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- Anup P. Shah Chartered Accountant

22nd October 2013

PM’s Speech:

◦ Reduce Stamp Duty to limit Black Money in real estate

◦ SD a big obstacle to cleaning the mess in real estate

◦ Marginal Reduction in SD Rates

But more than compensated by Exponetial Increase in

Reckoner / Circle / Guideline / Jantri Rates

In Stamp Law, 2 Principles:

◦ There's many a Slip 'twixt the Cup and Lip!

◦ What the Right Hand Giveth, the Left Taketh Away!

© PRAVIN P. SHAH & CO. 2

© PRAVIN P. SHAH & CO. 3

2nd Highest Revenue Source

Over 20% CAGR in 4 years

Rs. cr.

Seventh Schedule to Constitution

◦ Entry # 91 in List I (Union) & # 63 in List II (State)

◦ Indian Stamp Act, 1899 applies to whole of India except

J&K

◦ Maharashtra Stamp Act, 1958 overrides ISA in Mah. for

63 Instruments covered by it

◦ For balance 9 Instruments – ISA applies

◦ Schedule I to MSA and ISA contains rates of SD for

diff. Instruments

© PRAVIN P. SHAH & CO. 4

Q. Is Stamp Duty leviable on any transaction?

◦ NO !!!

◦ SD is on an Instrument and not on a Transaction

◦ Law well settled by s.3 & several decisions

Maharashtra Sugar Mills (Bom)

Hindustan Lever (SC)

© PRAVIN P. SHAH & CO. 5

◦ Instrument Includes every Document

By which right or liability is created, transferred,

extinguished, recorded

Excludes ~ Cheque, Share Transfer Form, Debenture,

Insurance Policy, Promissory Note

(9 Items in Entry # 91 in Union List)

◦ Instruments must be read as they are worded

Nothing more Nothing Less

Maharashtra Sugar Mills Ltd (Bom)

© PRAVIN P. SHAH & CO. 6

© PRAVIN P. SHAH & CO., CAs 7

Instruments where SD levied on MV

Conveyance / Scheme of Merger, Demerger, Reconstruction

Gift Deed

Lease Deed / Leave n Licence > 60 months

Transfer of Lease / Tenancy

Surrender of Lease for consideration

Development Rights Agr.

Power of Attorney to sell property in certain cases

Exchange

Trust

© PRAVIN P. SHAH & CO., CAs 8

◦ Instruments where SD levied on MV (cont’d)

Partition Deed

Release Deed

Partnership Deed - if capital is contributed by way of property

Dissolution of Partnership/Retirement - if a partner takes

property on dissolution / Retirement (who did not bring in)

Settlement

◦ Applicable to both Immovable & Movable properties

◦ Whose Name on Stamp paper

Either Party to Instrument

◦ What Amount to Pay on

If Ad Valorem- FMV of Property

Else, Duty Specified in Article

© PRAVIN P. SHAH & CO. 9

Conveyance –

◦ Must be an Instrument by which property, estate or interest in

property is transferred or vested in any other person inter

vivos

◦ Property may be immovable or movable

◦ Must not be covered by any other Article

Rates for Movable: 3%

Rates for IP:

◦ Class A @ 5%; Class B @ 4%; and Class C @ 3%

◦ Slab Rate Concession for Flats removed

© PRAVIN P. SHAH & CO. 10

Type of Property: Movable or Immovable?

◦ Transfer of Movable Property by Delivery &

Possession without an Instrument - No SD?

◦ IP – Conveyance is a must for value > Rs. 100–

TOPA + Registration Act

◦ IP Defn. in MSA: Includes Land, attached to earth

◦ GC Act: Benefits arising out of land

© PRAVIN P. SHAH & CO. 11

Type of Property: Movable or Immovable?

◦ Embedded in earth

◦ Damage on removal from earth

◦ Sold as such after removal

◦ Fixed to land

◦ Examples:

Chemical Plant

Paper Plant

◦ Imp. SC Cases: Duncan Agro / Triveni Engg. / Sirpur

Paper Mills

© PRAVIN P. SHAH & CO. 12

Expl. I to Art. 25

◦ Agr. to Sell IP: Deemed Conveyance

Whether Possession given on Not

S/o when Conveyance subsequently executed

Only for IP and not for Movables

Expln. doesn’t apply for any purpose other than SD

S.54 of TOPA - Distinction between Agr. to Sell &

Conveyance

Agr. To Sell creates no Interest in the Property

© PRAVIN P. SHAH & CO. 13

Expl. I to Art. 25

2013 Amdt: S/o for Conveyance only if Regd. Agr. to Sell

Not if Unregistered?

