Historical property documents not liable for stamp duty at current rates


Giving its verdict in a case, the Bombay HC has said that the stamp duty on a transaction could be recovered only at the rates prevalent when the transaction was concluded. We examine the implications of this ruling

It is well known that real estate in Mumbai is one of the most expensive in the world. The stamp duty, including metro cess, payable on a deed of transfer or conveyance or sale deed, was 6% on the market value of the property or consideration value, whichever was higher. This added substantially to the cost of acquisition. However, recently, due to the COVID-19 pandemic, the Maharashtra government has reduced the stamp duty payable on these documents up to March 31, 2021.

 

Stamp duty

 

Penalty of inadequately stamped documents under the Maharashtra Stamp Act

It was observed that in a lot of instances when the purchase document was presented for registration, the registering authority would call for the antecedent title document/s to be produced. At such time, if the authority found that the antecedent documents were unstamped or inadequately stamped, the officer concerned would impound the documents and call upon the parties to pay the appropriate stamp duty charges on the unstamped title deeds and differential stamp duty on inadequately stamped ones, as the case may be, along with penalty thereon.

Prior to 1985, when the Maharashtra Stamp Act, 1958, was amended, agreements for sale were stamped with nominal stamp duty. The Stamp Act empowers the collector of a district, suo moto or on receipt of information, to call for documents within a period of 10 years from the date of registration of such documents, to verify if appropriate duty on the instrument has been paid.

Besides the above, under the provisions of the Act, if a person in charge of a public office, before whom any instrument chargeable with duty is produced, observes that it is not duly stamped, then, he has the authority to impound the same and levy the unpaid/ differential stamp duty along with penalty.

 

Bombay HC ruling on stamp duty on antecedent title documents

However, the moot question is, how far back in time can the authorities go, to exercise this right. This issue has, to a certain extent, been considered by the Bombay High Court in a suit filed by Lajwanti Godhwani, who co-owned a flat in a cooperative society in south Mumbai, over a family property dispute.

Her late father had purchased the flat in question in the year 1979 and had paid stamp duty of Rs 10 on the purchase document, which was not registered either. Eventually, when the flat was sold, the sub-registrar of assurances initially declined to register the transfer document, on the ground that the antecedent title documents were insufficiently stamped.

See also: Stamp Duty: Bombay HC rules stamp duty cannot be charged for past transactions

While deciding the dispute, the Bombay High Court, though, has not gone into detail of the provisions of the Act. In its order passed in 2018, the HC held that stamp duty is payable on the instrument being executed and not on the underlying transaction or the historical documents narrated in the instrument. The court observed that if the authority’s view is to be accepted, it would imply that the title in the premises never ever passed and this could have unforeseen consequences.

The court also made a few other important observations from which, it can be inferred that even if the antecedent documents were liable to be stamped, the computation could not be based on the prevailing market rates. The stamp duty could be recovered, only at the market rate prevalent when the transaction was concluded.

 

Impact of the Bombay High Court ruling on stamp duty on historic documents

The judgment clarifies that sub-registrars cannot impound such historical title documents, while registering a current transfer document and cannot levy stamp duty at current rates and value along with penalty. This judgment would ensure that a flat purchaser does not need to make a provision for contingent liability, on account of stamp duty on historic title deeds.

(Harsh Parikh and Abhiraj Gandhi are partners at Khaitan & Co.)

(The views of the author(s) in this article are personal and do not constitute legal / professional advice of Khaitan & Co.)

 

FAQ

What is the stamp duty payable in Maharashtra?

The stamp duty in Maharashtra is around 5% to 7% of the property value. The Maahrashtra government has announced a reduction of up to 3% in the stamp duty rate, following the COVID-19 pandemic, up to March 31, 2021.

What is the registration charge in Maharashtra?

Registration charges in Maharashtra are generally 1% of the property’s value.

Can the sub-registrar impound property documents?

The Maharashtra Stamp Act, 1958, empowers the authorities to impound documents that are not duly stamped.

 

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