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High Court Of Delhi
CHIEF CONTROLLING REVENUE AUTHORITY - Appellant
Versus
MARSHAL PRODUCE BROKERS COMPANY PRIVATE LIMITED - Respondent
Stamp Duty Reference 1 of 1977
Decided On : 09/22/1978
STAMP DUTY - LEASE - SECURITY DEPOSIT - CHARGEABILITY - INDIAN STAMP ACT, 1899, ARTICLE 35 (C), 57 - TRANSFER OF PROPERTY ACT, 1882, SECTION 105.
Fact of the Case:
A lease agreement was executed between the landlords and lessees, wherein the lessees agreed to pay a monthly rent and deposit a security deposit of Rs. 26,730 for the due performance of the lease obligations. The Sub-Registrar held that the instrument was chargeable to a stamp duty of Rs. 1,345 under Article 35 (c) of Schedule 1-A of the Indian Stamp Act, 1899 (the Act) and impounded it. The Collector of Stamps sustained the objections and directed the lessees to pay a penalty of Rs. 100 in addition to the deficient stamp duty of Rs. 810. Aggrieved, the lessees sought a reference under Section 57 of the Act for opinion on the chargeability of duty on the security deposit.
Finding of the Court:
The Court held that the security deposit of Rs. 26,730 was not chargeable to stamp duty under Article 35 (c) of Schedule 1-A of the Act, as it was not money advanced in addition to the rent reserved. The Court further held that the deposit was chargeable under Article 57 of the Schedule read with Section 5 of the Act, as it was a security bond.
Issues: 1. Whether any duty is chargeable under Article 35 (c) of Schedule I -A of the Indian Stamp Act, 1899 on the amount of security/deposit/advance which is refundable on determination of the lease, in addition to the duty paid on the rent reserved under Article 35 (a) of the Schedule? 2. Will it make any difference in the chargeability of duly, if such deposit/advance is adjustable in rent/other charges dues payable under the lease? 3. Whether such amount of security deposit paid for the due performance of the contract of the lease can be charged under Article 57 of the Schedule apended to the Act ?
Ratio Decidendi: 1. The Court interpreted Article 35 (c) of Schedule 1-A of the Act and held that the words "for money advanced" denote a consideration irrevocably passing from the lessees to the landlords over and above the consideration for the lease which is given in the form of a rent. The Court found that the security deposit in question was not money advanced in addition to the rent reserved, as it was refundable to the lessees upon the determination of the lease. 2. The Court held that if the deposit/advance is adjustable in rent/other charges/dues payable under the lease, it will not make any difference in the chargeability of duty, as it will still be considered rent paid in advance. 3. The Court held that the security deposit was chargeable under Article 57 of the Schedule read with Section 5 of the Act, as it was a security bond.
Final Decision: The Court answered the first and second questions in the negative and the third question in the affirmative.
( 1 ) THIS reference made under Section 57 of the Indian Stamp Act, 1899 by the Chief Controlling revenue Authority, Delhi, has arisen in the following circumstances :
( 2 ) THE instrument of Lease made on twentieth day of November 1975 between Dr. Sarwan Singh Sidhu Karta H. U. F. and other (the landlords) and M/s. Marshall Produce Brokers Co. Pvt. Ltd. (the lessees) and drawn up non-judicial stamps of the value of Rs. 535 was presented for registration before the Sub-Registrar, New Delhi. In consideration of the monthly rent of Rs. 4. 455 and of the convenanits, conditions and agreement contained in the deed, the landlords had granted lease for three years of a flat known as Flat No. 302 in the building called as the New Delhi House situated at 27, Bara Khamba Roard. New Delhi. A Sum of Rs. 53,460 had been paid as advance rent adjustable in twenty four equal instalments, i. e. Rs. 2,227. 50 per month. In addition to the monthly rent, the lessees had agreed to deposit and always keep in deposit six months rent towards security for due performance of the obligations of the lease and this amount was to be dealt with in the manner provided. It is apposite to reproduce the relevant clauses of the instrument of lease here :
"2 (2) To deposit and always keep in deposit with the landlords a sum of Rs. 26,730 (Rs. Twenty Six thousand seven hundred and thirty only) equal to six months rent towards security of the performance of the obligation of the Lessees. The deposit shall carry eight percent simple interest per annum. The Lessee shall be entitled to and the landlords shall be liable to pay the interest either in cash or by way of adjustments of the rent due yearly. The refund or the appropriation of the deposit shall be governed by the provisions contained in Clause 4 (3) and Clause 4 (6) hereof. (3) In case the rent hereby reserved or any part thereof, or any other outgoing be in arrears for twenty one days after becoming payable (whether legally demanded or not) or if any covenant on the Lessees part herein contained shall not be performed or observed, the Landlords, notwithstanding any right herein contained will be entitled to absolutely appropriate the deposit mentioned in the provisions contained in Clause 1 (2) hereinabove, and not liable to pay the interest thereon without prejudice to their any other right to take legal action. 4 (6) The deposit kept by the Lessees as mentioned in the provisions contained in Clause 1 (2) hereinabove shall be refunded to the Lessees within seven days after the Lessees have handed over the vacant possession with all its fixtures and fittings therein belonging to the landlords with the interest due against the receipt issued and signed by a person duly authorised in this behalf by the Lessee, unless under Clause 4 (3) hereinabove the said deposit has priorly been appropriated. "
( 3 ) THE Sub-Registrar, New Delhi before whom the instrument of lease was presented expressed the opinion that the instrument is chargeable to a stamp duty of Rs. 1,345 under Article 35 (c) of Schedule 1-A of the Indian Stamp Act, 1899 (hereinafter called the Act) and being deficiently stamped impounded it under section 33 of the Act and sent it in original under section 38 (2) of the Act to the Collector of Stamps, Delhi for necessary action under section 40 of the Act. The Collector of Stamps, Delhi heard the parties, on the dispute whether any duty was chargeable on the amount of the security deposit under Article 35 (c) of the Schedule 1-A of the Act, in addition to the duty paid on the rent reserved under Article 35 (a) (ii) and sustained the objections raised by the Sub-Registrar, New Delhi. The Collector of Stamps, New Delhi took a lenient view and directed the lessees to pay a penalty of Rs. 100 only in addition to the deficient stamp duty of Rs. 810. Aggrieved by the aforesaid order, the lessees agitated the matter in revision under section 56c2) of the Act betore the Chief Controlling Revenu
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