Agr. to Sell in 2007: SD paid Rs. 10 lakh

Conveyance in 2013: SD based on 2013 RR: Rs. 30 lakhs

Excess Duty again payable?

Incorrect Assumption that Agr. To Sell must be registered

Naginbhai Desai v Taraben Sheth (Bom)

– Deeming Fiction applies only to MSA

– Registration not required for such Agreements to Sell

© PRAVIN P. SHAH & CO. 14

Deed of Confirmation

◦ Time Limit for Regn.: 8 months

◦ Documents executed earlier were registered today with

Deed of Confirmation

◦ 2013 Circular of IGR

If Registration delayed by more than 8 months – Pay SD

based on current FMV and not FMV prevailing when

originally executed

Conveyance of 2010: SD Rs. 5 lakhs

Registered today: SD Rs. 15 lakhs

Now pay differential duty also on Registration

© PRAVIN P. SHAH & CO. 15

16

◦ Lessee was in Garment Business

Restrictive covenant in Deed

◦ Business changed to IT Park

Covenant relaxed

Name changed to reflect new line

SD demanded as on a new lease deed

◦ Not a fresh lease deed - Fresh SD not payable

- Prasad Technology Park (SC) - 2005

Exchange of One Property for Another

◦ Barter Exchange

◦ Absence of Monetary Consideration

◦ SD leviable on property of Higher FMV

◦ Not twice

◦ Flat 105 (RR Value Rs. 1 cr.) exchanged with Flat 205

(RR Value Rs. 2 cr.) through one Deed of Exchange

SD @ 5% on Rs. 2 cr. on Deed = Rs. 10 lakhs

© PRAVIN P. SHAH & CO. 17

© PRAVIN P. SHAH & CO. 18

Lease Tenure Duty

Up to 5 yrs 0.5% of FMV of property

5 – 10 yrs 1.25% of FMV of property

10-29 yrs 2.5% of FMV of property

29 yrs+ 4.5% of FMV of property

The above rates are for Class A properties. For Class B & C Properties,

there is a reduction of 20% & 40% respectively

Monthly Tenancy = SD as on a Perpetual Lease

If no definite term for lease & terminable by Notice = Perpetual

-

Earlier differential SD on Transfer of Lease & Transfer of

Tenancy

◦ Transfer of Tenancy ~ Concessional SD

◦ In Law, no difference between Lease & Tenancy

◦ Since 2011, position neutralised for Trf. of Tenancy

Residential Prop. < 300 sft. – Concessional SD

Larger Prop. + Non-Res. Prop. – SD as on Conveyance

◦ Trf. of Lease – SD as on Conveyance

© PRAVIN P. SHAH & CO. 19

© PRAVIN P. SHAH & CO. 20

Tenure (months) Stamp Duty

Not exceeding 60

mts. with or without

renewal

0.25% of Total of:

• Licence Fees / Rent

• Non-refundable Security Deposit / Premium

• Interest @ 10% on Security Deposit

60 mts. Same as Lease Deed

Lease v Licence Distinction Imp. (up to 6 mts.)

• No interest in land in case of Licence

• SC decisions – ICICI; Associated Hotels; Dunlop; RN Kapoor

◦ Instruments executed outside Mah.

Relating to property situate in Mah.

Instrument or even Copy thereof which is received in Mah.

Liable to Differential SD

Antifriction Bearing Corp. (Bom)

Imm. Property in Gujarat

Debenture Trust Deed Stamped in Gujarat

Regd. Office in Mumbai so copy lodged with RoC of Mumbai

Held, Copy liable to difference in SD of Mah. over Gujarat

© PRAVIN P. SHAH & CO. 21

SD is an important factor in Bus. Rest.

