By this writ petition, the petitioner has assailed the orders dated 29.06.2011 passed by the Additional District Magistrate (Finance & Revenue), Lucknow in Case No.264/Stamp/ 2008 under section 33/47-A of the Indian Stamps Act as well as the order dated 28.05.2012 passed by Chief Controller Revenue Authorities under section 56 (1) A of the Indian Stamps Act in Appeal No.64 of 2011-12.
The facts in narrow compass are that the petitioner and M/s Sahara India Commercial Corporation Ltd. had executed an instrument on 15.07.2005 known as "Memorandum of understanding" (MOU), where both the parties agreed that the petitioner will have a space about 9455.30 sq.ft. (Super area) in a commercial complex known as Saharaganj, Hazratganj, Lucknow on "licence basis" initially, for a period of three years and the said period shall also be renewable and the same has already been renewed for a total period of 9 years.
The petitioner has paid stamp duty of Rs.100/- on the said instrument (MOU), by considering it as a deed of licence, but the stamp authorities considered the said instrument as a lease deed and demanded stamp duty of Rs.33,93,500/=. The penalty was also imposed to the tune of Rs.67,87,000/- @ 200%-. Thus, the total liability of Rs.1,01,80,500/- was saddled upon the petitioner alongwith interest at the rate of 1.5% per month on the deficient amount, from the date of execution of deed till the payment. Being aggrieved, the petitioner has filed the present writ petition.
With this backdrop, Sri Abhishek Kumar, learned counsel for the petitioner submits that the instrument is nothing, but is a deed of licence and the same cannot be treated as a lease agreement. He also submits that the question regarding the distinction between the lease and licence is a vexed one and does not have any mathematical solution and it is the intention of the parties. For this purpose, he relied on the ratio laid down in the case of Delta International Ltd. vs. Shyam Sundar Ganeriwala reported in AIR 1999 SC 2607, where it was observed that:
"To find out whether the document creates lease or licence real test is to find out 'the intention of the parties', keeping in mind that in cases where exclusive possession is given, the line between lease and licence is very thin."
Learned counsel further submits that the lease or licence is a matter of contract between the parties. Section 107 of the Transfer of Property Act provides that lease of immovable property may be made either by registered instrument or by oral agreement accompanied by delivery of possession; if it is a registered instrument, it shall be executed by both the lessee and the lessor. This contract between the parties is to be interpreted or construed on the well laid principles for construction of contractual terms viz for the purpose of construction of contracts, the intention of the parties is the meaning of the words they have used and there can be no intention independent of that meaning; when the terms of the contract are vague or having double intendment one which is lawful should be preferred; and the construction may be put on the instrument perfectly consistent with his doing only what he had a right to do.
Learned counsel also submits that in the instant case the intention of the parties is to create the licence , and not the lease. The same can be observed by examining the deed minutely and critically.
Regarding the interpretation of the fiscal statutes, he also alleges that taxing statutes will have to be interpreted strictly. For this purpose, he relied on the ratio laid down in the following cases:
1. The Board of Revenue Uttar Pradesh vs. Rai Sahab Siddha Nath Mehrotra reported in AIR 1965 Supreme Court, page 1092, paragraph 8;
2. A.V.Fernandez vs. The State of Kerala reported in AIR 1957 Supreme Court, page 657 paragraph 29;
3. The Central India Spinning and Weaving and Manufacturing Company Ltd. vs. The Municipal Committee, Wardha reported in AIR 1958 Supreme Court, page 341, para 5; and
4. The State of Punjab vs. M/s Jullundur Vegetables Syndicate reported in AIR 1966 Supreme Court, page 1295, para5.
Regarding the penalty, learned counsel submits that the penalty @ 200% imposed by the authorities below is totally against the law as the same was imposed in an arbitrary and illegal manner. For this purpose, he relied on the ratio laid down in the following cases:
1. M/s Hindustan Steel Ltd. Vs. State of Orissa reported in AIR 1970 Supreme Court, page 253, paragraph 7; and
2. Smt. Asha Kapoor vs. Additional Commissioner reported in 2008 Volume (2) AWC, page 1879, paragraph 7, Allahabad.
According to him, in the present case, no finding has been recorded by the authorities below as to why the penalty is being imposed. It has only stated in a cursory manner that petitioner has deliberately evaded the stamp duty. The cursory observations made by the appellate authority is not substantiated by any material as it is clear from the deed in question that the parties have agreed to create the licence. The instrument in question was rightly executed as licence deed by paying the stamp duty of Rs.100/-.
