THE INDIAN STAMP ACT, 1899 CHAPTER COVERAGE Introduction Detail Defination Of Instrument Conveyance Instrument Chargeable With Duty Several Instruments In Single Transaction Types Of Stamp Time Period Of Stamping Instruments Other Then Bill & Notes Executed Out Of India Valuation Of Instrument Payable Of Duty Impounding Of Instrument Evidentiary Value Of An Instrument Not Duly Stamp Recovery Of Duly Refund Of Duty And Penality Misused Stamp/stamp Duty On Debenture E-stamping 1
ECL THE INDIAN STAMP ACT, 1899 INTRODUCTION The sole object of the Act is to increase the revenue for the Government. It is a fiscal legislation imposing liability to pay stamp duty on certain and specified documents. The Rates of stamp duties on various instruments are divided as followings Instruments:- Bills of exchanges, cheques, promissory Union List notes, bill of lading, letters of credit, polices of insurance, transfer of shares, debentures, proxies and receipt. State List Other than instrument in Union list Bills of Exchange Promissory Note Cheques Bills of Lading An instrument in A note which A bill of exchange A receipt by the writing,containing promising the drawn on master of ship for an unconditional payment of any specified banker, goods delivered order signed by the sum of money not expressed to him for marker, directing a out of a particular to be payable delivery to certain period to fund which may otherwise on consignee. Three pay a certain sum or may not demand. copies are made of money only to, available or upon and signed by or to the order of, any condition or the master. Three a certain person or contingency which copies are kept to the bearer of may or may not by consignor, the instrument be performed consignee and or happen. master of the ship CONVEYANCE Section 2 (10) defines this term. It includes an instrument by which property whether moveable or immoveable is transferred. Such types of documents are specified in the schedule to the Act. Conveyance does not include the instrument of a will. Apart from the sale deed, the instrument pertaining to gift, release, settlement, transfer of lease, trust etc. is chargeable as conveyance. DULY STAMPED Section 2 (11) defines this term. It means that the instrument bears adhesive or impressed stamp not below the amount required by law and further no in contravention to the manner prescribed by law. The amount of stamp to the used is governed by provisions and schedule to the stamp Act. The manner of stamping is governed by section 10 to 19 of the Act and also by the rules framed by the Government. Under this head are included particulars as to the description of stamps and the number of stamps to be used. Thus an instrument which is to be written on paper with an impressed stamp is not duly stamped if it bears only an adhesive stamp of the value and vice- versa. 1
ECL DHEERAJ TYAGI INSTRUMENT Section 2 (14) defines this term. It includes two distinct types of document, namely: 1) A document by which any right or liability is created, transferred, limited extended, extinguished. 2) A document by which any such right or liability is only recorded even though the document itself does not create such a right or liability. Photocopy of an agreement is not an instruments An entry in register containing the term of hiring of machinery Is known as instruments INSTRUMENT CHARGEABLE WITH DUTY Section 3 provides that the instruments as mentioned in the schedule shall be chargeable with duty of the amount indicated therein. Wills are not subject to duty because there is no mention of them in the schedule. However, no duty shall be chargeable in respect of (1) Any instrument executed by or on behalf of or in favor of the Government, (2) An instrument executed by or on the behalf for the Purpose of special Economic Zone. SETTLEMENT Any non testamentary disposition in writing of movable or immovable property made:- a) In consideration of marriage b) For the purpose of distributing property of the settler among his family c) For any religious or charitable purpose SEVERAL INSTRUMENTS IN SINGLE TRANSACTION Section 4 provides that where in a case of any sale, mortgage, and settlement several instruments are employed for completing the transaction, the principle instrument only shall be chargeable with the duty prescribed in the Schedule; and each of the other instrument shall be chargeable with a duty of one rupee instead of the duty prescribed for it in the schedule. DISTINCT MATERS Section 5 deals with the instrument relating to several distinct matters. An instrument comprising or relating to distinct matters is called a multifarious instrument and such document is chargeable with the aggregate amount of the duties with which separate instrument comprising such matters would be chargeable. 2
ECL THE INDIAN STAMP ACT, 1899 SECTION 6 OF THE ACT Where the instruments contains only one matters but fall within two or more items in the Schedule. In such cases the highest of the duties mentioned against the various descriptions against which the instrument is likely to fall is to be paid. SECTION 8 OF THE INDIAN STAMP ACT PROVIDES THAT Any local authority raising a loan by the issue of bonds, debentures or other securities shall in respect of such loans, be chargeable with a duty of one percent on the total amount of the bonds, debenture or other securities issued by it. (1) On renewal, consolidation, sub-division of such securities need not be stamped and chargeable with any duty. (2) Default on the payment of such duty by the local authority shall be liable to forfeit a sum equal to 10% of the amount of duty payable. SECTION 9 OF THE ACT The Government has a power to reduce or remit whether prospectively or retrospectively the duties payable on any instruments or in favour of any particular class of persons or members of such class. SECTION 10 OF THE ACT SECTION 11 DEALS IN Uses of Adhesive Stamping:- 1) Bills of exchange and promissory note drawn or made out of India. (2) Instruments chargeable with a duty not exceeding 10 naya paisa. (3) Transfer by endorsement of shares in any incorporated company or any other body corporate. (4) Other As may prescribed. CANCELLATION OF ADHESIVE STAMP Section 12 deals with the cancellation of adhesive stamp. According to this provision: 1. An adhesive stamp should be cancelled at the time of execution so that it cannot be used again. 2. Where the adhesive stamp affixed to a document is no cancelled, the document is deemed to be unstamped and is not admissible in evidence. 3. The writing of the name or initial of the executants with the date of his so writing or in other effectual manner is sufficient cancellation. Deals in Types of stamping. There are two types of stampings:- (1) Adhesive Stamping (2) Impressed Stamping 3
