1999 Supreme(SC) 89

1999(1) Supreme 229
Supreme Court of India
(From Bombay High Court)
S.P. Bharucha & S. Rajendra Babu, JJ.
Veena Hasmukh Jain & Anr. -Appellants
versus
State of Maharashtra & Ors. -Respondents
Civil Appeal No. 1655 of 1996
With
Civil Appeal Nos. 1656/96, 1657/96 & 1658/96 and 1959 of 1996
Decided on 28-1-1999
Counsel for the Parties :
For the Appellants : M.S. Bhandari and A.M. Khanwilkar, Advocates.
For the Respondents : M.S. Nargolkar, Sr. Advocate, D.M. Nargolkar, Advocate.

Important Point
A deed of sale agreement executed under Section 4 of the Maharashtra Ownership Flats (Regulation of Promotion of Construction, Sale, Man­agement and Transfer) Act, 1963 which provides for handing over of possession even before execution of conveyance and does not costs an obligation to enter into conveyance at a later stage, is a conveyance within meaning of Section 2(g) of Bombay Stamps Act attracting stamp duty as if it is a conveyance as provided in the Explanation I to Section 25.

Headnote:Bombay Stamp Act, 1958-Sections 2(g), 25 and 32A-Maha­rashtra Owner­ship Flats (Regula­tion of the Promotion of Construction, Sale, Manage­ment and Transfer Act, 1963 (MOF Act)-Sections 4 and 11 - Determination of true market value-Sale agreement executed under Section 4 of MOF Act -Compulsorily registrable-Ques­tion whether agreement to sell is a document conveying right title and interest so as to attract Bombay Stamp Act-Agreement provides for handing over of possession of flat even before execution of conveyance-No obligation to enter into a conveyance at a later stage-Case clearly falls under Explanation I to Article 25 of Bombay Stamp Act-Agreement in question would attract duty as if it is a conveyance deed.

       Held : Under Entry 44 of List III-Concurrent List of the Seventh Schedule to the Constitution, any State as well as the Central Government levy stamp duties other than duties or fees collected by means of judicial stamps, but not including rates of stamp duty and in respect of such instruments mentioned in Entry 91 of List 1-Union List of the Seventh Schedule to the Constitution. A duty is leviable under Section 3 of the Bombay Stamp Act which indicates the instruments executed in the State or those outside the State but brought into the State for the first time relating to any property situate or to any matter or thing done or to be done in the State shall be chargeable to stamp duty prescribed under the Bombay Stamp Act. Article 25 of Schedule I refers to conveyance and the amount of conveyance as sought to be explained by the Explanation. The duty in respect of an agreement covered by the Explanation is leviable as if it is a conveyance. The conditions to be fulfilled are if there is an agreement to sell immoveable property and possession of such property is transferred to the purchaser before the execution or at the time of execution or subsequently without executing any conveyance in respect thereof such, an agreement to sell is deemed to be a “conveyance”. In the event a conveyance is executed in pursuance of such agreement subse­quently, the stamp duty already paid and recov­ered on the agreement of sale which is deemed to a conveyance shall be adjusted towards the total duty leviable on the conveyance. (Paras 6 & 7)

       Now, in the present case, the agreement entered into clearly provides for sale of an immoveable property and there is also a specific time within which possession has to be delivered. Therefore, the document in question clearly falls within the scope of the Explanation I. It is open to the Legislature to levy duty on different kinds of agreement in diferent rates. If the Legislature thought that it would be appropriate to collect duty at the stage of agreement itself if it fulfills certain conditions instead of postponing the collection of such duty till the completion of the transaction by execution of a conveyance deed inasmuch as all substantial conditions of a conveyance have already been fulfilled such as by passing of a consideration and delivery of possession of the property and what remained to be done is a mere formality of execution of a sale deed, it would be necessary to collect duty at a later stage itself though right, title and interest may not have passed as such. Still by reason of the fact that under the terms of the agreement there is an intention of sale and possession of the property has also been delivered, it is certainly open to the State to charge such instruments at a particular rate which is akin to a conveyance and that is exactly what has been done in the present case. Therefore, it cannot be said that levy of duty is not upon the instrument but on the transaction. (Para 7)

       It was urged that the character of an instrument cannot be determined by reason of a subsequent event to take place such as handing over of possession. But a close examination of the provisions of the Explanation will make it clear that in the case of an agreement to sell immoveable property possession is transferred at any time without executing the conveyance in respect thereof, such an instrument is deemed to be a “con­veyance”. The object of the Explanation is clear that if an agreement is entered into and that agreement itself contemplates the delivery of possession of the property within the stipulated time, then such an agreement should be deemed to be a conveyance for the purpose of duty leviable under the Bombay Stamp Act. It is clear that the object of the Stamp Act is to levy stamp duty on different kinds of instruments. The Legislature, in the present case, has chosen to levy a rate of duty equivalent to conveyance in respect of an agreement though the transaction may not have been com­pleted because of certain instruments arising out of such agreement being executed and possession thereof being taken prior to or simulta­neous with the document or subsequently. But in the Explanation it is not clear that if the document provides that possession has to be taken without execution of the conveyance certainly it would attract the appropriate duty. If the agreement provides that possession will be handed over on the execution of a conveyance as contemplated under Section 11 of the MOF Act, then the Explanation shall not be attracted at all. In the present case, it is clear that in the terms of the agreement there is no provision made at all for execution of the conveyance. On the other hand, what is submitted is that the provi­sions of the MOF Act could be applied to the agreement and, therefore, a conveyance could be executed subsequently when it is not clear as to when the conveyance is to be executed and the stipulated time within which the possession has to be handed over. If that is so, it is clear that the document would attract duty as if it is a conveyance as provided in the Explanation. (Paras 8 & 9)