as provided for in Section 4 of the Gujarat Ownership Flat Act, 1973 (iii) by a Corporation or an Association formed and registered under the Bombay Non-Trading Corporation Act, 1959- (The NTC Act repealed by Gujarat Act. No.6 of 2005 published in the Gujarat Govt. Gaz. Pt. IV, No.6 dated 25-02-2005 p.6-1) is chargeable with stamp duty as conveyance with effect from 1-09-2001. Explanation I: to this clause (g) provides that an instrument, other than an instrument of partition, whereby a co-owner of any property, transfers his interest to another co-owner of the property shall be deemed to be an 348 Li Taka Pharmaceuticals Ltd. v. State of Maharashtra and others, reported in (1996) 4 Comp LJ 385 (Bom) 312

instrument by which property is transferred inter vivos. The word 'instrument of partition', as, defined in clause (m) of Section 2 of the Act, means any instrument whereby co-owners of any property divide or agree to divide such property in severalty. Now, instead of making physical division of such property if one I co-owner purports to abandon or relinquish his claim to the share in the family property in favour of remaining co-owner or co-owners of the property such instrument by deeming provision of this explanation shall be an instrument by which property is transferred inter vivos and would be chargeable with stamp duty as 'conveyance'. With a view to cover certain types of instrument of release within the scope of definition of 'conveyance' several other States', namely; Maharashtra, Andhra Pradesh, Uttar Pradesh and West Bengal have amended this definition by inserting Explanation therein. 10.3.2.3. Duly Stamped: Section 2(h) Duly stamped as applied to an instrument means that the instrument bears an adhesive or impressed stamp of not less than the proper amount and that such stamp has been affixed or used in accordance with the law for the time being in force in the State; 10.3.2.3.1. Observation on Duly Stamped 1. An instrument must bear the proper description of stamps as provided in the Gujarat Stamp Rules, 1978; 2. Such stamps must be affixed, impressed or used according to the provisions of the Act and the Rules; 3. Such stamps used according to the provisions of the Act and Rules must be of the proper amount as prescribed in Schedule I to the Act. 4. Wherever it is expressly provided by the Act, proper amount of duties can be paid otherwise than by means of stamps, proper amount of stamp duty can be paid accordingly. 5. The words "impressed stamp" as defined in clause (k) now includes "impression by franking machine" and, therefore, proper amount of 313

stamp duty paid by impression by franking machine, as provided by sub-section (2A) and (28) of Section 10 of the Act. 10.3.2.4. Executed and Execution: Section 2(i) "Executed" and "Execution" used with reference to instruments, means "signed" and "signature"; 349 ["Explanation - The terms "signed" and "signature" also include attribution of electronic record as provided in section 11 of the, Information Technology Act, 2000"] 10.3.2.4.1. Observation on Executed and Execution Prior to amendment made in clause (i) by adding "Explanation" there under the words "executed" and "execution", used with reference to instruments, means "signed" and "signature". According to judicial decisions one of the essential elements of execution of an instrument is that it should be signed by the party, or parties, to the instrument. In absence of their signature, they cannot be bound by such, unexecuted instrument. In view of this legal necessity if an instrument is of such a character that both the parties to the instrument should sign it to constitute a binding agreement between them, then such instrument should contain signatures of both the parties to the instrument so as to legally complete it. Similarly, if such instrument also requires to be signed by two attesters in order to make such instrument legal this attestation will also be necessary in view of this definition. Section 11 of the Information Technology Act, 2000 (IT Act) reads as under: An electronic record shall be attributed to the originator,- (a) if it was sent by the originator himself; (b) by a person who had the authority to act on behalf of the originator in respect of that electronic record; or 349 Explanation in clause (i) was added by Gujarat 11 of 2007, Section 2(1) 314

