Future Commercial Use Cannot Determine Stamp Duty Value: Karnataka High Court

Recently, the Karnataka High Court quashed orders demanding differential stamp duty on a 37-acre land parcel in Hassan district, holding that authorities cannot determine the value of land merely on the basis of an alleged intention to use it for resort or commercial purposes, unless such intended use is established through relevant documents.

Justice M.G.S. Kamal allowed a writ petition filed by Disthi Vishal Pvt. Ltd. and another, challenging orders passed by the District Registrar and the Regional Commissioner under the Karnataka Stamp Act, 1957. The Bench held:

"Intention to use a particular property cannot be basis for valuation of the land for the payment of Stamp Duty, unless the documents establish the said factor."

Petitioners had acquired 37 acres and 23 guntas of land at Abbana Village, Kenchammana Hosakote Hobli, Alur Taluk, Hassan District, through transfer deeds dated 11 February 2020 for a consideration of Rs. 88,98,000.

Subsequently, the District Registrar, exercising powers under Section 45A(1) of the Karnataka Stamp Act (which empowers the authority to determine the market value of property for stamp duty purposes), determined that additional stamp duty of Rs. 82,71,988, along with proportionate registration fee, was payable.

Petitioners contended that although the land had been converted from agricultural to non-agricultural use, there had been no development or improvement of the property. Except for a small structure or stud farm measuring around 2,400 to 2,500 sq. ft., the entire land remained vacant, with no residential layout or residential or commercial units constructed on it.

State authorities, however, relied on a spot inspection and contended that the property was intended to be used for resort purposes and that a stable had also been constructed. On this basis, the authorities treated the property as having a higher value for determining stamp duty.

The High Court rejected this approach, holding that a mere intention to use the property in a particular manner cannot, by itself, form the basis for determining its value for stamp duty purposes. It observed that such intention must be established through relevant documents and cannot be based merely on an officer's opinion formed during an inspection.

It further found that the inspection did not establish that a residential layout had been formed or that residential or commercial units had been constructed on the land. Therefore, the authorities could not presume that the property was being used or developed for resort or other commercial purposes merely because such use was allegedly contemplated. Justice Kamal observed:

"There is no dispute of the fact that the petitioner had sought for change of land usage from agricultural to residential use. Therefore, in the absence of any document or petitioner intended to use the land other than residential purposes, the respondent-Authority could not have presumed the intention of the petitioners to use the same for resort or industrial purpose...."

The Bench also held that where land had been converted from agricultural to non-agricultural use, its valuation had to be undertaken in accordance with the guidelines issued by the Central Valuation Committee applicable on the date on which the document was presented for registration. The authorities, it held, could not adopt an enhanced valuation by relying on an assumed future use of the property.

Accordingly, the High Court set aside the Regional Commissioner's order dated 6 January 2023 and the District Registrar's order dated 16 February 2022. It directed the Sub-Registrar to undertake a fresh valuation of the property in accordance with the applicable Central Valuation Committee guidelines and thereafter determine the stamp duty and registration fee payable.

For Petitioner: Sridhar G., Advocate

For Respondent: Mahantesh Shettar, AGA