Further, Stamp Act being a taxing statute is required to be interpreted strictly and since the document in question is a licence, hence, it can not be required to be levied with the duty of stamp required for lease. No reason has been assigned for imposing penalty and mere cursory observation has been made by the appellate authority. Lastly, he made a request that the impugned orders may kindly be set aside.
On the other hand, Sri D.R.Misra, learned counsel for the department relied on the order passed by the lower authorities. He submits that the petitioner is a Company registered under the Companies Act and as per the instrument (MOU), the area has been taken on the rent ,initially, for three years but the same was extended. Now the total period of tenancy is 9 years. The rate of Rs.70.00 per sq. ft. was agreed. There is a provision for enhancement of the rent at the rate of 15%. Thus, the rent for 9 years comes to Rs.7,63,53,383/=. Accordingly, the deficit of stamp comes to Rs.33,93,500/=, which is supposed to be paid by the petitioner.
Learned counsel further submits that the essence of contract describes stamp duty payable on an instrument and from a perusal of instrument entitled 'memorandum of understanding', it is crystal clear that the same comes within the ambit and scope of Section 2(16) (b) of Indian Stamp Act and accordingly, as per Clause 35 (a) (iii) of Schedule-I-B of Indian Stamp Act, the instrument which has been entered into between the petitioner and M/s Sahara India Commercial Corporation, the requisite stamp duty is payable upon the said instrument as the same is an agreement of tenancy. He read out Clause 35 (a) (iii) of Schedule-I-B of Indian Stamp Act, which is reproduced as under:
35. Lease, including an under-lease or sub-lease and any agreement to let or sublet.
(a) Where by such lease the rent is fixed and no premium is paid or delivered-
(iii) where the lease purpose to be for a term exceeding five years but not exceeding ten years.
He also submits that the stamp duty is payable equally on the 'Agreement for lease' or 'Lease agreement' in view of provisions of Clause-35 of Parishishit-1(a) and as such, once the essence of instrument entitled 'memorandum of understanding' describes the terms and conditions in the nature of 'lease agreement' thereby disclosing the facts in respect to the payment of lease rent in respect to the property in question, in these circumstances, the stamp duty is payable upon the said instrument in accordance with law.
Learned counsel further alleges that as per the terms of the instrument entered into between the parties for the period of 9 years, there is a provision for enhancement of 15% rent every year and the rent on super area of having 9455.30 sq. ft. has been fixed as Rs.70/- per sq.mt. per month, as such, on calculating the rent of 9 years, the amounts comes to Rs.7,63,53,383 and on which there is a deficit stamp duty of sum of Rs.33,93,500/= which is payable by the petitioner. Accordingly, the instant writ petition filed by the petitioner being devoid of merit and is liable to be dismissed with costs.
After hearing both the parties, it appears that on 05.07.2005, the petitioner and M/s Sahara India Commercial Corporation Ltd. have executed "Memorandum of Understanding" (MOU) to have super area of 9455.30 sq. ft. (carpet are: 6303.53 sq. ft.) spread over ground floor in the commercial complex of Saharaganj, Hazratganj, initially for a period of three years, which is renewable. The monthly licence fee was fixed @ of Rs.70/- per sq.ft. per month, calculated on super build up area. Escalation in the monthly fee was fixed @ of 15% increase every three year over the last prevailing rate. It appears from the impugned orders that initially, the lease was executed for three years but it has been extended for a total period of nine years. In the said MOU, as per Clause 24, it was specifically mentioned that "This agreement shall never be construed as a tenancy agreement, lease agreement or otherwise, creating any other right/interest in the property in favour of second party, which is not at all the intentions of the parties."
