Stamp Duty Cannot Be Levied On Final Conveyance If Documents Form One Transaction: Bombay High Court

The Bombay High Court on 20 August held that where several agreements and a subsequent conveyance form part of one continuous property transaction, stamp authorities cannot treat the final conveyance as a fresh transaction and levy stamp duty again merely because the documents bear different names.

Justice Amit Borkar quashed the demand of Rs. 2.60 crore raised against Kumar Housing Corporation Private Limited towards alleged deficit stamp duty, along with the consequential penalty and other charges. The Bench observed:

“On overall consideration of the material, I hold that the Agreements dated 9 June 1995 and 31 December 1999, the subsequent instruments and the Conveyance dated 19 March 2012 were several instruments employed for completing one transaction within the meaning of Section 4 of the Maharashtra Stamp Act, 1958. Merely because different names were given to the documents, that by cannot change this conclusion.”

The dispute concerned land at Pashan in Pune. Kumar Housing had entered into agreements in 1995 and 1999 for acquiring rights in the property. Supplementary Agreements were subsequently executed in 2003, confirming the earlier arrangements. A Deed of Conveyance was executed on 19 March 2012.

The stamp authorities treated the 2012 Conveyance as a separate transaction and determined the market value of the property at about Rs. 61.09 crore. They consequently raised a demand of Rs. 2,60,49,475 towards deficit stamp duty, along with penalty at the rate of 2% per month. The demand was subsequently upheld by the appellate authority.

Kumar Housing approached the High Court contending that the agreements, supplementary agreements and the final conveyance were connected documents forming part of the same transaction. It argued that Section 4 of the Maharashtra Stamp Act, which applies where several instruments are used to complete a single transaction, prevented the authorities from imposing stamp duty repeatedly on the same transaction.

The High Court held that the name assigned to a document is not conclusive for determining stamp duty liability. The contents of the document, the rights created under it, the nature of possession and its actual legal effect must be considered. It explained that Section 4 applies where several instruments are used to complete a single transaction. Therefore, the documents need not have the same title or be executed on the same date. The relevant question is whether, when read together, the documents were employed for completing one transaction.

The Bench also found that the earlier agreements and the 2012 Conveyance were continuously connected. It noted that even when the Conveyance was registered, the authorities had treated the earlier documents as connected and had given credit for the stamp duty already paid.

The aggregate consideration under the earlier transactions was Rs. 5 crore. Stamp duty of Rs. 50 lakh was calculated on that amount. After giving credit for Rs. 5 lakh already paid, Kumar Housing paid the balance Rs. 45 lakh at the time of execution of the Conveyance.

The Court observed that the authorities could not take inconsistent positions. Having treated the earlier documents as connected with the Conveyance while accepting the stamp duty paid, they could not subsequently treat the Conveyance as an entirely independent transaction and raise a fresh demand. It also rejected the State's argument that Section 4 would not apply because the earlier documents were Development Agreements while the final document was a Conveyance.

It observed that merely because one document has the character of a development agreement and another is a conveyance does not take the transaction outside Section 4. The entire transaction must be examined to determine whether the documents were used to complete the same property transaction.

Further, the Bench clarified that Section 4 does not mean that no stamp duty is payable. Rather, where several instruments are used to complete one transaction, full duty is payable on the principal instrument, without subjecting the same transaction to repeated ad valorem stamp duty through other connected instruments.

Accordingly, the Court held that the authorities could not treat the 2012 Conveyance as a fresh and independent transfer and calculate stamp duty afresh on the market value prevailing in 2012. It therefore quashed the deficit stamp duty demand of Rs. 2,60,49,475, along with the consequential penalty and other charges.

Appearances: Senior Advocate Girish S. Godbole, along with Murlidhar Kumar and Kaustubh Thipsay, appeared for the Petitioner, Kumar Housing Corporation Private Limited. AGP Sulbha D. Chipade appeared for Respondent Nos. 1 to 4, State of Maharashtra