SHANTI BHUSHAN (D) THR. LR. & ORS versus STATE OF U.P. AND ORS on 25 April 2023

SHANTI BHUSHAN (D) THR. LR. & ORS.

v.

STATE OF U.P. AND ORS.

(Civil Appeal No. 8388 of 2017)

APRIL 25, 2023

[ABHAY S. OKA AND RAJESH BINDAL, JJ.]

Stamp Act,1899 – ss.31,32, 47-A and Art. 23 of the ScheduleIB – Market Value of property – Determination of – A property waspurchased by the appellants under a registered sale deed from thevendor – Appellants were already in possession land as tenants –The appellants calculated Rs.6,67,200/-as the market value of theproperty and paid the stamp duty quantified at Rs. 46,700/- – TheAssistant Stamp Collector, held that the market value of the landwill 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 saledeed property was Rs.19,23,08,305/- on which stamp duty ofRs.1,34,61,630/- was payable – Appellants were directed to pay adeficit stamp duty along with penalty and the interest – The appellantspreferred an appeal against the order of Assistant collector, whichwas dismissed by the Appellate Authority – The above orders werechallenged before the High Court – The High Court affirmed themarket value fixed by the authorities but set aside the demand forpenalty – On appeal, held: Stamp duty on a conveyance will bepayable as per the market value prevailing on the date of conveyanceunless consideration shown therein is more than the prevailingmarket value – The market value fixed by appellants was fixed byadopting method used for levy of property tax under the Municipallaws, such a value cannot be taken as basis for determining themarket value for the purpose of Art. 23 – Further, a property inpossession of a tenant will fetch lesser value in the open marketthan the market value of a similar property exclusively in possessionof the vendor as the buyer will not get actual possession of theportion of the property in possession of the tenant – The marketvalue can be determined by the comparison method even in case ofa property in possession of tenants – If no comparable instancesare found, the market value can be fixed of the property in possessionof tenants by making an appropriate deduction from the market

A

B

CDEF

GH

Avalue of a comparable property in which there are no tenants –Even if the guidance value of Rs. 24,000/- per sq. meter is to betaken as the market value of the sale deed land, necessary deductionswill have to be made from the market value as the appellants werealready in possession of the sale deed land as tenants – The extentto which deduction can be made will depend upon the nature of theBtenancy and other material factors – Case sent back to the AssistantStamp Collector for determination of the market value of the saledeed land.

Stamp Act, 1899 – Interpretation of – In interpreting a taxingstatute, equitable considerations cannot be applied – The rule ofCliteral construction must be applied while interpreting a taxingstatute – It must be interpreted in terms of the natural constructionof the words used – There is no scope to imply anything which is notexpressly provided.

Allowing the appeal, the CourtD

HELD:1. The Stamp Act is a taxing statute. In interpretingsuch a statute, equitable considerations cannot be applied. Ataxing statute has to be interpreted in accordance with what isclearly expressed therein. While interpreting such a statute anddetermining the liability to pay tax, the provisions are requiredEto be construed strictly. In other words, the rule of literalconstruction must be applied while interpreting a taxing statute.It must be interpreted in terms of the natural construction of thewords used. There is no scope to imply anything which is notexpressly provided. [Para 18][524-D-E]F

2. In view of Article 23 of Schedule I of the Stamp Act, thestamp duty payable on a conveyance will be in accordance withthe market value of the subject property on the date of theconveyance unless the consideration shown therein is more thanthe prevailing market value. When a sale deed is presented forGregistration, the registering authority must ascertain the correctmarket value of the property subject matter of the document onthe date of execution of the document. The stamp duty is payableon the basis of such market value and not on the considerationmentioned in the document. If the consideration mentioned is more than the market value, the stamp duty will be payable onthe consideration shown. Moreover, the market value mentionedin the agreement for sale or the market value prevailing on thedate of the agreement or the market value prevailing on the dateon which the bargain was struck is of no relevance for decidingthe stamp duty. The relevant market value is the one which prevailson the date of execution of the conveyance. Therefore, this Courthad no manner of doubt that the appellants were under anobligation to pay stamp duty calculated on the market value ofthe 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 themarket value of the sale deed property at Rs.6,67,200/- . Thismarket value was fixed by adopting method used for levy ofproperty tax under the Municipal laws. Such a value cannot betaken as the basis for determining the market value for thepurposes of Article 23. [Para 21][526-D]

