Stamp Duty Refund Also Applicable To All Development Agreements Signed Between Sep, 2020- March 2021 - Bombay High Court

In a landmark judgement last week, the HC held that the stamp duty payable on a Development Agreement is as per the duty payable on a Conveyance under Article 25 of the Maharashtra Stamp Act, 1958 and, therefore, Development Agreement would have to be treated at par with an instrument of Conveyance.

The State Government, in order to attract real estate deals during the slowdown period of the first lockdown in 2020, had reduced stamp duty on such deals by 2 per cent between September 1, 2020 and December 31, 2020 and the reduction between January 1, 2021 and March 31, 2021 was to be 1.5 per cent. The policy was brought into effect through a notification dated August 28, 2020 by the State's Revenue and Forest Department.

Hearing a petition filed by a developer M/s. Sandeep Dwellers Private Limited, the Nagpur bench of the High Court ruled, "So, even though a development agreement has been provided for specifically under Article 5(g-a)(i) of Schedule I, ultimately the stamp duty payable on the development agreement is as per the duty payable on a conveyance under Article 25 and, therefore, development agreement would have to be treated at par with an instrument of conveyance and hence it is an instrument which is squarely covered by the notification dated 28.8.2020."

A division bench of Justices Sunil Shukre and M S Jawalkar has directed a refund of the excess stamp duty, which according to the developer, was around Rs 23 lakh.

The developer had entered into three development agreements – one on December 28, 2020 and two on December 31, 2020. These agreements were eventually registered on different dates between January and June 2021.

Before execution of the development agreements, the developer had made an application under section 31 of the Maharashtra Stamp Act, 1958 for adjudication of the stamp duty chargeable on the agreements. The developer contended that the three agreements would be covered by the August 28, 2020 notification allowing reduction in stamp duty stating the agreements would amount to Conveyance as per Article 25(b) of Schedule I of the Act.

However, the Joint District Registrar (Class-1) cum Collector of Stamps, Nagpur, by an order passed on December 18, 2020, rejected the developer's contention and held that full stamp duty at the rate of 5 per cent be paid as per Article 5(g-a) read with Article 25(b)(i) of the Schedule I of the Stamp Act.

The developer executed the agreements and paid the stamp duty as per the order of December 18, 2020 and filed a petition challenging the same and sought a refund.

Advocate Kartik Shukul, appearing for the developer, submitted that as defined under Section 2(g), the Development Agreement is a Conveyance and the stamp duty payable in respect of a Development Agreement is same as is leviable on a Conveyance under clause (b) or (c) as the case may be of Article 25 read with under Article 5(g-a)(i) of Schedule I of the Stamp Act.

Assistant Government Pleader N R Patil, appearing for the respondent authorities, submitted that the scheme announced by the State government was a matter of record and that the petitioner cannot ask for the refund of excess stamp duty after having accepted the December 18, 2020 order and paid stamp duty accordingly.

The court, after going through the notification dated August 28, 2020 and the relevant sections of the Maharashtra Stamp Act, observed that the stamp duty chargeable on Conveyance which includes an agreement to sell in respect of any immovable property was originally chargeable at the rate of five per cent of the market value of the property in terms of Article 25(b). This stamp duty was reduced "in respect of instrument of Conveyance or Agreement to sell" between the period mentioned in the notification.

The bench observed that by the three agreements, the respective owners and developer had agreed for development jointly of immovable property mentioned in each of the agreements and the share in the developed property was shown as 25 per cent to the owners jointly and 75 per cent to the developer.

"There are also other rights and liabilities created in favour of and against the petitioner which are akin to transfer of immovable property to the petitioner by the owners and, therefore, in our considered opinion, the development agreements are Conveyances within the meaning of definition of Conveyance as given in section 2(g) of the Stamp Act," the bench held.

It then ruled that while a Development Agreement is provided for in Article 5(g-a)(i) of Schedule I of the Stamp Act, the payable on a Development Agreement was the same as is chargeable on a Conveyance under clauses (b) or (c), of Article 25 under Article 25 of Schedule I of the Stamp Act, therefore, Development Agreement would have to be treated at par with an instrument of Conveyance.

For the purpose of the rate at which refund should be provided since the agreements were executed before December 31, 2020, but were registered afterwards, and the rate of relief in stamp duty was different for the two periods, the bench held that the date of execution of the agreements would be relevant for calculation of stamp duty. The court, therefore, provided two per cent relaxation in the amount payable as stamp duty.

Case Title: M/s. Sandeep Dwellers Private Limited Vs The State of Maharashtra & ors

Citation: 2022 LiveLaw (Bom) 184

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