(c) by an information system programmed by or on behalf of the originator to operate automatically. In pursuance of the aforesaid provisions of Section 11 of Information Technology Act, various instruments covered within the ambit of charging Section 3 of the Bombay Stamp Act, 1958 are not required to be executed as contemplated in the definition of Section 2(i) of the Bombay Stamp Act, 1958. All these instruments prepared by an electronic record when sent to the parties as provided for in the said Section 11 of the Information Technology Act without any sign or signature of its originator would now, in view of the amended provisions of the Section 2, clause (i) of the Act, be liable to stamp duty. 10.3.2.5. Instrument: Section 2(l) "Instrument" includes every document by which any right or liability is, or purports to be, created, transferred, limited, extended, extinguished or recorded but does not include a bill of exchange, cheque, promissory note, bill of lading, letter of credit, policy of insurance, transfer of share, debenture, proxy and receipt; 350 [Explanation: The term "document" also includes any electronic record as defined in clause (t) of sub-section (1) of section 2 of the Information Technology Act, 2000]. 10.3.2.5.1. Observation on Instrument Prior to amendment made in the definition of the word "instrument" by adding explanation thereto, in a case the Gujarat High Court has held that the right or the liability, as the case may be, is created by the original instrument and not by its copy. 351 350 Explanation in clause (I) was inserted by Gujarat 11 of 2007 Section 2(4) 351 The Chief Controlling Revenue Authority v. the Nutan Mills Limited, reported 18 GLR page 409. 315

The said clause (t) of sub-section (1) of Section 2 of the Information Technology Act, 2000, reads as under: "electronic record" means data, record or data generated, image or sound stored, received or sent in electronic form or micro film or computer generated microfiche. This explanation under clause (1) is specifically added to cover documents which fall mostly within the following descriptions of entries of Schedule I to the Act. : (i) (ii) (iii) Art. 5, clauses (b) to (g) Art. 39, clauses (a) to (d) and (f); and Art. 48A clauses (b) to (d). All such agreements, contract notes and records pertaining to transactions of shares, scrip, stock and the commodities will be covered within the meaning of the Explanation and such electronic record shall be now covered within the scope of the definition of 'instrument' given in Section 2, clause (l) of the Act and will be chargeable with stamp duty accordingly. Instrument pertaining to transfer of immovable property and such other documents which cannot be created by electronic record would not fall within the ambit of Explanation added under clause(l) and, therefore, the right of liability in respect to such property can be created by the original registered instrument only. Under The Bombay Stamp Act, 1958, stamp duty is to be paid on all the documents by which any right or liability is or purports to be created, transferred, limited, extended, extinguished or recorded but does not include a cheque, promissory note, bill of exchange, bill of lading, letter of credit, policy of insurance, transfer of shares, debentures proxy and receipt, which is charged under Indian Stamp Act, 1899. Stamp duty is payable on document and not on transactions. Stamp duty should be charged on the basis of the contents of the document only. If any information essential for working out stamp duty is missing in the 316

document, stamp duty valuation officer can ask for the same. Information such as the Carpet or Built-up area of the flat, number of floors in the building, year of construction, name of Division/Village and survey number of plot of land on which property is situated must be mentioned in the agreement. Majority response to survey favours that; classification of instruments in different groups should be more specific so that the ambiguity to determine the true nature of the instrument can be averted. 352 10.3.3. Additional Duty: Section 3A Section 3A of Gujarat Stamp Act, 1958 makes provision for additional stamp duty. The section 3A is as under: 353 [3A. Instruments chargeable with additional duty (1) Every instrument chargeable with duty and described in the following articles of Schedule I when executed in respect of immovable property situated in the State shall, in addition to such duty, be chargeable with a duty at the rate of forty per cent, (including rate of stamp duty to be increased as provided for in Sections 207 and 209 of the Gujarat Panchayats Act, 1993 (Guj. 18 of 1993), of such duty, namely: (1) No. 17 (Certificate of sale), (2) No. 20(a), 20(b) and 20(c) (Conveyance), (3) No. 26 (Exchange of property), (4) No. 27 (Further Charge), (5) No. 28 (Gift), (6) No. 30 (Lease), (7) No. 36 (Mortgage), (8) No. 45(f) (Power of Attorney when given for consideration and authorizing the attorney to sell any immovable property), (9) No. 52 (Settlement), 352 Annexure-I, Survey Report, Majority Responses, Item No. 12. 353 Section 3A was inserted by Gujarat 15 of 2003, S 2. 317