4. The test for determination of the market value is verysimple. The market value is the one which a bona fide and willingbuyer will offer. It is apparent that if the property subject matterof the sale is in possession of the vendor himself, the bona fidepurchaser will offer more price for the property than the pricewhich he may offer for a similar property which is in possession ofa tenant. There is no doubt that a property in possession of atenant or tenants will fetch lesser value in the open market thanthe market value of a similar property exclusively in possessionof the vendor. The reason is that the buyer will not get actualpossession of the portion of the property in possession of thetenant. [Para 24][529-G-H; 530-A-B]

5. The market value can be determined by the comparisonmethod even in case of a property in possession of tenants. Forexample, if there is a sale transaction of a property in possessionof a tenant which is comparable to the property sought to bevalued and if the said sale transaction is held to be a genuinetransaction, market value can be fixed on the basis of the saletransaction. If no comparable instances are found, the market AB

C

D

EF

G

Avalue can be fixed of the property in possession of tenants bymaking an appropriate deduction from the market value of acomparable property in which there are no tenants. [Para 25][530- C]

6. The Assistant Collector, the Appellate Authority, and theBHigh Court have not decided the issue in terms of what this Courthave held above. Even if the guidance value of Rs. 24,000/- persq. meter is to be taken as the market value of the sale deedland, necessary deductions will have to be made from the marketvalue as the appellants were already in possession of the saledeed land as tenants. The extent to which deduction can be madeCwill depend upon the nature of the tenancy and other materialfactors. Some tenancies may be protected under the relevant rentcontrol legislation, whereas some may not be protected. That isall a matter of evidence. [Para 27][530-F-G]

7. The issue regarding the market value of the sale deedDland on the date of execution of the sale deed is required to bedecided by permitting the parties to adduce oral and documentaryevidence. The Assistant Collector will have to ascertain whethera comparable sale instance of a property in possession of tenantsis available. If it is not available, the Assistant Collector will haveEto ascertain the market value of the sale deed property on therelevant date again by comparison method by taking market valueof a comparable property which does not have encumbrance oftenancy. Thereafter, he will have to determine the percentage ofthe deduction which should be made from the market value inthe facts of this case. These questions are to be decided by theFAssistant 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 StampCollector for determination of the market value of the sale deedland on the date of execution of the sale deed. [Para 28][530-G-GH; 531-A-B]

Special Land Acquisition & Rehabilitation Officer,Sagar v. M.S. Seshagiri Rao & Another [1968] 2 SCR892; Mangat Ram and Others v. State of Haryana andOthers (1996) 8 SCC 664 : [1996] 1 Suppl. SCR 634; H

State of Rajasthan and Others v. Khandaka JainJewellers (2007) 14 SCC 339 : [2007] 12 SCR 105 –referred to.

A

O. N. Talwar v. The Collector of Stamps (1971) 7 DLT319; The Commissioner of Wealth Tax Mysore,Bangalore v. V. C. Ramachandran (1966) 60 ITR 103– referred to B

CaseLawReference

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 8388of 2017.

From the Judgment and Order dated 23.01.2013 of the High Courtof Judicature at Allahabad in CMWP No. 55473 of 2012.

D

Rohit Kumar Singh, Pavan Bhushan, Amartya Bhushan, TusharBhushan, Harsh Jain, Advs. for the Appellants.

R. K. Raizada, Sr. Adv., Bhakti Vardhan Singh, Ankit, Advs. forthe Respondents.

E

Jayant Bhushan, in Person/Sr. Adv.

The Judgment of the Court was delivered by ABHAY S. OKA, J.

F

FACTUAL ASPECTS

1. The dispute involved in this appeal is about the determination ofthe market value of a property at Allahabad purchased by the appellantsunder a registered sale deed dated 29[th] November 2010 (the sale deed)from Hari Mohan Das Tandon (the vendor). The property has beendescribed in the Schedule to the sale deed which reads thus:

G

“SCHEDULE OF THE PROPERTY”

Part Portion of Free Hold Site No. 49 Civil Station, Allahabad ofwhich Nagar Nigam No. is 19 Old, 77/29 New, and 19-A Old 79/31 New, Lal Bahadur Shastri Marg (Elgin Road), Allahabad H

Ameasuring 7818.00 sq.mts. land alongwith construction and superstructure standing thereon shown in Red Colour in the annexedmap and bounded as under:- BOUNDARIES

East : Part Portion of Freehold Site No. 49 Civil Station, Allahabad,Bfacing Strachey Road which has been released in the favour ofthe Sellers- 1st Party as per the compromise.

