Undervaluing Immovable Property To Pay Less Stamp Duty, Conceal Income Ripe In India, Remarks Delhi HC [Read Judgment]

Hearing in a property ownership dispute led the Delhi High Court to rue the “unfortunate” practice of undervaluing immovable property in India to evade part of stamp duty or the income tax.

“Unfortunately undervaluing of immovable properties so as to either pay less stamp duty or for other reasons of concealment of income etc, is ripe in this country…” said Justice Valmiki J Mehta.

Justice Mehta was forced to make the remark during hearing of an appeal by a man named Trilok Nath seeking a declaration that he was the owner of a certain property in West Delhi.

While Nath claimed that he had taken a loan of Rs 1 lakh from one Khem Chand but never got back the property on repayment, the latter produced sale deed and registered power of attorney to prove sale effected in 2006.

In this case, Khem Chand had transferred the suit property to one Kamla Devi in 2007. She, in turn, had sold the property to Devender in 2011.

The high court held that the third party rights originating from registered sale deed were protected by the Transfer of Property Act making the present owner the rightful owner of the property and Nath, in any case, had failed to prove repayment of alleged loan amount.

In an effort to show that the sale deed presented by the defendant is illegal, Nath argued that Khem Chand himself has admitted that the suit property was transferred to Kamla Devi for Rs.3. 25 lakh and the circle rates at the time of filing of the written statement was Rs.5 lakh.

“Therefore, since the initial transaction was only for a sum of Rs.1 lakh which was paid to the appellant/plaintiff by the respondent no.1/defendant no.1 hence it should be held that the documents dated 25.9.2006 (sale deed etc) are illegal,” he argued.

This led Justice Mehta to comment, “Unfortunately undervaluing of immovable properties so as to either pay less stamp duty or for other reasons of concealment of income etc, is ripe in this country…”

“..however, the appellant/plaintiff cannot take any benefit of the same in view of the provision of Section 25 of the Indian Contract Act, 1872 which specifies that inadequacy of consideration is not a ground for cancelling of a contract,” said the judge.

“In any case, it is very much possible that the declared consideration need not have been the actual consideration, and which of course this Court does not deal with or is not concerned with…,” he went on to say before dismissing the appeal.

Read the Judgment Here