(10) No. 57 (Transfer of lease). (2) Except as otherwise provided in sub-sec. (1), the provisions of this Act and the rules made there under shall, so far as may be, apply in relation to the additional duty chargeable under sub-sec. (1) as they apply in relation to the duty chargeable under Section 3. 10.3.3.1. Observation on Additional Duty By the amendment made by Gujarat 15 of 2003 additional panchayat stamp duty levied under Sections 207 and 209 of the Gujarat Panchayats Act, 1993 prior to 1/04/2003 has been included within the ambit of Section 3A. Prior to this amendment rate of additional stamp duty in respect of Urban area was 25 per cent whereas under the area of Panchayats jurisdiction rates of additional panchayat duty were maximum 35 per cent. Accordingly, total stamp duty inclusive of additional stamp duty leviable in respect of instruments of conveyance etc., was 10 per cent whereas it was maximum 10.8 per cent in case of instrument of conveyance etc., in respect of property situated in the Jursidiction of Taluka Panchayats and District Panchayats. These rates have virtually been increased to 11.2 percent and it is made applicable to all immovable properties irrespective of its situation. 10.4. Machinery Provision of Stamp Duty Bombay Stamp Act, 1958 consist totally VIII chapters. Sections 4 to 76 are machinery provisions. There are two schedules in the Act. Schedule I contains 59 articles. The Schedule mentions: descriptions of instruments, rate of stamp duty and kind of stamp to be used. Schedule II gives details of enactments repealed. Under section 70 of Act, State Government is having power to make rules generally to carry out purpose of the Act. The State Government has framed: Gujarat Stamp Rules, 1978, Bombay Stamp (Determination of Market Value of Property) Rules, 1984 and Gujarat Stamp Supply and Sales Rules, 1987. 318

10.4.1. Stamp Duty When Payable Sections 17, 18 and 19 are dealing with the situation when stamp duty is payable. Stamp duty is payable either before execution of the document or on the day of execution of document or on the next working day of executing such a document. Execution of a document means putting signatures on the document by the persons who are party to the document. However it is advisable to pay stamp duty before executing the document, for all practical purposes. 10.4.2. Stamp Duty by Whom Payable: Section 30 In the absence of any agreement to the contrary, the purchaser/transferee has to pay stamp duty or in case of exchange of properties, both parties have to bear stamp duty equally. 10.4.3. Penalty for Executing Instruments not Duly Stamped Section 59 of Bombay Stamp Act, 1958 is as under; (1) Any person executing or signing otherwise than as a witness any instrument chargeable with duty without the same being duly stamped shall, on conviction for every such offence be punished with fine which may extend to five hundred rupees: Provided that, when any penalty has been paid in respect of any instrument under Section 34, Section 39 or Section 58, the amount of such penalty shall be allowed in reduction of the fine (if any) subsequently imposed under this section in respect of the same instrument upon the person who paid such penalty. (2) If a share-warrant is issued without being duly stamped, the company issuing the same, and also every person who, at the time of when it is issued, is the Managing Director or Secretary or other principal officer of the company, shall, on conviction be punished with fine which may extend to five hundred rupees. 319

Whenever word penalty comes in mind of the person with regard to the stamp duty section 32A and section 33 comes first. This section is dealing with the penalty on stamp duty which is paid less. Many times it happens that there is a mistake in calculating the stamp duty due to which less stamp duty is paid to the government. When less duty is paid at that time the process of registration of instrument is stopped or if done then notice is issued to pay the duty, in this case they have to pay certain fine which is decided by the collector. Now let us see Section 32A(3) of Bombay Stamp Act, 1958. Section 32A Sub-section(3) is as under; (3) Upon such determination, the collector of the district shall require the party liable to pay the duty, to make payment of such amount as is required to make up the difference between the amount of duty determined under this sub-section and the amount of duty already paid by him and shall also require such party to pay penalty 354 [of two hundred and fifty rupees 355 [or the amount of proper duty or of the deficient portion thereof whichever is less] and on such payment, return the instrument to the officer referred in sub-section(3) of Section 31 or, as the case may be, sub-section(1) of this section: 10.4.4. Impounding of Instruments: Section 33 When through mistake or otherwise any instrument which is not duly stamped is registered under the Registration Act, 1908, the registering officer may call for the original instrument from the party and, after giving the party an opportunity of being heard and recording the reasons in writing and furnishing a copy thereof to the party, impound it. On failure to produce such original instrument by the party, a true copy of such instrument taken out from the registration record shall, for the purposes of this section, be deemed to be the original of such instrument. Section 33 of Bombay Stamp Act, 1958 is as under; 354 The words were substituted by Guj 4 of 1991, S.2. 355 These words were inserted by Guj 13 of 1994, S.7(3). 320

