1. By this petition, the petitioner has challenged the order dated 22.11.2005 passed by Commissioner Jhansi Division, Jhansi in Appeal No.38 of 2004-2005 under section 56 of the Indian Stamp Act, as also the order dated 10.5.2005 passed by Additional District Magistrate (Finance and Revenue) Jalaun at Orai in Case No.381 of 2004-05 under Sections 33 / 47A of the Indian Stamp Act.
2. Brief facts of the case are that the petitioner agreed to purchase plot of land i.e. plot no.179, situated at Umrarkhera, Kasba Orai, district Jalaun from one Ratanju and for that purpose an agreement for sale was executed on 21.8.2001 by power attorney holder of Ratanju namely, Shri Shree Ram, which was registered on 22.8.2001. As per the agreement the sale consideration was fixed at Rs.60,000/- out of which Rs.55,000/- was paid as earnest money and the balance was to be paid on execution of the sale deed. Two years' time was provided to execute the sale deed and in case the vendor resiled from execution of the deed, the vendee was given a right to sue for specific performance of the agreement. In this agreement it was specifically mentioned that possession has not been delivered to the vendee. On this agreement stamp duty of Rs.3752/-, and registration fee of Rs.1120/-, was paid on the consideration set forth in the instrument, as was required by clause (b-1) of Article 5 of the Schedule 1-B of the Indian Stamp Act, as applicable in the State of U.P.
3. From Annexure No.7 to the writ petition it appears that on 1.12.2004 the Sub Registrar, Orai, on the direction of the Asst. Inspector General Registration, Orai, carried out inspection of the land, which was the subject matter of the agreement for sale. On the basis of the inspection, a report was submitted by him to the Assistant Inspector General Registration, Orai, on 4.12.2004, which has been brought on record as Annexure 7 to the petition. In this report it was stated that on the date of inspection i.e. 1.12.2004 it was found that there were demarcation marks surrounding the plot in question, which suggested that possession was delivered. Although otherwise the plot was vacant. It was also stated that the persons present on spot had deposed that Raj Kumar i.e. the vendee (petitioner herein) was in possession. On this basis, the Sub Registrar reported that the agreement for sale was with deilvery of possession and, therefore, was liable to be stamped as a conveyance under the Explanation to Article 23 of Schedule 1-B of the Indian Stamp Act, as applicable in the State of U.P. Accordingly, by assessing the market value of the land at Rs.6,07,000/-, he opined that the stamp duty payable was Rs.60,700/-, as against Rs.3,752/- paid by the petitioner, and registration fee payable was Rs.5,020/-, as against Rs.1120/- paid by the petitioner. He, therefore, recommended for initiation of proceedings to realize the deficient stamp duty of Rs.56,948/-, as also the deficient registration fee of Rs.3900/-.
4. Pursuant to the report dated 4.12.2004 of the Sub Registrar, Orai, the Additional District Magistrate (F & R), Jalaun at Orai issued notice to the petitioner purportedly under sections 33/47-A of the Indian Stamp Act thereby calling upon the petitioner to show cause as to why deficit stamp duty of Rs.56,948/- and deficit registration fee of Rs.3900/- together with penalty be not imposed on him.
5. In response to the notice given by the ADM (F&R), Jalaun the petitioner gave his reply stating, inter alia, that the agreement for sale was without delivery of possession; that the petitioner is still not in possession; that the report was obtained ex parte, therefore, is not reliable; that the sale deed was to be executed within two years, therefore, under the law of limitation the petitioner can institute suit for specific performance up to 21.8.2006; and that when ever the sale deed is executed the petitioner would pay stamp duty as per law. With the aforesaid averments he prayed that the notice be withdrawn.
6. The Additional District Magistrate (Finance and Revenue), Jalaun at Orai, by placing reliance on the report of the Sub Registrar, on 10.5.2005, passed an order thereby concluding that the agreement for sale was with delivery of possession, therefore, was liable to be stamped as a conveyance under the Explanation to Article 23 of the Schedule 1-B of the Indian Stamp Act, as applicable in the State of U.P. He further assessed the market value of the land at Rs.6,07,000/- and thereby determined the deficiency in payment of stamp duty at Rs. 56,948/-, and of the registration fee at Rs.3,900/. He also imposed a penalty of Rs. 56,948/- thereby making a total demand of Rs. 1,17,796/- from the petitioner.