Can often make or mar a decision which

otherwise makes business sense

◦ Jindal Merger converted into Reverse Merger due to

heavy SD

Indirect Tax considerations sometimes prevail

over Direct Tax considerations

© PRAVIN P. SHAH & CO. 22

SD on Merger is an evergreen issue

MSA Conveyance defn. – s.2(g) Includes

◦ Every Instrument,

◦ Every Decree / Order of Civil Court

◦ Every HC Order u/s. 394 of Cos Act or RBI Order

under Banking Act for the amalgamation or

reconstruction of Cos.

© PRAVIN P. SHAH & CO. 23

◦ Art. 25 Conveyance

10% of Market Value of shs issued + consideration

But not exceeding higher of:

5% of Market Value of Immovable Property of Transferor located

in Maharashtra; or

0.7% of Market Value of shares issued

Upper limit if 5% of MV of IP > 10% of MV of shs

For Market Value of Imm. Property –

Refer to Ready Reckoner Value

◦ SD also on issue of Certificate @ 0.1% of Amount

© PRAVIN P. SHAH & CO. 24

Details Scenarios

1 2 3

FMV of Shares 1000 1500 1700

FMV of Imm. Prop. In Mah. 3000 500 120

10% of FMV of Shares 100 150 170

5% of Imm. Prop. 150 25 6

0.7% of FMV of Shares 7 10.5 11.9

Stamp Duty 100 25 11.9

© PRAVIN P. SHAH & CO. 25

◦ Art. 25 Conveyance

For Market Value of Shares :

If Transferee listed & quoted for Trading on a St. Exch. :

FMV as on Appointed Date in Scheme or

Date of Court Order

Transferee Not listed &/or listed Not quoted for Trading:

FMV of Transferor’s Shares or

FMV as determined by Collector

© PRAVIN P. SHAH & CO. 26

◦ For Listed Transferee Cos.

What is meant by “quoted for trading”?

What is meant by “trading”?

What if no quotations on Appointed Date?

◦ For Unlisted Transferee Cos.

Why valuation is based on Transferor Co’s Value

Presumption : Transferor Co. is listed

Else : Valuation by Collector only

Q. Is Collector competent to value Shares? Basis?

Swap Ratio by a CA not relevant?

© PRAVIN P. SHAH & CO. 27

◦ Hindustan Lever (SC)

Under MSA – did not deal with

ISA expressly

SD payable even if no amdt to

MSA

◦ Madhu Intra Ltd. (Cal)

Under ISA – WB – 2 Member

Overruled Single J. in Gemini

Silk

HLL (SC) not cited or considered

No SD on Order unless express

provision like under MSA

All people who paid SD entitled

to refund

◦ Delhi Towers (Del)

Decision under ISA ~ Delhi

Considered all decisions

Order u/s.394 is a conveyance

Liable to stamp duty

◦ Hero Motors (All)

Order u/s.394 a conveyance

Liable to stamp duty

◦ ITP Ltd (Cal)

Division Bench

Considered all decisions

Held Madhu did not consider HLL

SD applicable even under ISA in

West Bengal

© PRAVIN P. SHAH & CO. 28

◦ Is SD payable under ISA on Mergers in States where

no express provision?

◦ Now Unanimous Yes

◦ Amendments done / under way in several States: TN,

West Bengal

© PRAVIN P. SHAH & CO. 29

◦ Li Taka Pharmaceuticals

Measure of SD is on valuation of property

What is transferred in a Merger is a Going Concern and not

individual A & L

Going Concern value is reflected in

Share Exchange Ratio or Assets (-) Liabilities

Valuation by Stamp Office must be on the basis of price of

shares allotted + other consideration paid AND NOT Values

of Individual A & L

© PRAVIN P. SHAH & CO. 30

◦ Merger of WOS into Holdco

No Shares issued on merger

Charging Provision under Art.25(da) fails

10% of FMV of Shares = NIL

Planning?

© PRAVIN P. SHAH & CO. 31

◦ Cos. situated in 2 diff. States

Separate Court Orders must be obtained

Calico Company (Bom)

Which Stamp Act applies?