33. Examination and impounding of instruments: (1) 356 [Subject to the provisions of section 32-A, every person] having by law or consent of parties authority to receive evidence, and every person in charge of a public office except an officer of police, before whom any instrument, chargeable, in his opinion, with duty, is produced or comes in the performance of his functions shall if it appears to him that such instrument is not duly stamped, impound the same. (2) For that purpose every such person shall examine every instrument so chargeable and so produced or coming before him in order to ascertain whether it is stamped with a stamp of the value and description required by the law for the time being in force in the State when such instrument was executed or first executed: Provided that (a) nothing herein contained shall be deemed to require any Magistrate or Judge of Criminal Court to examine or impound, if he does not think fit so to do any instrument coming before him in the course of any proceeding other than a proceeding under Chapter XII or Chapter XXXVI of the Code of Criminal Procedure, 1898; (V of 1898). (b) in the case of a Judge of High Court, the duty of examining and impounding any instrument under this section may be delegated to such officer as the Court may appoint in this behalf. (3) For the purpose of this section, in case of doubt, 356 These words, figures and letter were substituted for the words "Every person", by Gujarat 21 of 1982, S.15. 321

(a) the State Government may determine what offices shall be deemed to be public offices; and (b) the State Government may determine who shall be deemed to be persons in charge of public offices. In Section 2(g) of the Bombay Stamp Act, 1958 as adapted by the State of Maharashtra 'explanation' similar to one inserted in Section 2(g) of Gujarat Act was inserted with effect from 10/12/1985. In view of the said explanation Sub- Registrar of Assurances impounded a document of release deed without consideration wherein the daughter and the son renounced their claim in respect of the property in favour of their mother. The Bombay High Court in its judgment observed that in order to determine whether a document is a release or conveyance, actual character of the transaction and precise nature of the rights created under the instrument are relevant and quashed the impugned order impounding the document treating it to be deed of conveyance. 357 It is established provisions of law that once the sub-registrar registers the instrument presented to him for registration under the provisions of the Registration Act, 1908 he becomes functus officio and, thereafter, he cannot impound the same under the provisions of Section 33. During the receipt audit conducted by the Accountant General's office or the Departmental Audit of the Sub-Registrar Office when it is noticed that owing to mistake or otherwise any instrument which is not duly stamped is registered then on the basis of audit note or original or, as the case may be, a copy of such document is called for from the concerned party and the Sub-Registrar forward the same to the Collector of Stamps for initiating appropriate action. It seems that in most of the cases the Collector initiate action on such instrument under Section 39(1) and a copy of such instrument under Section 7(3) without impounding the same. Initiation of such statutory action by the Collector of Stamps would obviously be improper and illegal. In this situation it 357 Asha Kishanlal Bajaj (Smt) v. Sub-Registrar Assurances, 2001 (2) Bom. LR 629 (Bom- DB) 322

would be proper to make a scheme similar to one adopted by the Maharashtra State by inserting Section 33A which reads as under: 33A. Impounding of instruments after registration When through mistake or otherwise any instrument which is not duly stamped is registered under the Registration Act, 1908, the registering officer may call for the original instrument from the party and, after giving the party an opportunity of being heard and recording the reasons in writing and furnishing a copy thereof to the party, impounding it. On failure to produce such original instrument by the party, a true copy of such instrument taken out from the registration record shall, for the purpose of this section, be deemed to be original of such instrument. Registering officer in Maharashtra can, on the basis of statutory provisions of Section 33A, legally impound such registered instrument and forward the same to the Collector as provided for in Section 37 who will initiate action for the recovery of deficit duty and penalty under Section 39 of the Act. Sec. 18 & Section 32 proviso (b) - respectively provide that instruments executed out of State may be stamped or, as the case may be, endorsed with proper certificate within three months after it has been first received in this State. Supreme Court in a case has held that time limit of three months provided in Section 18 and Section 32. Proviso (b) in respect of documents executed outside India and presented for use in court proceedings in India is not attracted where document is impounded under Section 33. The Supreme Court also held that in case where the unstamped document (other than bill of exchange) is produced as evidence, within three months as statutorily provided, the stamp duty can be collected without impounding and without penalty. If the document is sought to be used as evidence beyond three months, the above said bar of three months shall not apply, and the document 323

