In a significant ruling in the matter of Sukhraj B. Nahar Charitable Trust, Mumbai & Another v/s Chief Controlling Revenue Authority, Pune & Others, regarding stamp duty assessments in India, the Bombay High Court addressed the legality of demands raised by stamp authorities on a rectification deed executed by a lessee. The case revolved around a petition filed under Article 226 of the Indian Constitution, challenging an order from the Collector of Stamp Duty and an appellate authority, which demanded a hefty sum of Rs. 53,63,050 on account of stamp duty.

The genesis of the dispute dates back to July 2009, when a lease deed was executed between Mr. and Mrs. Sheth as lessors and the petitioner as lessee for land totaling 3872.53 square meters across two plots: CTS Plot No. 53A/1-B and CTS Plot No. 53A/1-C. Both plots were adjacent, but the lease did not clearly specify the area derived from each plot.

The property card at the time of the lease indicated that CTS Plot No. 53A/1-B covered 3125.50 square meters, designated for a playground, while CTS Plot No. 53A/1-C measured 3872.53 square meters, reserved for a municipal primary school.

The stamp authorities assessed the stamp duty based on a market value of Rs. 16,99,08,000 for the leased area, resulting in a duty payment of Rs. 76,45,860 by the petitioner on December 4, 2009.

On October 15, 2005, an order for subdivision and amalgamation of the properties was issued, leading to a physical demarcation of the plots in 2010. Following this process, the area of CTS Plot No. 53A/1-B increased to 4050.80 square meters. Subsequently, the petitioner executed a rectification deed on July 29, 2011, reflecting this change and sought adjudication for the stamp duty on the newly added area.

In July 2015, the petitioner requested the Collector to assess the stamp duty based solely on the additional area of 178.27 square meters. However, the Collector's order on August 11, 2015, determined that the stamp duty should be calculated based on an area of 925.30 square meters, leading to the substantial demand for duty.

The petitioner contended that the original lease area was 3872.53 square meters, which included parts of both plots. Therefore, the increase in area attributable to the rectification deed should only reflect the additional 178.27 square meters. The petitioner’s counsel argued that imposing duty on the larger figure of 925.30 square meters effectively resulted in a double charge, as part of this area had already been accounted for in the original lease.

In contrast, the respondents maintained that the sole document before the Collector was the rectification deed and the updated property card, which justified the increased demand. They argued that the earlier subdivision details were not considered by the Collector during the assessment.

After reviewing the case, the Bombay High Court concluded that the original lease indeed encompassed portions from both CTS Plot Nos. 53A/1-B and 53A/1-C. The court highlighted that the total area leased was 3872.53 square meters, necessitating that at least 747 square meters must have come from CTS Plot No. 53A/1-C.

The court found that the increase in area resulting from the rectification deed could only be attributed to the additional 178.27 square meters, and not the 925.30 square meters claimed by the authorities. It emphasized that the stamp duty should only be payable on the newly added area and that the original payment already covered the earlier leased portions.

The court ruled in favor of the petitioner, quashing the orders of the Collector and the appellate authority, stating that the stamp duty demand based on the larger area was unjustified. The ruling reinforced the principle that authorities must accurately assess stamp duty based on the actual leased areas, respecting the history of transactions and existing agreements.

MAHARASHTRA SPECIAL PROVISION FOR PAYMENT OF STAMP DUTY ACT, 1974    Constitution of India, 1950