Property's Potential Use In Proximate Future Has To Be Seen To Determine Its Market Value U/S 47-A Indian Stamp Act: Allahabad HC

The Allahabad High Court has recently observed that the market value of a property for the purpose of Section 47-A Of the Indian Stamp Act has to be determined with reference to the use to which the land is capable reasonably of being put to immediately or in the proximate future.

It may be noted that where it is found that an instrument is undervalued [which happened in the instant case], the procedure has been set forth under Section 47-A of the Act for assessing the correct stamp duty on the instrument.

In determining so, what has to be seen is the market value of the property and, if it is found that the value of the property mentioned in the instrument is less than even the minimum value determined in accordance with the rules made under the Act, the registering officer is empowered to impound the instrument when it is presented for registration.

It may be further be noted that the authority can even require the person liable to pay stamp duty with deficit stamp duty as computed on the basis of the minimum value determined in accordance with the rules and return the instrument for presenting again for registration.

The case in brief 

A registered society/petitioner 'The Assembly of God North India Balrampur' purchased land area 0.408 hectares in District Balrampur in Jan 2006 and it paid a stamp duty on sale consideration of Rs.24 Lakhs.

Deputy Registrar, Utraula in his report said that the land purchased by the petitioner-society had commercial use, for which the rate was fixed at Rs.5,400/- per Sq. M., whereas the stamp duty was paid at the agricultural rate of the land i.e. Rs.3,50,000/- per acre.

Considering the use of the land, it was said that the stamp duty ought to have been paid at the commercial rate. In view of this, after impounding the sale deed, a notice was issued to the petitioner-society for payment of the deficit stamp duty of Rs.3,12,360/-.

In reaching this conclusion, the Collector (Stamp) took into account the potential use of the land in question, its location, and several other factors to conclude that the land in question was in fact purchased for commercial usage. 

In response to this, the petitioner-society argued that the nature of the land in question was agricultural land and, therefore, the stamp duty on commercial rate was not payable by the petitioner-society.

Before the Court, the counsel for the petitioner-society submitted that for the purposes of payment of stamp duty, the nature of the land at the time of execution of the sale deed is the relevant factor and the future use of the land cannot be considered for payment of the stamp duty.

Court's observations 

At the outset, the bench of Justice Dinesh Kumar Singh perused Section 47-A of the Indian Stamp Act and observed that the Collector (Stamp) under this section is empowered to determine the correct stamp duty on receipt of reference or by suo motu and if on inquiry and examination and if he/she finds that the market value of the property has not been truly set forth and the instrument is not properly stamped, then he/she is empowered to order for payment of proper duty.

Further, regarding the determination of factors to evaluate the market value of the property, the Court also referred to the HC's ruling in the case of Smt. Pushpa Sareen Vs. State of U.P. and others, 2015 (2) ESC 819 (All) (FB) and observed thus:

"The Collector in making that determination is not bound either by the value as described in the instrument or for that matter, the value as discernible on the basis of the Rules. It has been further held that the market value of the property has to be determined with reference to the use to which the land is capable reasonably of being put to immediately or in the proximate future. The possibility of the land becoming available in the immediate or near future for better use and enjoyment reflects upon the potentiality of the land."

The Court also observed that the Collector would be within the jurisdiction in referring to exemplars that have a bearing on the true market value of the property which is required to be assessed.

Against this backdrop, taking into account the facts of the present case, the Court said that it was an admitted case of the petitioners that they had bought the land in question not for agricultural purposes, but for household (Grihasti) purposes and in fact, within a few months, they had started construction of the houses on the said land.

Therefore, the Court stressed that the Collector (Stamp) had determined the true market value of the property after considering the relevant factors as mentioned above in the said judgment of Smt. Pushpa Sareen (supra).

Considering the aforesaid facts, the Court did not find that the Collector (Stamp) or the Commissioner erred in determining the true market value of the property and accordingly the stamp duty payable on the instrument. With this, the plea was dismissed.

Case title - The Assembly of God North India Balrampur and another v. State of U.P. through Secy. Revenue Lko. and 3 others

Case Citation: 2022 LiveLaw (AB) 139

Click Here To Read/Download Order