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IN THE HIGH COURT OF BOMBAY
(B. A. Masodkar J.)
LIFE INSURANCE CORPORATION OF INDIA Applicant.
v.
DINANATH MAHADEO TEMBHEKAR and others Opponents.
Advocate Appeared
For applicant-R. K. Thakur. For opponent No. 1-Shankar Anand.
For opponents Nos. 2 and 3-M. H. Razvi.
STAMP ACT - SECTION 2(N) - LEASE - INTERPRETATION - DOCUMENT NOT CREATING DEMISE OR TRANSFER IN FAVOUR OF LESSEE - NOT A LEASE - NOT LIABLE TO STAMP DUTY.
Fact of the Case:
A document was disputed to be a lease within the meaning of Clause (n) of section 2 of the Bombay Stamp Act, 1958, and duty and penalty were demanded applying Article 36 (vii) of that Act.
Finding of the Court:
The document in question did not create any demise or transfer in favor of the lessee and was not an instrument of lease. The demise was already agreed upon separately and independently of the document.
Issues: Whether the document in question was a lease within the meaning of Clause (n) of section 2 of the Bombay Stamp Act, 1958.
Ratio Decidendi: The definition of "lease" in section 2(n) of the Bombay Stamp Act, 1958, requires an instrument creating a lease of immovable property. The document in question did not create any demise or transfer in favor of the lessee and was not an instrument of lease. The demise was already agreed upon separately and independently of the document. Therefore, the document was not a lease within the meaning of Clause (n) of section 2 of the Bombay Stamp Act, 1958, and was not liable to stamp duty.
Final Decision: The revision was allowed, and the order impounding the document was modified to the extent that the document was not liable to stamp duty. The trial Court was directed to permit the parties to lead additional evidence and then proceed to hear them on the merits of the cause and decide the suit according to law.
2. The concerned document purports to be of 3rd July 1974 and recites amongst other that certain terms and conditions were put forward and were being accepted. Those terms are set out as terms and conditions under the signature of tenants. Documents produced at Annexure A-1 of 1-8-1968 is a letter sending three months' rent for the block allotted. In the disputed document itself, there is no demise of the property, nor under it the lease agreed between the parties is mentioned. The sum and substance of the entire document is laying down certain conditions that would be binding on the tenant and the Corporation the lessor during the continuance of the demise which is not witnessed by the document nor is created under it. Dominantly, therefore, the document evidences the collateral terms and nothing more.
3. The principle on which the liability under fiscal statutes like Stamp Act is cannot be disputed. The interpretation has to be according to strict letter of the law and not only in case of doubt but in case of beneficial interpretation favouring the subject, the rule is to tend in favour of the subject rather than the exchequer. There being no equity in the matters of taking statutes, the Court adheres and follows this path to substantially advance the cause of the disputes. See A. V. Fernandez v. State of Kerala1; Ramo Swarup v. Foti2 ; Firm of Chunilal v. Firm Mukalal3; R. D. Sethna v. Mirza Mohamed4 and Santdas Moolchand v. Sheodayal5. Turning with these principles to apply to the provisions of section 2 (n) which defines lease for the purpose of Stamp Act, the ground may be clear by referring to the purposes of the Act itself it is under Entry 63, List II, i.e. the State List of Seventh Schedule of the Constitution, that the State Legislature has enacted the provisions of the Stamp Act with a view to collect stamp duty in respect of documents. Reference to the preamble itself shows that the nature of duty is payable on documents or instruments and not on mere, transaction. Provisions of section 3 in Chapter If makes the instruments chargeable with duty as contained in the schedules appended to the Act and reference to other provisions like sections 4 to 6 emphasizes that it cannot be the intention of the Legislature to collect duty on transactions. There is a clear distinction in the legal affairs of men which can be taken note of in that transactions may be effected having legal effects without resort to formal inscribing of them in the shape of documents or instruments. Sometimes by the instruments the legal rights may stand conveyed and sometimes without it. Instruments may be inscribed and executed just to witness the completed transactions and similarly instruments or documents may come in existence with a view to create rights and obligations in future. There may be executed, executory as well executable instruments which may take the formal shape of agreements or which may be spelt out by the documents that pass between the parties. Question in each case while applying the provisions of fiscal statutes like the Stamp Act is a question of fact to be determined taking into account all the relevant circumstances, the nature of transaction and its legal effect, leaning always in case of doubt to favour the subject from the tax law.
4. Section 2 (n) of the Bombay Stamp Act which has to be applied to the present case is peculiarly worded and it defines "lease" as meaning "a lease of immovable property" and then proceeds to include certain other instruments like (i) a potta, (ii) a Kabulayat, or other undertaking in writing not being a counter-part of the lease to cultivate, occupy or payor deliver rent for immovable pro
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