The writ petition involves interpretation of the period of lease stipulated under the lease agreement executed between M/s Naman Buildcon Limited and the petitioner for leasing out super ground floor of commercial building, Bansal Chamber situate over plot No.45, Kaushambi, district Ghaziabad and the manner of levy of stamp duty on it.
The agreement provides that the initial period of lease shall be minimum 3 years and shall commence from 1st June, 2005 with an option to the lessee for extension of two consequential terms of 3 years each and that in the event of extension of the lease the rent shall be enhanced by 15% for every term of 3 years.
The aforesaid agreement is on a stamp paper of Rs.100/- only.
In respect of the aforesaid lease agreement, on the report of the Sub-Registrar, Ghaziabad dated 5.11.2007 proceedings under Section 33 of the U.P. Stamp Act were initiated. The Additional Collector holding the aforesaid lease to be a lease for a period over 5 years subjected it to stamp duty under Article 35 (a) (iii) of Schedule 1-B to the Indian Stamp Act, 1899 (hereinafter referred to as an Act). The aforesaid order has been affirmed in appeal by the Commissioner vide order dated 18.11.2010.
The aforesaid two orders have been assailed by the petitioner by filing the present writ petition.
I have heard Sri R.B.Singhal, learned counsel for the petitioner and Sri Nimai Das, learned Standing Counsel for respondents.
Pleadings exchanged between the parties have also been perused.
One of the submission of Sri Singhal is that the lease is only for a period of three years with an option to get it extended for further period. Therefore, basically it is a lease for 3 years only and is chargeable to stamp duty under Article 35(a)(ii) of Schedule 1-B to the Act and not under Article 35(a)(iii) of Schedule 1-B to the Act.
Indian Stamp Act, 1899 is a statute of a fiscal nature. It has been enacted to secure revenue for the State by collecting proper stamp duty on certain classes of instruments as specified. Section 3 of the Act is the charging section and provides that the instruments specified in Schedule of the Act with certain exceptions are chargeable to stamp duty of the amount indicated in the Schedule of the Act itself.
Schedule 1-B of the Act is a Schedule which is applicable to the State of Uttar Pradesh. It contains the instruments chargeable to stamp duty under the Act and the manner of charging stamp duty on them in its application to the State of U.P. Article 35 of the Schedule 1-B of the Act provides for stamp duty on ' Lease' including an under-lease or sub lease and any agreement to let or sub-let. Thus, an instrument of lease, under lease, sub-lease or any agreement to let or sublet are chargeable to stamp duty as per the rate indicated therein. The aforesaid Article provides for different rates for charging stamp duty on leases, under leases, sub-leases or agreements to let or sublet depending upon the term/period with premium or with no premium.
It is beneficial to reproduce Article 35 of Schedule 1-B of the Act herein below:
"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.
(i) Where the lease purports to be for a term of less than one year;
The same duty as a Bond (No. 15) for the whole amount payable or deliverable under such lease.
(ii) Where the lease purports to be for a term of not less than one year but not more than three years;
The same duty as a Bond (No. 15) for the amount or value of the average annual rent reserved.
(iii) Where the lease purports to be for a term in excess of three years;
The same duty as a Conveyance (No. 23) for a consideration equal to the amount or value of the average annual rent reserved.
(iv) Where the lease does not purport to be for any definite term;
The same duty as a Conveyance (No. 23) for a consideration equal to the amount or value of the average annual which would be paid or delivered for the first ten years if the lease continued to long.
(v) Where the lease purports to be in perpetuity;
The same duty as as a Conveyance (No. 23) for a consideration equal to one-fifth of the whole amount of rents which would be paid or delivered in respect of the first fifty years of the lease.
(b)..................................................................
(c)..................................................................
Exemptions...................................................."
A lease without premium for a period exceeding one year but not exceeding 5 years is chargeable to stamp duty on a consideration equal to three times the amount or value of the average rent reserved; whereas a lease without premium for a period exceeding 5 years but not exceeding 10 years is chargeable to stamp duty for a consideration equal to 4 times the amount or value of the average annual rent reserved.
Thus, the chargeability of stamp duty upon a lease deed and agreement to let or sublet is depended upon the duration of the lease or the agreement, as the case may be.
In view of the above, the period for which the lease had been granted or the period of the agreement to let or sub-let acquires importance.
In the instant case, the instrument in question has been titled as the agreement. It has been made at 10th of May, 2005. It provides that the lease shall commence from Ist of June, 2005 and shall continue to be in force and binding between the parties for a minimum period of 3 years with a option to the lessee to get it extended for 2 consecutive terms of 3 years each. It is thus, apparent that the initial period of lease stipulated is 3 years with two extensions of 3 years each at the option of the lessee.
