Bombay High Court Sets Aside ₹21.93 Crore Stamp Duty Demand Against Wadhwa Constructions

The Bombay High Court on 7 September set aside a stamp duty demand of about Rs. 21.93 crore against Wadhwa Constructions & Infrastructure Private Limited in connection with a Joint Development Agreement, holding that the valuation had wrongly taken into account development rights and benefits that did not exist on the date of the agreement.

A Single-Judge Bench of Justice Amit Borkar set aside the valuation adopted by the Collector of Stamps and the appellate authority. He observed that “the expression 'market value' has to be applied to the property and rights which form the subject matter of the instrument on the relevant date.”

The case arose from a Joint Development Agreement entered into by Wadhwa Constructions with Valuable Properties Pvt. Ltd. The company had paid Rs. 15.67 crore as stamp duty. The stamp authorities subsequently claimed that a higher amount was payable and raised a deficit demand of Rs. 21.92 crore.

A key dispute concerned an additional 50.23 acres of land. Under the agreement, development rights over this land would arise only if a “Swap Notice” was issued in future. However, the authorities included the land while calculating stamp duty as though the development rights already existed on the date of the agreement.

The High Court rejected this approach, holding that a future right cannot be treated as a present right merely because the agreement contemplates that the right may arise later. If the right comes into existence subsequently, the State can examine its stamp duty implications at that stage.

It also found that the authorities had adopted an incorrect method to calculate the project value. It held that a conversion factor of 1.2, rather than 1.5, had to be used for valuation. It further held that the authorities could not rely on the sale price of a completed residential property when the agreement concerned a construction obligation.

The Bench clarified that only the Floor Space Index (FSI) actually available on the date of the agreement could be considered for valuation. A possible future increase in FSI could not be included merely because the agreement contemplated such an increase.

Similarly, the authorities could not assume that a future revenue-sharing arrangement had already become applicable when the conditions for such an arrangement had not arisen. The Bench also directed that the parking calculation be redone based on the position existing on the date of the agreement.

Accordingly, the High Court allowed the petition and set aside the valuation adopted by the Collector of Stamps and the appellate authority. It directed the competent authority to recalculate the market value and stamp duty afresh, considering only the rights and benefits that actually existed on the date of the agreement.

Appearances: Senior Advocate Girish Godbole, along with Advocates S.S. Kanetkar, Parimal K. Shroff, D.V. Deokar and Sachin Pandey, instructed by M/s. Parimal K. Shroff & Co., appeared for the Petitioners. Advocate Yatin Shashikant Khochare, “B” Panel Counsel, appeared for the Respondents-State.