West : Site No. 50 Civil Station, Allahabad North : Elgin Road (Lal Bahadur Shastri Marg)

CSouth : Site No. 30 Civil Station, Allahabad”

This property is hereinafter referred to as the sale deed property.

2. According to the case of the appellants, Bungalow No.19 andCottage No.19-A existed on the larger property. According to their case,in the year 1939, Bungalow No.19, together with appurtenant land andDouthouse as well as cottage no.19-A, was taken on rent by the firstappellant’s father. The appellants claimed to be protected tenants underthe United Provinces (Temporary) Control of Rent and Eviction Act,1947 and subsequently under the U.P. Urban Buildings (Regulation ofLetting, Rent and Eviction) Act 1972. According to the case made outEby the appellants, by two letters dated 2[nd] September 1966 and 10[th]September 1966, the vendor agreed to sell the sale deed property to thefirst appellant’s father for a total sale consideration of Rs. 1 lakh. A sumof Rs. 5000/- was paid to the vendor as earnest money. The land was aleasehold land. It was converted into a freehold land on 8[th] June 2000 byvirtue of a freehold deed executed in favour of the vendor. The firstFappellant filed a suit for specific performance in the same year.

3. On 29[th] September 2010, a compromise was arrived at betweenthe vendor and the appellants under which the appellants agreed to giveup approximately 1/3[rd] of the land which was a part of the originalagreement for sale covered by the aforesaid two letters, and agreed toGtake land measuring 7818 sq. meters along with existing structures forthe same consideration which was fixed in the year 1966. An applicationto record compromise was made in the pending suit on 5[th] October 2010.On the basis of the said compromise, on 12[th] October 2010, an agreementfor sale was executed by and between the parties. A compromise decreeHwas passed by the Civil Court on 16[th] November 2010.

4. Prior to the execution of a fresh agreement for sale, on29[th] September 2010, the appellants filed an application under Section31 r/w 32 of the Indian Stamp Act, 1899 (for short ‘the Stamp Act’) foradjudication of the stamp duty payable on the sale deed by forwarding acopy of the proposed sale deed. However, no adjudication was made.On 29[th] November 2010, the sale deed was executed by the vendor infavour of the appellants.

5. Two notices were issued to the appellants on 8[th] February 2011and 15[th] April 2011 by the Assistant Stamp Commissioner in the exerciseof powers under Section 47-A of the Stamp Act, informing the appellantsthat the Assistant Stamp Collector was considering the question of paymentof appropriate stamp duty on the sale deed.

6. We may note here that by using the rent capitalisation method,the appellants calculated Rs.6,67,200/- as the market value of the saledeed property and paid the stamp duty on the said market value quantifiedat Rs. 46,700/-. In the notice dated 15[th] April 2011, it was alleged thatthe deficiency in the stamp duty was to the extent of Rs.1,33,07,900/-.The appellants contested the notices by filing written submissions. TheAssistant Stamp Collector, by order dated 6[th] January 2012, held that themarket value of the land having an area of 7818 sq. meters will have tobe calculated at the rate of Rs. 24,000/- per sq. meter. The AssistantCollector noted that four sales had taken place in 2010 in respect of apart of the same property showing the market value at Rs.24,000/- persq. meter. By calculating the market value of the land at Rs.24,000/- persq. meter, the Assistant Stamp Collector added the value of the structuresas well as mango trees. The Collector came to the conclusion that onthe date of the sale deed, the market value of the sale deed propertywas Rs.19,23,08,305/- on which stamp duty of Rs.1,34,61,630/- waspayable. Taking into account the stamp duty of Rs. 46,700/- paid by theappellants, they were directed to pay a deficit stamp duty ofRs.1,34,14,930/-. A penalty of Rs. 27,00,000/- was imposed on theappellants. Moreover, they were directed to pay interest at the rate of1.5% per month on the deficit stamp duty from the date of the sale deedtill the realisation of the amount.

7. According to the case of the appellants, on 1[st] February 2012,they paid a stamp duty of Rs.70 lakhs by demand draft as coerciveaction was likely to be taken against them. The appellants preferred anappeal against the order dated 6[th] January 2012, which was dismissed AB

C

D

EF

G

H

Aby the Appellate Authority. The appellants deposited an additional amountof Rs. 30 lakhs towards the stamp duty on 9[th] November 2012. Theorders of the Assistant Collector and the Appellate Authority weresubjected to a challenge by the appellants before the Allahabad HighCourt by invoking writ jurisdiction under Article 226 of the Constitution.While affirming the market value fixed by the authorities, the High CourtBgranted limited relief to the appellants vide judgment dated 23[rd] January2013. The limited relief was of setting aside the demand of the penaltyof Rs.27,00,000/-. The present appeal is directed against the judgmentand order of the High Court.

