1999 (1) TMI 521 - SC - Indian Laws

Supreme Court Upholds Duty on Sale of Flats Under Bombay Stamp Act

VEENA HASMUKH JAIN AND ANR. Versus STATE OF MAHARASHTRA AND ORS.

VEENA HASMUKH JAIN AND ANR. Versus STATE OF MAHARASHTRA AND ORS. - 1999 AIR 807, 1999 (1) SCR 302, 1999 (5) SCC 725, 1999 (1) JT 186, 1999 (1) SCALE 185 Issues Involved:1. Duty payable under the Bombay Stamp Act, 1958 on an agreement for sale of flats.2. Whether the agreement for sale is a 'conveyance' under the Bombay Stamp Act.3. Applicability of Explanation I to Article 25 of Schedule I of the Bombay Stamp Act.4. Constitutionality of the provision for levying duty on the 'transaction' rather than the 'instrument'.Detailed Analysis:1. Duty payable under the Bombay Stamp Act, 1958 on an agreement for sale of flats:The appellants entered into an agreement for the purchase of a flat, which was executed and lodged for registration as required under Section 4 of the Maharashtra Ownership Flats (Regulation of the Promotion of Construction, Sale, Management and Transfer) Act, 1963 (MOF Act) and Section 17(1) of the Indian Registration Act, 1908. The agreement disclosed a consideration of Rs. 3,75,000, with a registration fee of Rs. 3,750 paid. However, the Sub-Registrar of Bombay impounded the agreement, and the Assistant Director of Town Planning, Stamp, and Valuation initiated proceedings under Section 32A of the Bombay Stamp Act, 1958, suspecting that the market value of the property was not fully disclosed.2. Whether the agreement for sale is a 'conveyance' under the Bombay Stamp Act:The principal question was whether the agreement to sell constituted a document conveying right, title, and interest in the flat to the appellants. The terms of the agreement indicated that the purchaser agreed to buy the flat for Rs. 3,75,000, with specific conditions regarding payment and possession. The High Court concluded that the agreement could be construed as a conveyance under Section 2(g) of the Bombay Stamp Act, as it transferred the right, title, and interest in the flat to the purchaser upon payment of installments.3. Applicability of Explanation I to Article 25 of Schedule I of the Bombay Stamp Act:Explanation I to Article 25 of Schedule I of the Bombay Stamp Act states that an agreement to sell immovable property, where possession is transferred before, at the time of, or after execution without a conveyance, shall be deemed a conveyance, and stamp duty shall be levied accordingly. The High Court held that the agreement in question attracted this explanation, as it obligated the builder to hand over possession before executing a conveyance. The Supreme Court upheld this view, noting that the agreement clearly provided for the sale of immovable property and specified a time for possession delivery, thus falling within the scope of Explanation I.4. Constitutionality of the provision for levying duty on the 'transaction' rather than the 'instrument':The appellants contended that the duty should be levied on the 'instrument' and not the 'transaction,' arguing that Explanation I to Article 25 of Schedule I was ultra vires the Constitution. The Supreme Court rejected this contention, stating that under Entry 44 of List III-Concurrent List of the Seventh Schedule of the Constitution, both the State and Central Governments could levy stamp duties on instruments. The Court clarified that the duty was levied on the instrument, which, by fulfilling certain conditions, was deemed a conveyance. The Legislature could levy duty at the agreement stage if substantial conditions of a conveyance, such as consideration passing and possession delivery, were fulfilled. The Court found no error in the High Court's view and upheld the decision.Conclusion:The Supreme Court dismissed the appeals, affirming the High Court's decision that the agreement for sale of flats attracted duty as a conveyance under the Bombay Stamp Act, 1958, and upheld the constitutionality of the provision for levying duty on the transaction.