2025 (2) TMI 737 - SC - Indian Laws

Recovery of deficit stamp duty and penalty - whether the appellant is liable to pay stamp duty and penalty on the agreement to sell dated 03.09.2003 allegedly executed between the appellant and the mother of Respondent No.1 in respect of the suit property? - HELD THAT - In the instant case the agreement to sell executed between the appellant and mother of the Respondent No.1 specifically states that this property is in your occupation on rental basis and it will not be part of the sale transaction. After completion of sale transaction the possession of the said property will be given to you on the ownership basis. This makes it very clear that the suit property was occupied by the appellant on a rental basis and it would not be a part of the sale transaction. Further there was a clause by which timeline was given for execution of sale deed. Since the possession was admittedly given to the appellant even before the date of agreement implying acquisition of possessory rights protected under Section 53A of the Transfer of Property Act the same requires payment of proper stamp duty. The agreement to sell includes a clause stating that physical possession had already been handed over to the appellant regardless of the basis of such possession. This satisfies the requirement to treat the instrument as a conveyance within the meaning of Explanation I to Article 25 of Schedule I of Bombay Stamp Act with only the formality of executing the sale deed remaining. Pertinently it is to be pointed out that the appellant filed a suit for specific performance of the agreement to sell against the respondents; Respondent No.1 filed a suit seeking eviction of the appellant from the subject property; and both the suits are pending which clearly establish the possession of the property by the appellant. Therefore the said document is liable for payment of stamp duty at the hands of the appellant. The Courts below impounded the document and directed the same to be sent to the Registrar of Stamps for recovery of deficit stamp duty and penalty as per law by the orders impugned herein which is perfectly correct. However it is made clear that as per the second proviso to Article 25 if the stamp duty is already paid or recovered on the agreement to sell then the same shall be deducted while computing the stamp duty payable when the sale deed is executed; and the recovery shall be restricted only to the extent of difference in stamp duty and the entire penalty from the date of execution of the agreement to sell till the date of payment of stamp duty. Conclusion - The agreement to sell which involved possession is a conveyance for stamp duty purposes under Explanation I to Article 25 of Schedule I of the Bombay Stamp Act. The duty is on the instrument and possession whether current or agreed triggers the duty. There are no reason to interfere with the orders passed by the Courts below - appeal dismissed.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal issue considered in this judgment is whether the appellant is liable to pay stamp duty and penalty on an agreement to sell dated 03.09.2003, under the provisions of the Bombay Stamp Act, 1958. The specific question revolves around the applicability of Explanation I to Article 25 of Schedule I of the Bombay Stamp Act, which deems an agreement to sell as a conveyance if possession is transferred or agreed to be transferred, thus requiring stamp duty akin to a conveyance.

ISSUE-WISE DETAILED ANALYSIS

Relevant legal framework and precedents: The legal framework centers on the Bombay Stamp Act, 1958, particularly Article 25 of Schedule I and its Explanation I, which stipulates that an agreement to sell is deemed a conveyance if possession is transferred or agreed to be transferred before, at, or after the execution of the agreement without executing a conveyance. The court referenced precedents, including Veena Hasmukh Jain v. State of Maharashtra and Shyamsundar Radheshyam Agrawal v. Pushpabai Nilkanth Patil, which clarify that stamp duty is levied on the instrument rather than the transaction.

Court's interpretation and reasoning: The court interpreted Explanation I to mean that if an agreement to sell involves the transfer of possession, it is deemed a conveyance, necessitating stamp duty. The court emphasized that the duty is on the instrument, not the transaction, and that possession being transferred or agreed upon triggers the duty.

Key evidence and findings: The agreement to sell dated 03.09.2003 stated that the appellant was in possession of the property as a tenant and would receive ownership possession only upon execution of the sale deed. Despite this, the court found that the agreement implied a transfer of possessory rights, satisfying the conditions of Explanation I.

Application of law to facts: The court applied the principles from the Bombay Stamp Act and relevant case law to determine that the agreement to sell, which involved possession, was indeed a conveyance for stamp duty purposes. The fact that the appellant was in possession as a tenant did not negate the applicability of Explanation I, as the agreement implied a change in jural relationship.

Treatment of competing arguments: The appellant argued that no stamp duty was payable as the agreement did not transfer possession and was contingent on a future sale deed. The court rejected this, citing the legal position that the duty is on the instrument and the agreement's terms indicated possession was part of the transaction. The respondents argued successfully that the agreement was a deemed conveyance under the law.

Conclusions: The court concluded that the agreement to sell was liable for stamp duty as a conveyance under Explanation I to Article 25 of the Bombay Stamp Act. The order to impound the document and recover the deficit stamp duty and penalty was upheld.

SIGNIFICANT HOLDINGS

The court affirmed that the stamp duty is levied on the instrument rather than the transaction, as articulated in Veena Hasmukh Jain v. State of Maharashtra: "The duty in respect of an agreement covered by the Explanation is leviable as if it is a conveyance." The court held that the agreement to sell, which involved possession, was a conveyance for stamp duty purposes under Explanation I to Article 25 of Schedule I of the Bombay Stamp Act.

Core principles established: The judgment reinforced the principle that agreements to sell involving possession are deemed conveyances for stamp duty purposes. The ruling clarified that the duty is on the instrument, and possession, whether current or agreed, triggers the duty.

Final determinations on each issue: The court upheld the decisions of the lower courts to impound the document and recover the stamp duty and penalty, affirming that the agreement to sell was a conveyance under the Bombay Stamp Act. The appeal was dismissed, and the appellant was held liable for the stamp duty and penalty as determined by the lower courts.