SUBMISSIONSC

8. Shri Jayant Bhushan, the learned senior counsel who is appellantno.3, appeared in person and made submissions on his behalf as well ason behalf of the other appellants. He has taken us through the factsleading to the filing of the writ petition. Learned senior counsel submittedthat though the appellants were entitled to purchase total land measuringD11428 sq. meters as per the agreement for sale, they agreed to give upan area of 3614 sq. meters by agreeing to purchase a lesser area of7814 sq. meters. However, the agreed monetary consideration was notreduced.

9. The learned senior counsel submitted that the first appellant’sEfather was already inducted in the sale deed property as a tenant. Hesubmitted that when a property is in possession of a tenant, the marketvalue considerably diminishes. He stated that when a willing purchaseracquires a property in possession of a tenant, he is aware that he willhave to follow a long process of law to evict the tenant. Therefore, theFvalue fetched by such property is less than the market value of acomparable property which is in possession of the owners. He urgedthat the sale, in this case, was of an encumbered property which was on“as is where is” basis.

10. The learned senior counsel submitted that the market value ofGa property is ascertained by applying the test of what a willing buyerwould pay. He submitted that while determining the market value of aproperty in possession of a tenant, when the property is sold to the tenant,the market value has to be apportioned as per the principles laid down inseveral decisions of this Court in connection with fixation of the marketvalue of the acquired land under the Land Acquisition Act, 1894. HeH

relied upon decisions of this Court in the case of Special LandAcquisition & Rehabilitation Officer, Sagar v. M.S. Seshagiri Rao& Another[1]and Mangat Ram and Others v. State of Haryana andothers[2]. He submitted that the market value is liable to be reduced ifthere are encumbrances on the property. The market value will be thereal market value minus the value of encumbrances or liabilities. Herelied upon a decision of the Delhi High Court in the case of O.N. Talwarv. The Collector of Stamps[3].

11. He submitted that the market value of the property furtherdiminishes due to the fact that there was already an agreement of sale infavour of the appellants under which the vendor had agreed to sell theproperty for a price of Rs. 1 lakh.

12. He submitted that though an application for adjudication ofthe stamp duty payable on the proposed sale deed was submitted, therewas no response to the said application, and on that ground, the order ofpenalty imposed by the Assistant Collector has been set aside by theHigh Court.

13. He submitted that as per the compromise between the vendorand the appellants, the consideration agreed to be paid by the appellantswas of Rs.1 lakh plus the release of 1/3[rd] of the property. He submittedthat the actual conveyed property to the appellants was 2/3[rd] of the landin respect of which they were tenants. Therefore, the value of 2/3[rd] landwould be 2/3[rd] x (1/3[rd] of the value of the entire land plus Rs.1 lakh). Hesubmitted that the market value will have to be calculated accordingly.

14. The learned senior counsel also pointed out that even thedirection to pay interest @ 1.5% per month under Section 47-A (4A) ofthe Stamp Act was not justified as even before the execution of the saledeed, the appellants had voluntarily sought adjudication of the amountpayable by way of stamp duty on the draft sale deed. Moreover, hepointed out that by interim order dated 23[rd] September 2013, the HighCourt had stayed the recovery proceedings. Lastly, he pointed out that atotal amount of Rs.1 crore has already been deposited by the appellants.

15. Shri R. K. Raizada, learned senior counsel, submitted on behalfof the State that stamp duty payable by the appellants is to be calculated 1 (1968) 2 SCR 8922 (1996) 8 SCC 6643 (1971) 7 DLT 319

AB

C

D

E

F

G

H

Aas per the prevailing market value of the sale deed land on the date ofthe execution of the sale deed. He submitted that the value of the propertyfixed by the parties under the agreement for sale has no relevance to thedetermination of the market value. The learned senior counsel submittedthat even the consideration amount shown in the compromise decreehas no relevance. He submitted that when a tenant purchases anBimmovable property, he becomes full owner of the property, and he takesthe property without any encumbrances. The learned senior counselsubmitted that the determination of rateable value for the purposes ofdetermination of property taxes is always made on the basis ofhypothetical rent which the property may fetch. He submitted that theCrateable value fixed under municipal laws is not the market value for thepurposes of the Stamp Act. He would submit that the Assistant Collector,the Appellate Authority, and the High Court have concurrently held thatthe appellants are liable to pay deficit stamp duty. The said orders callfor no interference.D16. As far as the determination of market value is concerned,learned senior counsel appearing for the appellants relied upon thedecision of Karnataka High Court in the case of The Commissioner ofWealth Tax Mysore, Bangalore v. V.C. Ramachandran[4].