can be impounded under Section 33 and stamp duty and penalty levied, even after expiry of three months. 358 10.4.4.1. Effect of Impounding The provision of Section 39 of the Bombay Stamp Act, 1958 is as under; 39. Collector's power to stamp instruments impounded: (1) When the Collector impounds any instrument under section 33, or receives any instrument sent to him,under sub-section (2) of section 37, not being an instrument chargeable with a duty of twenty naye paise, or less he shall adopt the following procedure :- (a) (b) if he is of opinion that such instrument is duly stamped or is not chargeable with duty, he shall certify by endorsement thereon that it is duly stamped, or that it is not so chargeable, as the case may be; if he is of opinion that such instrument is chargeable with duty and is [lot duly stamped he shall require the payment of the proper duty or the amount required to make up the same, together with a penalty of five rupees; or, if he thinks fit, an amount not exceeding ten times the amount of the proper duty or of the deficient portion therefore, whether such amount exceeds or falls short of five rupees: Provided that, when such instrument has been impounded only because it has been written in contravention of section 13 or section 14, the Collector may, if he thinks fit, remit the whole penalty prescribed by this section. (2) Every certificate under clause (a) of sub-section(1), shall for the purposes of this Act, be conclusive evidence of the matters stated therein. 358 Malaysian Airlines System I v. Stic Travels (P) Ltd., (AIR 2001 SC 358) 324

(3) Where an instrument has been sent to the Collector under subsection(2) of section 37 the Collector shall, when he has dealt with it as provided by this section, return it to the impounding officer. 10.4.5. Exemption The body of tax statues as whole is voluminous and complex in structure as well as in concept and expression. In fact, taxes are as complex as life. The moralist calls for just taxes, but taxes cannot just be just, if we recall the scheme of special bearer bonds for mopping up black money. They cannot simply be simple. The businessman demands practical taxes, but financially history proves that it is impracticable to make them practical. Exemption Notifications have to be strictly construed; if exemption is available on complying with certain conditions, conditions have to be complied with; plea of 'substantial compliance' depends upon facts of each statue imposing taxes or monetary burdens are strictly construed. Exemption Notifications have to be strictly construed; if exemption is available on complying with certain conditions, conditions have to be complied with which is true because if the condition for taking exemption for tax relief is not fulfill then exemption will not be granted, exemption or tax relief will be granted only when the essential condition which are complying with must be fulfilled. The taxing statute is also strictly constructed as all statutes are interpreted strictly because each and every statute should be interpreted in a strict manner. There is another thing that for taking exemption or tax relief one must have fulfilled the tax relief application. It is well settled principle that tax exemptions are strictly against taxpayers. Tax refunds in the nature of tax exemption, are resolved strictly against the claimant. Taxing enactment should be strictly construed and the right to tax should be clearly established that is strict and favorable construction equitable construction should not be taken into account. Courts should not strain words and find unnatural meaning to fill loopholes. 325

10.4.5.1. Exemption: Indian Stamp Act, 1899. Any instrument executed by or on behalf of the corporation, in relation to its business, payment of stamp duty and registration is exempt from payment of stamp duty, mentioned in Schedule 1-A to the Indian Stamp Act, e.g. conveyance deed executed under Punjab Scheduled Castes Land Development and Finance Corporations Act, 1970. 359 The sine qua non for involving provisions of Section 47A(3) of the Act is that the collector had reason to believe that the stamp duty had not been properly set forth in the instrument as per market value of the property. Once the instrument is registered and the prescribed stamp duty as prescribed by the collector had been paid, the burden to prove that the market value of the property was more than the minimum as prescribed by the collector under the rules, was upon the collector. The report of the Sub-Registrar or Tehsildar itself was not sufficient to discharge the burden. 360 Loan taken for leveling land and for development of farm house cannot be said to for the purpose exempted, not liable to exemption from stamp duty. 361 Co-operative society accruing land for purpose of housing, sold it to its members for raising commercial complex is not entitled to exemption from payment of stamp duty under notification dated 24th October 1980. 362 In case of execution of sale deed through court in pursuance of decree for specific performance, demand of stamp duty made on purchaser on the basis of market value of property as on the date of execution and registration of the documents would not be legal. However, the Registering Authority shall have the right to assess market value of the property as on date of agreement and collect stamp duty. 363 359 State of Punjab v, Jaspal Singh, 2009 (4) PLR 708 (P&H). 360 Vijay Kumar v. Commissioner, Meerut Division, AIR 2008 All 176. 361 Joginder Singh v. State of Punjab, 2009(1) PLR 3 (P&H)-(DB). 362 Abhishek Co-operative Housing Society Ltd. v. Board of Revenue, Madhya Pradesh, AIR 2009 MP 17: 2008 (2) MPLJ 602. 363 State of Tamil Nadu v. Janab Habeeb Jank, (2008) I MLJ 1136: (2008) 1 Mad LW 743 (Mad). 326

