Bombay Stamp Act | Agreement To Sell Attracts Stamp Duty If Possession Is Granted : Supreme Court

The Supreme Court today (February 14) observed that an agreement to sell specifying delivery of the possession of the property would be deemed as 'conveyance' and would be subject to the stamp duty as per the Bombay Stamp Act.

Emphasizing that stamp duty is levied on the instrument (agreement) and not the transaction, the Court held that even an agreement to sell could attract stamp duty if it grants possession of the property to the buyer, even though the actual transfer of ownership would occur upon the execution of the sale deed.

A bench comprising Justices J.B. Pardiwala and R. Mahadevan heard the case relating to the Bombay Stamp Act where the Appellant was aggrieved by the trial court's and High Court's decision to levy stamp duty on the agreement to sell, which granted possessory rights to him even though the actual ownership would take place on the execution of the sale deed.

In short, the Appellant was already in possession of the suit property as a tenant. An agreement to sell was executed between the Appellant and the Respondent, stating that while the Appellant occupied the property as a tenant, ownership-based possession would be transferred only upon the execution of the sale deed.

The Appellant argued that the agreement explicitly states that possession of the property was with the appellant as a tenant and would only be transferred on an ownership basis after the execution of the sale deed. Therefore, he contended that the agreement to sell can't be subject to stamp duty because it can't be deemed as conveyance.

Rejecting the Appellant's argument, the judgment authored by Justice Mahadevan observed that even though the appellant was already in possession as a tenant, the agreement to sell, coupled with the intention to transfer ownership possession later, was enough to trigger the stamp duty.

“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. As indicated above, 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 court observed.

Reference was drawn from the cases of Veena Hasmukh Jain and another v. State of Maharashtra and Others (1999) 5 SCC 725 and Shyamsundar Radheshyam Agrawal v. Pushpabai Nilkanth Patil that support the principle that if possession is transferred or agreed to be transferred under the agreement to sell, it attracts stamp duty as a conveyance. It doesn't matter when the possession changes hands i.e., before, during, or after the agreement.

In a nutshell, the Court clarified that if the purchaser is already in possession of the property (e.g., as a tenant), and the agreement provides for the transfer of possession, it may be treated as a conveyance.

Accordingly, the appeal was dismissed.

Case Title: RAMESH MISHRIMAL JAIN VERSUS AVINASH VISHWANATH PATNE & ANR.

Citation : 2025 LiveLw (SC) 206

Click here to read/download the judgment

Appearances:

For Petitioner(s) :Mr. Abhimanyu Bhandari, Sr. Adv.(N.P.) Ms. Rooh-e-hina Dua, AOR Mr. Harshit Khanduja, Adv. Mr. Ankit Khera, Adv.

For Respondent(s) :Ms. Awantika Manohar, Adv. Mr. Dhawesh Pahuja, AOR Mr. Nilesh Sharma, Adv. Ms. Parul Dhurvey, Adv. Mr. P Mohit Krishna, Adv.