7. Against the order dated 10.5.2005, the petitioner preferred an appeal under Section 56 of the Indian Stamp Act, before the Commissioner, Jhansi Division, Jhansi. The Commissioner, Jhansi Division, Jhansi affirmed the order passed by the Additional District Magistrate (Finance and Revenue), Jalaun and confirmed the demand against the petitioner. Aggrieved by the aforesaid orders, the present petition has been filed.
8. I have heard Sri Sudama Ji Shandilya, Advocate, counsel for the petitioner and the learned Standing Counsel for the respondents and have perused the record.
9. The short question that arises for adjudication is whether the agreement for sale in question was liable to be treated as a deed of conveyance under the Explanation to Article 23 of Schedule 1-B of the Indian Stamp Act, and be subjected to stamp duty as payable thereon. If the answer to this question is in the negative then the agreement in question would be liable to stamp duty on the consideration set forth in the agreement, as per clause (b-1) of Article 5 of Schedule 1-B, resulting in abatement of the proceedings under section 47-A, as they are to be instituted to determine the market value of the subject matter of the instrument, where the incidence of stamp duty is dependent on the market value of the subject matter of the instrument.
10. I have carefully read the agreement for sale dated 22.8.2001, which is the subject matter of the proceeding. A perusal thereof goes to show that it does not disclose that the possession was delivered in the past or was agreed to be delivered without executing the deed of conveyance. There is also nothing in the agreement which may show that the possession was being delivered at the time of its execution. In fact, the agreement clearly records that the possession of the subject matter of agreement has not been delivered.
11. The Explanation to Article 23 of Schedule 1-B of the Indian Stamp Act, as incorporated in the State of Uttar Pradesh, reads as under:- '' For the purposes of this Article, in the case of an agreement to sell an immovable property, where possession is delivered before the execution or at the time of execution, or is agreed to be delivered without executing the conveyance, the agreement shall be deemed to be a conveyance and stamp duty thereon shall be payable accordingly: Provided that the provisions of Section 47-A shall mutatis mutandis apply to such agreement: Provided further that when conveyance in pursuance of such agreement is executed, the stamp duty paid on the agreement shall be adjusted towards the total duty payable on the conveyance."
12. A bare perusal of the Explanation to Article 23 of Schedule 1-B of the Indian Stamp Act, as incorporated in the State of Uttar Pradesh, goes to show that an agreement to sell an immovable property shall be deemed to be a "conveyance" for the purpose of stamp duty, if any, of the following conditions are fulfilled: (i) where the possession is delivered before the execution of the agreement; or (ii) where the possession is delivered at the time of execution of the agreement; or (iii) where the possession is agreed to be delivered without executing the conveyance.
13. From the record of the instant case I find that the agreement for sale does not disclose that the possession was delivered before its execution or at the time of its execution. The agreement also does not disclose that it was agreed between the parties that the possession would be delivered to the purchaser without execution of the deed of conveyance. Rather the agreement clearly states that the possession was not being delivered, and that there would be a period of two years for execution of the sale deed, and if the sale deed is not executed within the said period the vendee would have a right to sue for specific performance.
14. The Additional District Magistrate (Finance and Revenue) Jalaun, as well as the Commissioner, Jhansi Division, Jhansi, has proceeded to invoke the provisions of the Explanation to Article 23 of Schedule 1B of the Indian Stamp Act on the basis of the report submitted by the Sub Registrar, Orai.
15. I have perused the report of the Sub Registrar carefully. This report was based on an inspection carried out by him after more than three years from the date of execution of the agreement. Even otherwise the report is based on hearsay material. The petitioner has denied his possession. There is no admissible evidence on record to show that possession was delivered before, or at the time of execution of the agreement in question. In fact there is a recital in the agreement that the possession has not been delivered. Thus, there was no material to infer that possession was delivered either before or at the time of the execution of the agreement to sell.
16. Assuming that the petitioner, after execution of the agreement for sale, had entered into possession over the subject matter of the agreement, even then the provisions of the Explanation to Article 23 of Schedule 1-B would not be attracted inasmuch as there was no provision in the agreement in question to deliver possession to the petitioner on any future date without the execution of a deed of conveyance.