CONSIDERATION OF SUBMISSIONS AND OUR VIEWS

E

17. It is not in dispute that stamp duty on a conveyance will bepayable as per the market value prevailing on the date of conveyance.In fact, the appellants themselves have relied upon Article 23 of ScheduleIB of the Stamp Act as applicable to the State of Uttar Pradesh. Theyhave placed reliance on the said provision in their written submissionsFfiled before the Assistant Collector. Paragraphs 2 to 4 of their writtensubmissions read thus:

“2. The stamp duty payable on a sale deed is governed by Article23 of Schedule I of the Indian Stamp Act. In the Central Act,Article 23 a stamp duty is payable on the value of the considerationGof such conveyance as set forth in the sale deed. The considerationas contained in the sale deed is Rs.1 lakh and therefore, if the saledeed was governed by the Central Act only, without the UPAmendment the Stamp Duty would have been payable on theamount of Rs.1 lakh.

H4 (1966) 60 ITR 103.

SHANTI BHUSHAN (D) THR. LR. & ORS. v. STATE OF U.P.AND ORS. [ABHAY S. OKA, J.]

3. However, the Indian Stamp Act in its application to UP hasbeen amended by the UP (Stamp Amendment Act 1952) andArticle 23 of Schedule IB as applicable to UP provides as below:- “Article 23 conveyance (as defined by Section 2 (10) not beinga transfer charge or exempt under No.62. Where the amountor value of the consideration of such conveyance as setforth therein or market value of the property which isthe subject of such conveyance, whichever is”greater…….

4. So this provision which is applicable to the case in hand providesthat if the market value of the immovable property is higher thanthe value of the consideration as set forth in the deed ofconveyance, the stamp duty will be payable on the market valueof the immovable property which is the subject matter of theconveyance deed.”

(emphasis added)

Article 23 of Schedule IB applicable to the State of Uttar Pradesh,reads thus: - “Description of Instrument Proper Stamp-duty

23. Conveyance [as defined

Sixty rupees.

by section 2(10)] not being a

Transfer charged or

exempted under No.62 –

(a) if relating to immovableproperty where the amount orvalue of the consideration of suchconveyance as set forth thereinor the market value of theimmovable property which is thesubject of such conveyance,whichever is greater does notexceed Rs.500.

Where it exceeds Rs.500but does not exceed One hundred and twenty-five rupees.

A

B

C

D

E

F

G

H

ARs.1,000.and for every Rs.1,000or part thereof in excessor Rs.1,000.

One hundred and twenty-five rupees.Provided that theduty payable shallbe rounded off to thenext multiple of tenrupees.Twenty rupees B

(b) if relating to movable propertywhere the amount or value of theconsideration of such conveyanceCas set forth therein does notexceed Rs.1,000.

and for every Rs.1,000 or part Twenty rupees”thereof in excess of Rs.1,000.

18. At this stage, we may note that the Stamp Act is a taxingDstatute. In interpreting such a statute, equitable considerations cannot beapplied. A taxing statute has to be interpreted in accordance with whatis clearly expressed therein. While interpreting such a statute anddetermining the liability to pay tax, the provisions are required to beconstrued strictly. In other words, the rule of literal construction must beapplied while interpreting a taxing statute. It must be interpreted in termsEof the natural construction of the words used. There is no scope to implyanything which is not expressly provided.

19. In view of Article 23 of Schedule I of the Stamp Act, thestamp duty payable on a conveyance will be in accordance with themarket value of the subject property on the date of the conveyanceFunless the consideration shown therein is more than the prevailing marketvalue. A useful reference can be made to a decision of this Court in thecase of the State of Rajasthan and others v. Khandaka JainJewellers[5]. Paragraphs 18 and 19 of the said decision read thus:

“18. The contention of the learned counsel for the State that asGper Section 17 of the Act, the market value has to be taken intoconsideration because Section 17 stipulates that all the instrumentschargeable with duty and executed by person of India shall bestamped before or “at the time of execution”. The word H5 (2007) 14 SCC 339

SHANTI BHUSHAN (D) THR. LR. & ORS. v. STATE OF U.P.AND ORS. [ABHAY S. OKA, J.]