ECL DHEERAJ TYAGI Section17:- Instruments executed in India All instruments chargeable with duty and executed by a y person in India shall be stamped before or at the time of execution. Section 18:- Instruments other than bills and notes executed out of India Q TIME PERIOD OF STAMPING (1) Every instrument chargeable with duty executed only out of 3 India and not being a bill of exchange or promissory note, may be stamped within three months after it has been first received in India. (2) However, in case of bill of exchange or promissory note made out of India, it should be stamped by first holder in India before he presents for payment or endorses or negotiates in India [section 19]. VALUATION OF INSTRUMENT FOR LEVY OF DUTY Section 20 provides that where an instrument is chargeable with ad valorem duty in respect of any money expressed in any currency other that of India, such duty shall be calculated on the value of such money in the currency of India and for that purpose current rate of exchange on the date of instrument shall apply. Section 21 provides that where an instrument is chargeable with ad valorem duty in respect of any stock or security thereof on the date of the instrument. Section 23 provides that where interest is expressly made payable by the terms of an instrument, such instrument shall not be chargeable with duty higher than that with which it would have been chargeable and it will be taken into consideration that there is no mention of interest in such instrument. Section 24 provides that duty shall be paid also on the amount of the debt where a property is transferred to any person in consideration wholly or in part of any debt due to him. Explanation to section 24 provides that in the case of sale of property subject to mortgage, any unpaid mortgage money together with interest if any shall be deemed to be part of consideration for the sale. Where property under mortgage is transferred to the mortgage, he shall be entitled to deduct from the duty payable of transfer the amount of any duty already paid in respect of the mortgage. Section 25 provides for computation of duty in the case of annuities in the following manner: a) Where the sum payable is for a definite period and ascertained amount, then on such total amount. b) Where the sum is payable in perpetuity or for an indefinite period, them on total amount as payable during the period of 20 years to be calculated from the date on which the first payment becomes dues. c) Where the sum is payable for an indefinite period but terminable with any life in being at the date of such instrument then on the maximum amount as payable during the period of 12 years as calculated from the date on which the first payment becomes due. Section 26 provides that where the instrument is chargeable with ad valoram duty but such cannot be ascertained for the reason that the amount/ value of the subject matter of the instrument cannot be ascertained at the date of its execution, then the executants can value the instrument as the pleases but he shall not be entitled to recover under such document any amount in excess of the amount for which the stamp duty has been paid. Section27 provides that the parties to an instrument are bound to set forth truly and fully the facts and circumstances affecting the chargeability of an instrument. 4
ECL THE INDIAN STAMP ACT, 1899 BY WHOM DUTY IS PAYABLE Section 29 provides for the person liable for payment of stamp duty. The expense of providing the proper stamp duty, in the absence of an agreement to the contract, shall be borne: In the case of Administration Bond Agreement relation got Deposit of Title-deeds, Pawn or Pledge, Bill of Exchange, Bonds By the person drawing, making or executing such instrument. In the case of policy of insurance other than fire instrument: By the person effecting the insurance. In the case of policy of fire- insurance-by the person issuing the policy. In the case of lease or agreement to lease:- By the lessee or intended lessee. In the case of an instrument of exchange. By the parties in equal shares. In the case of certificate of sale : By the purchaser of the property of the property to which such certificate relates, and In the case of an instrument of partition By the parties thereto in proportion to their respective shares in the whole property partitioned or, when the partition is made in execution of an order passed by a Revenue Authority or Civil Court or arbitrator, in such proportion as such authority, Court or arbitrator directs. DETERMINATION TO THE CORRECT STAMP DUTY PAYABLE Section 31 gives the power to the Collector to adjudicate as to the proper stamp payable for a particular document. The opinion of the Collector in this regard can be obtained on payment of prescribed fee. For applicability of this provision, the Collector may call for the abstract of the instrument along with other documents or any other evidence as he may deem necessary to ascertain the amount of stamp duty payable or such instrument. Section 32 gives the power to the Collector to issue a certificate for a document brought to him under section 31 as to what amount of duty is payable to such an instrument or whether in his opinion instrument is not chargeable with any duty. The certificate can be issued to the extent that the instrument is fully stamped. IMPOUNDING OF INSTRUMENTS Section 33 lays down provisions regarding impounding of instruments. Under this provision an instrument which is not duly stamped can be impounded by that person who is either authorized to receive evidence or a person in charge of a public office and such document has been produced before him. This provision makes it obligatory for the Courts, Arbitrators and the public officers to examine the instrument produced before them in order to ascertain whether it is property stamped. However, authority of a police officer is excluded from impounding a document. 5