17. At this stage the standing counsel appearing for the state respondents contended that if such vendees are not charged with stamp duty payable as on a conveyance then it would become a novel method to evade stamp duty thereby causing loss to revenue. This argument of the standing counsel cannot be accepted. Indian Stamp Act is a taxing statute. Under section 3 of the Indian Stamp Act, 1899 it is the "Instrument" which is chargeable to duty, and not the transaction. If the "Instrument", as in the present case, cannot fall under the import of the Explanation to Article 23 of Schedule 1-B, the revenue authorities, on the basis of their own assumed transaction, cannot impose stamp duty. This court in the case of Nand Kumar Agarwal v. State of UP reported in 2009 (107) RD 438, in paragraph no.13, observed as under: "It is an acknowledged legal position that there are two guiding principles for applicability of the Stamp Act in respect of a particular document. They are:- (1) The Court is not bound by the apparent tenor of an instrument, it shall decide according to the real nature or substance of the document; and (2) The duty is on the instrument and not on the transaction".
18. A Special Bench of this court consisting of three Hon'ble Judges in the case of In Re The Incorporation of Swadeshi Cotton Mills Company, Ltd. reported in AIR 1932 Allahabad 291, emphasising upon the freedom of the parties to have their own method for transactions, as also the limitations in power of the revenue department in chasing those transactions for generating additional revenue, observed: "It seems to us that if the parties chose to be satisfied with a mere contract for sale, without an actual deed of sale, stamp duty payable on a conveyance cannot be demanded. By entering into a mere contract short of an actual conveyance they run a certain amount of risk. If either party resiles from the contract, the other party may have to institute a suit for specific performance of the contract. Trouble may also arise if the vendors subsequently convey the property to a bona fide transferee for value. But if in spite of this risk the parties refrain from getting an actual deed of conveyance prepared, they can successfully evade the payment of higher duty." While making the above observations the Special Bench noted with approval the observations made by Lord Esher in the case of Commissioners of Inland Revenue V. G. Angus and Co. reported in [1889] 23 Q.B.D. 579, which is being reproduced below: "But it is said that if the appeal be decided against the commissioners purchasers will rest satisfied with an agreement of which specific performance would be decreed and will not go on to execute a conveyance, and so the Crown will lose the stamp duty and it is rather suggested that this would be cheating the Crown and committing a fraud. The Crown however must make out its right to the duty, and if there be a means of evading the stamp duty, so much the better for those who can evade it. It is no fraud upon the Crown, it is the thing which they are perfectly entitled to do so. The Crown cannot have the stamp duty unless the parties to the sale choose to effectuate the transaction by an instrument which of itself conveys the property, and if they chose to be satistied with something less, the matter is not brought within S.70 (of the Stamp Act of 1870)".
19. From the decisions noted above it is clear that the department of revenue cannot dictate the parties to transact in a particular manner. Only when the Instrument is executed evidencing a transaction that the chargeability to stamp duty can be assessed depending on its nature, as evidenced by the Instrument, and not by the transaction that might be found from a source other than the Instrument itself.
20. In view of the aforesaid discussion I'm of the considered opinion that the respondents committed manifest error of law by invoking the Explanation to Article 23 of the Schedule 1-B of the Indian Stamp Act so as to treat the agreement for sale dated 21.8.2001 as a deed of conveyance. The agreement in question was liable to stamp duty as payable under sub clause (b-1) of Article 5 to Schedule 1-B that is, on the consideration set forth in the instrument. Accordingly, the proceedings under sections 33 & 47-A of the Indian Stamp Act for determining the market value of the subject matter of the instrument are not justified in law.
21. In the result, the writ petition succeeds and is allowed. The orders dated 10.5.2005 and 22.11.2005 passed by the Additional District Magistrate (F & R), Jalaun at Orai and the Commissioner, Jhansi Division, Jhansi respectively are hereby quashed and set aside. Amount, if any, deposited by the petitioner in pursuance of the impugned orders shall be refunded to the petitioner within a period of two months from the date of production of a certified copy of this order. There shall be no order as to costs.
Order Date :- 3.2.2012 G.S