“execution” has been defined in Section 2(12) of the Act whichsays that “execution” used with reference to the instruments, mean“signed” and “signature”. Therefore, it shows that the documentwhich is sought to be registered has to be signed by both theparties. Till that time the document does not become an instrumentfor registration. A reading of Section 2(12) with Section 17 clearlycontemplates that the document should be complete in all respectswhen both the parties should have signed it with regard to thetransfer of the immovable property. It is irrelevant whether thematter had gone in for litigation.

19. It may be mentioned that there is a difference betweenan agreement to sell and a sale. Stamp duty on a sale has tobe assessed on the market value of the property at thetime of the sale, and not at the time of the prior agreementto sell, nor at the time of filing of the suit. This is evidentfrom Section 17 of the Act. It is true that as per Section 3,the instrument is to be registered on the basis of thevaluation disclosed therein. But Section 47-A of theRajasthan (Amendment) Stamp Duty Act contemplates thatin case it is found that properties are undervalued then it isopen for the Collector (Stamps) to assess the correct marketvalue. Therefore, in the present case when the registeringauthority found that valuation of the property was not correct asmentioned in the instrument, it sent the document to the Collectorfor ascertaining the correct market value of the property.”

(emphasis added)

Ultimately in paragraph 22, this Court held thus:

(emphasis added)

Ultimately in paragraph 22, this Court held thus:

“22. In this background, if we construe Section 17 read withSection 2(12) then there is no manner of doubt that at thetime of registration, the registering authority is underan obligation to ascertain the correct market value atthat time, and should not go by the value mentioned inthe instrument.”

(emphasis added)

20. Hence, when a sale deed is presented for registration, theregistering authority must ascertain the correct market value of the AB

C

D

E

F

G

H

Aproperty subject matter of the document on the date of execution of thedocument. The stamp duty is payable on the basis of such market valueand not on the consideration mentioned in the document. If theconsideration mentioned is more than the market value, the stamp dutywill be payable on the consideration shown. Moreover, the market valuementioned in the agreement for sale or the market value prevailing onBthe date of the agreement or the market value prevailing on the date onwhich the bargain was struck is of no relevance for deciding the stampduty. The relevant market value is the one which prevails on the date ofexecution of the conveyance. Therefore, we have no manner of doubtthat the appellants were under an obligation to pay stamp duty calculatedCon the market value of the sale deed property on the date of executionof the sale deed.

21. As stated earlier, stamp duty was paid by the appellants bytaking the market value of the sale deed property at Rs.6,67,200/-. Thismarket value was fixed by adopting method used for levy of propertyDtax under the Municipal laws. Such a value cannot be taken as the basisfor determining the market value for the purposes of Article 23.

22. Now we turn to the provisions of Section 47-A of the StampAct as applicable to the State of Uttar Pradesh at the relevant time.Section 47-A reads thus:

E

“47A. Instruments of conveyance etc., if undervalued, how to bedealt with: – (1)(a) If the market value of any property which isthe subject of any instrument on which duty is chargeable on themarket value of the property as set forth in such instrument is lessthan even the minimum value determined in accordance with theFrules made under the Act, the registering officer appointed underthe Registration Act, 1908 shall, notwithstanding anything containedin the said Act, immediately after presentation of such instrumentand before accepting it for registration and taking any action undersection 52 of the said Act, require the person liable to pay stampduty under section 29, to pay the deficit stamp duty as computedGon the basis of the minimum value determined in accordance withthe said rules and return the instrument for presenting again inaccordance with section 23 of the Registration Act, 1908.

(b) When the deficit stamp duty required to be paid under clause(a), is paid in respect of any instrument and the instrument is H

presented again for registration, the registering officer shall certifyby endorsement thereon, that the deficit stamp duty has been paidin respect thereof and the name and the residence of the personpaying them and register the same.

(c) Notwithstanding anything contained in any other provisions ofthis Act, the deficit stamp duty may be paid under clause (a) inthe form of impressed stamp containing such declaration as maybe prescribed.

(d) If any person does not make the payment of deficit stampduty after receiving the order referred to in clause (a) and presentsthe instrument again for registration, the registering officer shall,before registering the instrument, refer the same to the Collectorfor determination of the market value of the property and theproper duty payable thereon.