ECL DHEERAJ TYAGI EVIDENTIARY VALUE OF AN INSTRUMENT NOT DULY STAMPED Section 35 prohibits admission in evidence of instruments chargeable with duty unless such instruments are duly stamped. However, to this rule there are certain exceptions as under: 1. Courts and Arbitrators shall admit in evidence documents unstamped or deficiently stamped on payment of the proper duty and penalty. 2. An unstamped receipt shall be admissible not generally but against the person by whose fault it is unstamped on payment of penalty of Rs. 1/-. 3. Where the contract is effected by correspondence consisting of two or more letters and any of the letters bears proper stamp, the contract shall be deemed to be duly stamped. Section 36 provides that where an instrument has been admitted in evidence, such an admission shall not be questioned at any stage of the same suit and proceeding on the ground that the instrument has not been duty stamped. INSTRUMENT NOT DULY STAMPED Section 41 provides for collection of the deficit duty only without penalty if a person voluntarily produces an instrument offering to pay the deficit duty within one year from the day execution and the Collector is satisfied that the omission to stamp was due to accident, mistake or urgent necessity. The parties are not liable to be prosecuted. The proviso to section 43 clarifies that no prosecution shall be instituted in case of any instrument in respect of which such a penalty has been paid, unless it appears to the Collector that he offence was committed with of evading payment of proper duty. RECOVERY OF DUTY There are certain circumstances in which, if a person is not liable to pay duty/penalty under this act, but due to some reasons he is paying it. Then, person paying duty or penalty may recover the same from the person who in actual bound to bear such expenses of duty or penalty. REFUND OF DUTY /PENALTY IN CERTAIN CASES BY REVENUE AUTHORITY. This Act provides the scope of two authorities who can refund the penalty in excess of duty payable on instrument in certain cases. Refund order can be made by:- Collector Chief Controller Revenue authorities (in special cases only) Refunds can be made of:- (1) Part of stamp Duty (2) Whole of stamp Duty Difference between, both authorities is that collector can only refund in limited cases only, while chief controller revenue authorities is having no such restrictions. Q. Refunds of impressed stamp not used? Section 49 deals with different circumstances in which refund would be admissible in respect of impressed stamp not used. Refund order can also made in case of unused impressed stamp paper. 6
ECL THE INDIAN STAMP ACT, 1899 REASON (1) If stamp paper is spoiled before execution. (2) Where document is not executed after writing. (3) Where bill of exchange /promissory note is not accepted. MISUSED STAMP Section 52 deals with allowance for misused stamps and applies to both impressed and adhesive stamps in the followings instances:- (1) If person used stamp of a description other than prescribed under this act. (2) When any stamp used for an instrument has been inadvertently rendered useless. The collector may on application made within six month after the date of instrument or, if it is not dated within six months after the execution thereof by the person by whom it was first or alone executed, and upon the instrument if chargeable with duty, being re stamped with proper duty, cancel and allow as spoiled the stamp so misused. STAMP DUTY ON DEBENTURES Companies are not obligated to pay stamp duty on original or renewed debenture. As per section 55 when any duly stamped debenture is renewed by the issue of a new debenture in the same term the collector shall upon application made within one month repay to the person issuing such debenture the value of stamp on the original or the new debenture whichever shall be less. REFERENCE AND REVISION Under this Act if the collector feels doubt as to the amount of duty chargeable in the instrument, he may draw up a statement of the case and refer to the Controlling Revenue Authority. The Controlling revenue authority after reference may send a copies of the decision to the collector who shall proceeds to assess and charge the duty if any or may referred the case to the high court and same shall be decided by not less than three judges of the high court and the majority decision prevails. E-STAMPING E-Stamping is a computer based application and a secured way of paying non-judicial stamp duty to the Government Benifits of E-Stamping Less time consuming Easy Accessibility Security Cost Saving User Friendly QUESTION FROM ICSI BOOK Q1. D executes an agreement in favor of C, (with witnesses) by which he promises to repay a loan taken by him from C. Discuss whether this is an agreement, a promisory note or a bond. Q2. Is an agreement for the sale of good conveyance, for the purposes of the stamp Act. discuss. Q3. Can Parliament increase or, decrease, the stamp duty on an agreement. 7
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