10.4.5.2. Exemption: Bombay Stamp Act, 1958. An exemption section must be construed having regard to the object and purpose of the Act which it seeks achieve. 364 Exemption notification, particularly in fiscal matters has to be strictly construed and person claiming its benefit, its obliged to satisfy the court that his claim was covered by the exemption notification. The notification has to be read in entirely and not in parts. 365 Exemption notification is to be construed strictly as regards entitlement of a person there under. 366 The intention to create exemption must affirmatively appear and cannot be raised by implications. 367 It has been held that an enactment imposing a burden requires a strict construction in favour of the subject, but an exemption must be strictly construed in favour of the state. 368 The notification has to be read in its entirety and not in parts. 369 Section 9 of Bombay Stamp Act, 1958 provides provision regarding power to reduce, remit or compound duties. Section 9 is as under; The State Government may, by rule or order published in official gazette, (a) Reduce or remit, whether prospectively or retrospectively, in the whole or any part of the State the duties with which any instruments or any particular class of instrument or any of the instruments belonging to such class, or any instruments when executed by or in favour of any particular class of persons, or by or in favour of any members of such class are chargeable, and (b) provide for the composition or consolidation of duties in the case of issue by any incorporated company or other body corporate of bonds or marketable securities other than debentures. The State Government is empowered to rescind the order granting remission or reduction in stamp duty by virtue of Section 21 of the Bombay General 364 Government of India v. Indian Tobacco Association, (2005) 7 SCC 396, 399. 365 Grasim Industries Ltd. v. State of M.P., AIR 2000 SC 66. 366 Tamilnadu Electricity Board v. Status Spinning Mills Ltd., AIR 2008 SC 2838. 367 Visheswar Singh v. Commissioner of Income Tax, AIR 1935 Pat 342 (SB). 368 The Deputy Commissioner of Commercial Taxes v. Pentapati Lakshmanaswami, 1956 Andh LT 700. 369 Grasim Industries Ltd. v. State of M.P., AIR 2000 SC 66. 327

Clauses Act, however, such order will come in force only with effect from the date of publication in the Government Gazette, and not with any retrospective effect. 370 What may be the form in which the purchaser society has couched the sale deeds and whatever might be the devise adopted, it was to plain and needs to argument to conclude that the land of 840 sq. yards with the superstructure thereon was sold to co-operative society for a construction far exceeding Rs.50,000/-, though this was done by the devise of 12 documents executed on one and the same day. If this be the case, it would be the outside of the scope of exemption contemplated by the notification. 371 Hotel industries can be considered and industries undertaking within the meaning at notification dated 3/11/1972 issued under Section 9 of Bombay Stamp Act. 372 Majority survey response suggests that geographical area is most effective criterion for granting exemptions of stamp duties. Researcher personally does not agree with the majority response. The present provision in the Act is more effective classification for the purpose of exemption. 373 10.4.5.3. Survey and Exemption Questionnaire item no. 10 is basically dealing with the issue of exemption. The detail of questionnaire item no. 10 is as under. Question: Which of the following should be the most effective criterion for granting exemptions of stamp duties- Response (a) Class of persons 97 (b) Class of instruments 101 (c) Geographical area 118 (d) Economic development 86 402 370 Vimpsan Precision Pvt. Ltd. v. State of Gujarat, 1993(2) GLR 1015. 371 President Kankaria C-op. Housing Society Ltd., Ahmedabad v. The Chief Controlling Revenue Authority, Ahmedbad, AIR 1984 Guj 118-121. 372 Daljit Khimji & Others v. State of Gujarat, 1993 (1) GCD 78 (SC). 373 Annexure-I, Survey Report, Majority Responses, Item No. 10. 328