Their Lordship of this Court in the case of Gopal Swarup Chatruvedi Vs. State of U.P. and others 2007 (102) RD 574 relying upon certain decisions of the Apex Court made a distinction between renewal of lease and its extension. They laid down that extension of lease is prolongation of the existing lease whereas in case of renewal a fresh lease comes into existence may be on the same terms and conditions as the previous one. Therefore, renewal of lease is nothing but a grant of fresh lease.
In the above factual and legal position, I have to examine whether the option of getting the lease extended would be extension of existing lease simplicitor or would amount to grant of a fresh lease.
The extension of lease stipulated in the instrument is not automatic. It is dependent upon the option to be exercised by the lessee. In the event lessee does not agree to get it extended, there may not be any extension and the lease would come to an end on the expiry of three years term stipulate therein.
Thus, when the extension is based upon option to be exercised by either of the parties or both, on the option so exercised, a fresh lease would ordinarily come into existence with the modification about the rate of rent and exhausting the stipulation regarding further extension. It would not be an extension or prolongation of the previous lease but its renewal giving rise to a new lease virtually in terms of the previous one.
It would have been something different if there was no option clause and the extension was automatic on the expiry of the initial term without the indulgence of either of the parties. In that event the old lease would have continued but this is not the situation herein.
Here in the present case the shop stood closed w.e.f. March 2006 within the initial three years period of lease and apparently the lessee would not like to seek its extension when his business has come to a halt.
Accordingly, the term of the lease would remain three years and would not be affected by the extension clause contained therein as it would give rise to another lease which would be amenable to stamp duty independently.
Sri Nimai Das, learned Standing Counsel has argued that even if the period of lease is taken to be three years, the aforesaid instrument contemplates a future agreement of the same kind creating right and liabilities between the parties in respect of the property involved. Such an instrument is subject to payment of stamp duty independently.
Evidentially, the instrument is a lease deed for a period of 3 years and since it contains a condition for extension of the lease after 3 years, it is also an instrument creating right and liabilities inter see the parties in respect of the land in future. In that sense, it becomes an agreement to let after 3 years which would be subject to the payment of stamp duty in accordance with Article 35 of Schedule 1-B of Act.
In this view of the matter, the instrument in question is a composite document of lease and an agreement to let.
Section 5 of the Act stipulates that where a single instrument comprises of distinct instruments chargeable to stamp duty, aggregate amount of stamp duty would be chargeable/payable in respect of all such instruments which are part of it. It means that in the instant case on the instrument of lease and agreement to let aggregate amount of stamp duty would be payable.
In the above legal scenario, the instrument in question would be subject to aggregate stamp duty for the first 3 years as a lease under Article 35 (a) (ii) of Schedule 1-B of the Act and as an agreement to let for the next 6 years in accordance with Article 35(a) (iii) of the Act. The authorities below have erred in subjecting it to a flat rate of stamp duty under Article 35 (a) (iii) of Schedule 1-B of the Act.
In this legal sense, the period of lease or the period of extended lease looses all significance and wherever in a lease there is stipulation either for renewal or extension of lease on the expiry of the initial period of lease, it would be a composite instrument of lease and agreement to let both of which are chargeable to stamp duty under Article 35 of Schedule 1-B of the Act.
The other submission of Sri Singhal is that the penalty imposed is excessive and is not justified in the facts and circumstances of the case.
The authorities have determined the deficiency in stamp duty to the tune of Rs.3,33,400/- and an equal amount of stamp duty has been imposed. In imposing the penalty no reason has been assigned. It is true that under Section 47-A(4) of the Act, the authorities are empowered to levy penalty equivalent to 4 times of the proper stamp duty or the deficiency portion thereof, but such imposition of penalty cannot be arbitrary based upon whims and fancies of the authorities. It has to be imposed by following the sound judicial principles. In order to avoid any arbitrariness in imposing penalty in the case of Smt. Sonia Jindal Vs. State of U.P. and others 2011 (5) ADJ 316 it has been held that while imposing penalty the authorities must record reasons.
In the absence of reasons the order of penalty becomes a non-speaking order which is not tenable in law.
In view of the aforesaid facts and circumstances, the impugned orders dated 28.07.2008 and 18.11.2010 are quashed and the matter is remanded to the Collector/ competent authority to redetermine the amount of stamp duty/deficiency in stamp duty on the aforesaid instrument by treating it to be a composite instrument of lease of 3 years and an agreement to let thereafter for a period of 6 years, in accordance with law as expeditiously as possible, preferably within a period of 6 months from the date of production of certified of this Court.
Any amount which the petitioner may have deposited pursuant to the impugned orders or in compliance with the interim direction issued by this Court shall be subject to the final decision taken by the authorities pursuant to the remand.
The writ petition is allowed as above.
Order Date :- April 6, 2012 brizesh