(2) Without prejudice to the provisions of sub-section (1), if suchRegistering Officer, while registering any instrument on whichduty is chargeable on the market-value of the property, has reasonto believe that the market-value of the property, which is the subjectof such instrument, has not been truly set forth in the instrument,he may, after registering such instrument, refer the same to theCollector for determination of the market-value of such propertyand the proper duty payable thereon-

(3) On receipt of a reference under sub-section (1) or sub-section(2), the Collector shall, after giving the parties a reasonableopportunity of being heard and after holding an enquiry in suchmanner as may be prescribed by rules made under this Act,determine the market value of the property which is the subjectof the instrument and the duty as aforesaid. The difference, any,in the amount of duty shall be payable by the person liable to paythe duty.

Explanation. - The payment of deficit stamp duty by any personunder any order of registering officer under sub-section (1)shall not prevent the Collector from initiating proceedings onany instrument under sub-section (3).

(4) The Collector may, suo motu, or on a reference from anycourt or from the Commissioner of Stamps or an AdditionalCommissioner of Stamps, or a Deputy Commissioner of Stamps A

B

C

D

E

F

G

H

SUPREME COURT REPORTS

Aor an Assistant Commissioner of Stamps or any Officer authorizedby the Board of Revenue in that behalf, within four years fromthe date of registration of any instrument on which duty ischargeable on the market value of the property, not alreadyreferred to him under sub-section (1) or sub-section (2), call forand examine the instrument for the purpose of satisfying himselfBas to the correctness of the market value of the property which isthe subject of such instrument and the duty payable thereon and ifafter such examination, he has reason to believe that the marketvalue of such property has not been truly set forth in the instrument,he may determine the market value of such property and the dutyCpayable thereon in accordance with the procedure provided for insub-section (3). The difference, if any, in the amount of duty shallbe payable by the person liable to pay the duty.

A

Provided that, with the prior permission of the State Government,an action under this sub-section may be taken after the periodDof four years but before the period of eight years from thedate of the registration of the instrument on which the duty ischargeable on the market value of the property.

Explanation - The payment of deficit stamp duty by any personby any order of the registering officer under sub-section (1)shall not prevent the Collector from initiating proceedings onany instrument under sub-section (3).

E

(4) If on enquiry under sub-section (2) and examination undersub-section (3) the Collector finds the market value of the property –

F

(i) truly set forth and the document duly stamped, he shall certifyby endorsement that it is duly stamped and return it to theperson who made the reference;

ii) not truly set forth and not truly stamped, he shall require thepayment of the proper duty or the amount required to make upthe deficiency in the same together with a penalty of an amountnot exceeding four times the amount of proper duty or thedeficit portion thereof.

G

(4A) The Collector shall also require along with the deficit stampduty or penalty required to be paid under clause (ii) of sub-section(4), the payment of a simple interest at the rate of one and half H

per cent per mensem on the amount of deficit stamp duty calculatedfrom the date of the execution of the instrument till the date ofactual payment:

Provided that the amount of interest under this sub-sectionshall be recalculated if the amount of deficit stamp duty isvaried on appeal or revision or by any order of a competentCourt or authority.

(4B) The amount of interest payable under sub-section (4A) shallbe added to the amount due and be also deemed for all purposesto be part of the amount required to be paid.

(4C) Where realisation of the deficit stamp duty remained stayedby any order of any Court or authority and such order of stay issubsequently vacated, the interest referred to in sub-section (4A)shall be payable also for any period during which such order ofstay remained in operation.

(4D) Any amount paid or deposited by, or recovered from, orrefundable to, a person under the provision of this Act, shall firstbe adjusted towards the deficit stamp duty or penalty outstandingagainst him and the excess, if any, shall then be adjusted towardsthe interest, if any, due from him.”

23. Accordingly, in this case, an adjudication was made by theAssistant Stamp Collector. After inspection of the sale deed property,the Assistant Stamp Collector came to the conclusion that the descriptionof the property in the sale deed was incorrect. The Assistant Collectorobserved that in the sale deed, the covered area of the land is shown as970 meters, but actually, it was found to be 995 sq. meters. The AssistantCollector referred to four sale transactions of the year 2010 which werein relation to the properties which were a part of the same larger propertywherein the market value shown was Rs. 24,000/- per sq. meter. Thedetermination of market value by taking the market value at Rs. 24,000/- per sq. meters has been approved by the Assistant Collector, AppellateAuthority and the High Court.