At the strength of this Clause, learned counsel for the petitioner submits that the agreement will have to be examined as per the intention of the parties and the intention of the parties is to create the licence, and certainly, not the lease.
Needless to mention that the term 'lease' is defined under section 105 of Transfer of Property Act, which is reproduced as under:-
"S.105. Lease defined- A lease of immovable property is transfer of a right to enjoy such property, made for a certain time, express or implied, or in perpetuity, in consideration of a price paid or promised, or of money, a share of crops, service or any other thing of value, to be rendered periodically or on specified occasions to the transfer by the transferee, who accepts the transfer on such terms."
Further, Section 2(16) of Indian Stamp Act, 1899 provides the definition of lease. The said provision reads as under:-
2(16) "Lease" means a lease of immovable property, and also
(a) a patta;
(b) a kabuliyat or other undertaking in writing, not being a counterpart of a lease, a cultivate occupy or pay or deliver rent for immovable property;
(c) any instrument by which tolls of any description are let;
(d) any writing on an application for lease intended to signify that the application is granted;
(e) any instrument by which mining lease is granted in respect of minor minerals as defined in clause (e) of Section 3 of the Mines and Minerals (Regulation and Development) Act, 1957.
On the other hand, Section 52 of Easement Act provides the definition of licence. The said provision reads as under:-
"Section 52. Where one person grants to another, or to a definite number of other persons, a right to do, or continue to do, in or upon the immovable property of the grantor, something which would, in the absence of such right, be unlawful, and such right does not amount to an easement or an interest in the property, the right is called a licence."
Moreover, Section 62 (C) of the Easement Act, 1882 itself provides that a licence is deemed to be revoked when it has been either granted for a limited period or acquired on condition that it shall become void on the performance or non-performance of a specified Act, and the period expires, or the condition is fulfilled.
In the instant case, the petitioner heavily relied on the ratio laid down by the Hon'ble Supreme Court in the case of Delta International (supra), but the said judgment was regarding to run a petrol service station. In 1985, Delta International Ltd. filed a Civil Suit No.491/85 in the High Court of Calcutta for a perpetual injunction restraining the defendants and / or their servants, agents and assigns from using any of the fixtures, fittings and occasions lying at suit premises; for damages, for wrongful use and occupation of the premises i.e. the date of termination of lease and licence as claimed in the plaint and for degree of possession of the said premises and other reliefs.
But in the instant case, the facts and circumstances are quite different and the said ratio laid down in the case of Delta International is not applicable.
Needless to mention that the ratio will have to be applied in the identical facts and circumstances of the case.
It may not be out of place to mention that the word 'lease' is frequently used to designate the contract by which the relation of land-lord and tenant is created. Accordingly, a lease is a species of contract for the possession and profits of land and tenements, either for life, or for a certain period of time, or during the pleasure of parties, or a contract for the possession and profits of land, for a determinate period with the recompense of rent. Thus, a lease may regarded as a conveyance or grant of an estate or interest in real property, for a limited term with condition attached.
On the other hand, a licence is a right or permission granted by some competent authority to carry on business or to do an act which, without such licence, would be illegal. In other words, it is a formal or official permit or permission to carry on some business or do some act which, without the licence, would be unlawful and the word 'licence' and 'permit' are often used synonymously.
Regarding the property, a licence is simply the authority to enter the land of another and perform a specified act or series of acts without obtaining any permanent interest in the land. It is a permit or privilege to do what otherwise would be trespass, or tort or otherwise unlawful. An example is that a ticket holder has a licence to watch the movie in a particular show in the hall.
If the instrument or agreement grants an interest or a right to use and occupy the land, it may not be construed as a mere licence, notwithstanding it is called a licence by the parties, as observed in the case of Dargis vs. Paradise Park, Inc., 354 III APP. 3D 171, 289 III Dec. 420, 819 N.E.2d 1220 (2d Dist. 2004).