The questionnaires were sent to 601 persons, among those 408 have responded, 6 respondents have not answered this item. Figure 10.1: Survey Response Graph for Item No. 10 140 120 100 97 101 118 86 80 60 40 20 0 (a) (b) (c) (d) Majority Response: Most effective criterion for granting exemptions of stamp duties is geographical area. Observations: The majority of respondent have opted for the geographical area as the most effective criteria for granting the exemption for stamp duty, geographical area is often indicative of economic strata of tax payers. The class of persons therefore shall be a better option so far as granting exemption is concern under Section 9 of the Bombay Stamp Act, 1958, the executive powers to grant exemptions are delegated by the legislature for the simplification of the procedure. However, executive powers may lead to opportunity for favourable offers; researcher therefore suggests that executive decision should be placed before the legislature, for the purpose of perusal which may indirectly control the executive powers. The basic idea behind the perusal of executive order before legislature is to maintain check and balance system. 329

10.4.6. Adjudication Section 31 of Bombay Stamp Act, 1958 provides for Adjudication. The section corresponds to section 12 of the English Stamp Act and section 31 of Indian Stamp Act, 1899. It provides for securing the Adjudication of the Collector in cases of bona fide doubts on payment of nominal fee. While section 11 of the English Stamp Act applies only to instruments executed, this section applies also to instruments in the stage of being executed. 374 In the case of instrument already executed, the party gets the benefit of getting the instrument certified as duly stamped on payment of the duty determined by the collector without having to pay the penalty. But the instrument should be brought to the Collector for the purpose of such adjudication within prescribed time. Direction to sub-registrar to submit valuation report cannot be termed as adjudication under section 31 of the Act, whereas reasons must be disclosed for the basis of the valuation of the property for determination of Stamp Duty. Therefore there can be no restriction on proceedings under section 33 of the Act. 375 Section 31 cannot be considered as a remedy in a situation where document presented before the Registrar for registration was not properly stamped. Section 31 obviously applies to the instruments which are voluntarily submitted to the Collector for his adjudication as to the Stamp Duty payable on them. 376 10.4.6.1. Adjudication as to Proper Stamps The Supreme Court has decided the important question as to whether the executed instrument submitted to the collector under section 31 for obtaining his opinion regarding proper stamp duty leviable thereon is competent to impound the same under section 33 of the Act. Any person having doubt regarding proper amount of duty payable in regard to executed document, which was executed more than a month, may submit application under 374 Chief Controlling Revenue Authority v. Madras Industrial Investment Corporation, (1966) 2 MLJ 320 (FB). 375 Adarsh Kumar v. State of Uttar Pradesh, AIR 2008 ALL 2 : 2008 ALHC 151 : (2007) 16 All LJ 198. 376 Kethi Needi Jainendra Kumar v. District Registrar, Elure, AIR 2000 AP 268 (269) : 2000(1) ALT 336 : 2000(1) APLJ 427 : 2000(2) ALD 74. 330

section 31 to the collector who shall require to determine the duty with which in his judgment the instrument is chargeable. 377 Upon receiving the Collector s opinion, if the said instrument is found to be deficiently stamped, the applicant may withdraw the said instrument and simultaneously produce the same of his own motion before the Collector under section 40 of the Act and offers to pay to the Collector the amount of proper duty or the amount required to make up the same, and if the application made by the applicant is within one year from the date of its execution or first execution and the Collector is satisfied that the omission to duly stamped such instrument has been occasioned by the accident, mistake or urgent necessity, the Collector may, instead of proceeding under section 33 and 39, receive such amount and endorse the same as provided in section 41 of the Act. Similarly, if the instrument is produced before the Collector after one year from the date of execution or first execution the Collector would obviously proceed under section 33 and 39 of the Act, this is, he will impound the said document under section 33 and issue order of levying deficit stamp duty and penalty as providing in section 39 (1)(b) of the Act. 10.4.7. Demand of Stamp Duty Once the consideration amount was paid it could not be attacked on any ground, the question of demanding stamp duty subsequently on the basis of the market value prevailing on the date of execution of sale deed not arise, because of the circumstances that had taken place and in view of abnormal delay in execution of sale deed in terms of the agreement of sale. On the other hand 128 respondents were fighting the litigation throughout in one Court or the other and ultimately realized the fruits of litigation by 1995. Hence there was no justification on the part of the registering authorities under Rule 1 of Andhra Pradesh Stamp (Prevention of under Valuation of Instruments) 377 Government of Uttar Pradesh and other v. Raja Mohmmad Amir Ahmed Khan, (AIR 1961 SC 787). 331