24. It appears to be an accepted position that the appellants weretenants of the vendor in respect of the sale deed property. The test fordetermination of the market value is very simple. The market value isthe one which a bona fide and willing buyer will offer. It is apparentthat if the property subject matter of the sale is in possession of the AB

C

D

E

F

G

H

Avendor himself, the bona fide purchaser will offer more price for theproperty than the price which he may offer for a similar property whichis in possession of a tenant. There is no doubt that a property in possessionof a tenant or tenants will fetch lesser value in the open market than themarket value of a similar property exclusively in possession of the vendor.The reason is that the buyer will not get actual possession of the portionBof the property in possession of the tenant.

25. The market value can be determined by the comparison methodeven in case of a property in possession of tenants. For example, if thereis a sale transaction of a property in possession of a tenant which iscomparable to the property sought to be valued and if the said saleCtransaction is held to be a genuine transaction, market value can befixed on the basis of the sale transaction. If no comparable instances arefound, the market value can be fixed of the property in possession oftenants by making an appropriate deduction from the market value of acomparable property in which there are no tenants.D

26. In the written submissions, the learned counsel appearing inperson has suggested a formula for calculating the market value by takinginto consideration the market value on the date of agreement for sale(1966) and the market value of the 1/3[rd] of the land given up by theappellants by way of compromise. However, this contention is obviouslyEnot acceptable as the market value of the property sold will have to bedetermined on the date of execution of the sale deed.

27. The Assistant Collector, the Appellate Authority, and the HighCourt have not decided the issue in terms of what we have held above.Even if the guidance value of Rs. 24,000/- per sq. meter is to be taken asFthe market value of the sale deed land, necessary deductions will haveto be made from the market value as the appellants were already inpossession of the sale deed land as tenants. The extent to which deductioncan be made will depend upon the nature of the tenancy and other materialfactors. Some tenancies may be protected under the relevant rent controllegislation, whereas some may not be protected. That is all a matter ofGevidence.

28. The issue regarding the market value of the sale deed land onthe date of execution of the sale deed is required to be decided by permittingthe parties to adduce oral and documentary evidence. The AssistantCollector will have to ascertain whether a comparable sale instance of aHproperty in possession of tenants is available. If it is not available, the Assistant Collector will have to ascertain the market value of the saledeed property on the relevant date again by comparison method by takingmarket value of a comparable property which does not haveencumbrance of tenancy. Thereafter, he will have to determine thepercentage of the deduction which should be made from the marketvalue in the facts of this case. These questions are to be decided by theAssistant Collector on the basis of the evidence on record. Therefore,subject to what we have held in the judgment, we propose to send backthe case to the Assistant Stamp Collector for determination of the marketvalue of the sale deed land on the date of execution of the sale deed.

29. The appellants have already deposited a sum of Rs.1 croretowards the amount made payable by them. The sum amount will besubject to the final adjudication by the Assistant Stamp Collector. If theAssistant Stamp Collector comes to the conclusion that the market valueof the land and structures is lesser than what was determined earlier bythe Assistant Stamp Collector, the appellants will be entitled to a refundof the excess amount paid with interest at the rate of 8% per annumfrom the date on which the amount was paid till the date on which therefund is made. If it is found that the deficit stamp duty exceeds Rs.1crore, the appellants will have to make good the said amount. Sub-section4A of Section 47A is in mandatory terms. The use of the word ‘shall’make it clear that the Collector has no choice but to impose interest atthe rate of 1.5% per month on the deficit amount. We are not disturbingthe judgment of the High Court insofar as it relates to penalty as theState Government has not challenged that part.

30. Hence, we set aside the impugned judgment of the High Courtas well as the judgment of the Assistant Stamp Collector and the AppellateAuthority and remand the case for fresh consideration to the AssistantStamp Collector. However, we confirm that part of the impugned judgmentof the High Court, by which it was held that the appellants are not liableto pay penalty. The Assistant Stamp Collector shall permit the appellantsto lead evidence on the issue of valuation. The Assistant Stamp Collectoris directed to conclude the proceedings as early as possible and preferablywithin a period of six months from today.

31. The appeal is, accordingly, allowed on the above terms withno order as to costs.

Appeal allowed.

(Assisted by : Raoul Sawant and Aarsh Choudhary, LCRAs)

AB

C

D

E

F

G

H