2012 (12) TMI 1245 - HC - Income Tax

Possession certificates deemed conveyance under Stamp Act; stamp duty payable, but Section 46-A limitation bars recovery

Digambar Warty and Ors. Versus District Registrar and Chief Controller of Revenue and Ors. s

HC held that possession certificates issued by housing societies conferred transferable rights amounting to a transfer of immovable property benefits and ... - Issues Involved:1. Whether the transactions involving possession certificates constitute 'Conveyance' under Section 20(2) of the Karnataka Stamp Act.2. Whether the limitation period prescribed under Section 46-A of the Karnataka Stamp Act is applicable.Issue-wise Detailed Analysis:1. Conveyance under Section 20(2) of the Karnataka Stamp Act:The core issue was whether the possession certificates issued by the Sri Chitrapur Co-operative Housing Society Limited and M/s. Dattaprasad Housing Co-operative Society to their members constitute 'Conveyance' as defined under Section 20(2) of the Karnataka Stamp Act, thereby attracting stamp duty.The court analyzed the nature of the transaction, the rights conferred by the possession certificates, and the relevant statutory definitions. It was observed that:- The Society leased land and constructed apartments, with ownership of the buildings vesting in the Society.- Members were issued share certificates, loan stock certificates, and possession certificates, which conferred rights of possession, transfer, and letting out of the flats.- The definition of 'Conveyance' under Section 2(d) includes every instrument by which property, whether movable or immovable, is transferred inter vivos.- The term 'immovable property' includes land, buildings, and benefits arising out of the land.The court concluded that the possession certificates, combined with the rights conferred by the bye-laws of the Society, amounted to a transfer of immovable property benefits, thus constituting 'Conveyance' under the Act. This interpretation was supported by the inclusive nature of the definition of 'immovable property' and 'Conveyance' under the Stamp Act. Consequently, the instruments were chargeable with stamp duty.2. Limitation Period under Section 46-A of the Karnataka Stamp Act:The second issue was whether the limitation period prescribed under Section 46-A for recovering stamp duty not levied or short levied applied to the proceedings initiated by the revenue authorities.The court examined:- The statutory framework for impounding instruments under Section 33, adjudicating duty under Section 37, and recovering duties and penalties under Section 46.- Section 46-A specifies a five-year limitation period for initiating proceedings to recover unpaid stamp duty, extendable to ten years in cases of fraud, collusion, or willful suppression of facts.In this case, the possession certificates were issued in 1987, and proceedings were initiated in 2004, well beyond the five-year limitation period. The court held that:- The limitation period under Section 46-A applied, and the proceedings initiated in 2004 were barred by limitation.- The authorities could not recover the stamp duty due to the expiration of the limitation period.Conclusion:The court affirmed the learned Single Judge's finding that the possession certificates constituted 'Conveyance' under the Stamp Act and were chargeable with stamp duty. However, it held that the proceedings to recover the stamp duty were barred by limitation under Section 46-A. The court allowed the appellants to voluntarily pay the requisite stamp duty and get the documents registered within six months from the date of adjudication by the authorities. The appeals were thus partly allowed, with each party bearing their own costs.