Stamp duty held payable on agreement to sell executed prior to sale deed – Supreme Court
In a recent judgment, Hon’ble Supreme Court has held that stamp duty was payable on agreement to sell executed prior to sale deed as agreement to sell as it was principal document in view of the clause whereby the possession was handed over to the purchaser satisfying the requirement to treat the instrument as conveyance and what remained was only the formality of execution of the sale deed.
ABCAUS Case Law Citation:
4260 (2024) (09) abcaus.in SC
In the instant case, the appellant was aggrieved by the order of the Bombay High Court in affirming the order passed by the Sessions Court/Trial Court ordering impounding agreements for sale and directing sending the same to the Collector of Stamp for adjudication of stamp duty and penalty, if any.
The Trial Court observed that the said agreements included a clause that the physical possession of the properties mentioned therein, was transferred to the purchasers; however, they were not duly stamped; and hence, the documents required the payment of stamp duty of the conveyance.
The case of the appellant was that as per Section 4 of the Maharashtra Stamp Act, 1958 (the Act) the agreements to sell in relation to the same immovable properties ultimately resulted into a sale deed in favour of the appellants and the said sale deed was also duly registered, upon payment of the required stamp duty and therefore, the prior agreements to sell are not required to be registered and stamped.
According to the appellants, the sale deed having been executed in relation to the same immovable properties and stamp duty having been paid, the earlier agreements to sell which are part and parcel of the same transaction, got merged with the said sale deed and hence, separate stamp duty is not required to be paid on the earlier agreements to sell.
The Hon’ble Supreme Court observed that in order to determine the stamp duty that is chargeable upon an instrument, the legal rule is that the real and true meaning of the instrument is to be determined by ascertaining the intention of the parties from the contents and the language employed in the whole instrument and the description or the nomenclature given to the instrument by the parties is immaterial.
The Hon’ble Supreme Court noted that Section 4(1), makes it clear that where several instruments are executed for completing a transaction, the principal instrument alone shall be chargeable with duty prescribed. Also, sub-section (2) also gives an opportunity to the parties to determine for themselves, which of the instruments shall be deemed to be the principal instrument. As per Act, an agreement for sale is to be treated as a “conveyance” if either possession is handed over immediately or if it is agreed to be handed over within a particular time. A reading of the above Explanation I of Article 25 of Schedule I along with Section 4 of the Act makes it clear that the duty is levied only on the instrument and not on the transaction.
It was further observed that while dealing with the question as to whether the agreement to sell can be treated as document of conveyance, liable to stamp duty the Hon’ble Supreme Court held that the duty in respect of an agreement covered by the said Explanation I is leviable as if it is a conveyance. The conditions to be fulfilled are that if there is an agreement to sell immovable property and possession of such property is transferred to the purchaser before the execution or at the time of execution or subsequently without executing any conveyance in respect thereof, such an agreement to sell is deemed to be a “conveyance”. In the event a conveyance is executed in pursuance of such agreement subsequently, the stamp duty already paid and recovered on the agreement of sale which is deemed to be a conveyance shall be adjusted towards the total duty leviable on the conveyance.
In the given case, the Hon’ble Supreme Court noted that the agreement for sale consisted of a clause whereby the possession was handed over to the purchaser satisfying the requirement to treat the instrument as conveyance and what remained was only the formality of execution of the sale deed. Therefore, it can be safely concluded that the agreement for sale was the principal document on which stamp duty was to be paid as per Article 25.
Accordingly, the Hon’ble Supreme Court upheld the findings of the Trial Court that the subsequent sale deed cannot be construed as a principal transaction and the agreements to sell would be treated as the principal conveyance as per Explanation I of Article 25 of Schedule-I of the Act.
However, the Hon’ble Supreme Court stated that since, the state cannot recover by way of stamp duty in excess of what it is entitled to, 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 for sale till the date of payment of stamp duty.
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