Kerala High Court Quashes Stamp Duty Demand On Bank For ATM Installation In 2016

The Kerala High Court has quashed a demand issued by a Sub-Registrar directing a bank to pay ₹37,500 as deficit stamp duty for installation of an ATM under a registered lease deed.

It held that the authority lacked statutory power to recover the alleged deficit in 2016.

Justice P.V. Balakrishnan observed that the power to recover deficient stamp duty after registration was introduced only by the Kerala Finance Act, 2019. Therefore, the provision could not be applied to proceedings initiated in 2016.

The petitioner, State Bank of Travancore, had leased premises at Athikayam for opening a branch under a registered lease deed executed in 2014. The lease deed also permitted installation of an ATM without fixing any separate rent.

After the lease deed was registered, the Sub-Registrar issued a notice asking the bank to pay ₹37,500 as additional stamp duty.

The demand was based on an audit objection, which stated that Article 5(e) of the Kerala Stamp Act, introduced by the Kerala Finance Act, 2015, required payment of ₹2,500 per year as stamp duty for documents relating to the installation of an ATM.

The State contended that the deficiency was detected during audit and that the Deputy Inspector General of Registration had directed recovery of the deficit stamp duty.

During the hearing, however, the Government Pleader fairly admitted that, apart from Section 33A, there was no provision under the Kerala Stamp Act empowering the Sub-Registrar to issue such a recovery demand.

The Court noted that Section 33A itself was introduced only in 2019 and therefore had no application to a notice issued in 2016.

It observed that the power enabling a Sub-Registrar to recover deficient stamp duty was introduced through Section 33A of the Kerala Stamp Act by the Kerala Finance Act, 2019, which came into force on 1 April 2019. Since the impugned demand was issued in 2016, it was without legal authority.

The Court also took note of the State's own pleadings, which revealed that the Deputy Inspector General had initially directed the Sub-Registrar who registered the document to make good the alleged loss to the exchequer. Since the officer, being a low-paid employee, was unable to pay the amount, the demand was instead issued to the bank.

The High Court held that this could not be treated as a valid legal basis for recovering the alleged deficit stamp duty from the petitioner.

Accordingly, the Court allowed the writ petition and quashed the demand notice issued by the Sub-Registrar.

For Petitioner: Senior Advocate T. Sethumadhavan, K. Jayesh Mohankumar, Pushparajan Kodoth

For Respondents: Haroon Rasheed, Senior Government Pleader