A licence is also distinguished from a lease. As per "Corpus Juris Secundum", a licence generally provides the licencee with less rights in real estate than a lease. If the contract gives exclusive possession of the premises against all the word, including the owner it is a lease, but if it merely confers of a privilege to occupy the premises under the owner, it is a licence. Accordingly, a licence in a property is the permission or authority to engage in a particular act or series of acts upon the land of another without possessing an interest therein, and is thus subject to management and control retained by the owner.
As a further distinction between a licence and a lease, the latter conveys an interest in the land, requires a writing to comply with the statute of frauds, and transfers possession, while the former merely excuses acts done by one on the land in the possession of another that without a licence would be trespasses, and conveys no interest in land. Further, a lease is corporeal and the licence an incorporeal and the absence of consideration is more indicative of a licence than a lease.
In the case of Associated Hotels of India vs. R.N.Kapoor reported in (1960) 1 SCR 368, wherein it was observed:
"...If a document gives only a right to use the property in a particular way or under certain terms while it remains in possession and control of the owner thereof, it will be a licence. The legal possession, therefore, continues to be with the owner of the property, but the licensee is permitted to make use of the premises for a particular purpose. But for the permission, his occupation would be unlawful. It does not create in his favour any estate or interest in the property."
Further, it is quite clear that the distinction between lease and licence is marked by the last clause of section 52 of the Easement Act as by reason of a licence, no estate or interest in the property is created. In the case of Qudrat Ullah vs. Municipal Board, Bareilly reported in (1974) 1 SCC 202, wherein it was observed:-
"....If an interest in immovable property, entitling the transferors to enjoyment is created, it is a lease; if permission to use land without right to exclusive possession is alone granted, a license is the legal result."
Further, in the case of Pradeep Oil Corporation vs. Municipal Corporation of Delhi and anr. reported in (2011) 5SCC 270, wherein it was observed that:
"We may also notice the undisputed fact that in the present case the parties have agreed that for the purpose of determination of the agreement three calendar months' notice had to be given. Undoubtedly, such clause in the document in question has a significant role to play in the matter of construction of document. Clearly, if the parties to the agreement intended that by reason of such agreement merely a license would be created, such a term could not have been inserted."
In the instant case, the petitioner has paid stamp duty of Rs.100/- on the said instrument (MOU), by considering it as a deed of licence. But fact remains that mere use of the words 'licence' or 'licencee' would not be sufficient to hold that the the said instrument (MOU) is a licence. Simply, using the word licence will neither be regraded conclusive nor determinative.
Moreover, if a contract is for the exclusive possession and profits of the land, it is a lease and not a licence, no matter in what nomenclature, the rent is to be paid. Further, in the said MOU, as per clause 19, it has been specifically mentioned:
"Either or both parties may terminate this agreement any time after the date of opening of shop by serving written notice of six months to the other parties..."
Moreover, it is well settled legal position that a licence can be revoked at any time at the pleasure of the licensor. Thus, by merely stating that a transaction is a licence, not a lease, its nature can not be changed.
In view of above, the instrument in question (MOU) is a tenancy agreement, specially by looking upon the length of the period of nine years, the same will have to be treated as tenancy/lease agreement.
Needless to mention that by an agreement, the petitioner can not override the legal provisions. Hence, there is no infirmity in the order passed by the lower authorities, though I agree with the submission made by the learned counsel for the petitioner that taxing statutes will have to be interpreted strictly. Therefore, the petitioner will have to pay the deficiency of the stamp duty as per the Indian Stamps Act.
For the similar reasons, the penalty is leviable, but looking into the peculiar facts and circumstances of the instant case, the penalty @ of Rs.200% seems to be on higher side. By taking a lenient view as per the ratio laid down in the case of Shyam Oil Mills vs. CIT (2006) 286 ITR 251 MP, the penalty is reduced @ of 100%. Thus, the petitioner will get the partial relief from the orders passed by the lower authorities.
Accordingly, the writ petition is partly allowed.
No costs.
Sept. 12, 2012 ank/-