Both States or that State which transfers the Assets & Liabilities

– correctly speaking Transferee Co.’s State

Avoidance of Double Taxation in all Stamp Acts

Duty paid in one State on an instrument allowed as a set-off

against Duty payable in another State on same instrument

© PRAVIN P. SHAH & CO. 32

◦ Cos. in Delhi but Property in Mumbai

SD payable as applicable in Delhi

◦ Instrument now recd. in Mumbai

SD payable as if executed in Mumbai

Set-off Provisions applicable

Duty already paid in Delhi allowed as a Set-off against

Duty payable in Mumbai

© PRAVIN P. SHAH & CO. 33

Demerger / Reconstruction

◦ Would cover all cases of Arrangement, Compromise,

etc. u/ss. 391 – 394

◦ Position, Rates same as Merger

◦ Express Amdt. made in MSA in 2002

◦ Cases discussed for Merger pari passu apply

◦ In Rajasthan, amdt for Merger but not for Demerger –

Q. Concession available?

© PRAVIN P. SHAH & CO. 34

Slump Sale / Assets Sale

◦ Conveyance under MSA & ISA

◦ Bifurcate assets into Immovable & Movable

◦ Bifurcation for SD purposes does not negate IT Benefit –

Expln. 2 to s.2(42C) of IT Act

◦ Under MSA - SD on Movables @ 3%

◦ Under MSA - SD on Immovables @ 3-5%

◦ Registrar’s demand in some cases

© PRAVIN P. SHAH & CO. 35

◦ Slump Sale: Sale of Undertaking as a Going Concern

◦ SD only on Net Market Value of Undertaking – not on

Gross Value of Assets: Li Taka Pharmaceuticals (Bom)

Sale of Und. consisting of Land & Liabilities

Land’s RR Value: Rs. 10 cr. + Other Asset Rs. 1 cr. = Rs.11 cr.

Liabilities taken over: Rs. 10 cr.

Consideration: Rs. 1 cr.

SD adjudicated on Agr. @ 5%: Rs. 5 lakhs

5% on Rs. 1 cr. NOT on Rs. 10 cr.

© PRAVIN P. SHAH & CO. 36

Slump Sale / Asset Sale

◦ Under ISA: By a 1937 Notification - No SD if transfer:

Between Transferor owning at least 90% of Transferee Co.;

Between Parent Co. & 90%+ Sub; or

Two 90%+ Subs of one Parent Co.

◦ Validity of 1937 Notification?

◦ Valid in Maharashtra?

© PRAVIN P. SHAH & CO. 37

SSA / SHA-cum-SSA

◦ Executed by PEs / VCFs / for FDI

◦ Investor agrees to invest an amount for a certain % stake

CPs / Covenants / R&Ws

◦ Liable to be stamped

@ 0.1% of contract amount – if below Rs. 10 lakhs

@ 0.25% of contract amount – if above Rs. 10 lakhs

© PRAVIN P. SHAH & CO. 38

◦ Articles of Association

0.2% of Share Capital – Max. Rs. 50 lakhs

At every increase in Authorised Capital

◦ Issue of Share Certificate:

0.1% of the Value of the Share

Even includes Premium Amount

Rs 1 lakh + Rs 150 lakhs premium SD = Rs. 15,100

© PRAVIN P. SHAH & CO. 39

Takeover / Transfer of Shares

◦ SD covered by ISA and not MSA

◦ SD under ISA @ 0.25% of consideration on Share Trf Deed

◦ No SD if shares in Demat form

◦ Share Purchase Agreement

Art. 5(h)(A)(iv): SD @ 0.25% on Agr. creating Obligation / Right /

Interest – applies?

Art. 5(h)(B) : Rs. 100 if Agr. Not otherwise provided for – applies?

Does it amount to stamping the same instrument twice?

© PRAVIN P. SHAH & CO. 40

Pvt. Co.’s only Asset is Real Estate

◦ Sale of 100% Shares

◦ SD on Conveyance @ 5% or Shares @ 0.25%?

Can Revenue probe substance by disregarding Legal

Form?

Does SH have interest in Company’s assets?

© PRAVIN P. SHAH & CO. 41

◦ Admission

If share in firm is bought in cash > Rs.50,000 = 1% subject

to maximum of Rs. 5,000

If share in firm is bought in property =

Same as Conveyance on MV of property

◦ Retirement / Dissolution

If retiring partner taking property is not same as introducing

partner = Conveyance (min. Rs. 100)

Else = Rs. 200

© PRAVIN P. SHAH & CO. 42

◦ Admission-cum-retirement deed

Duty as on an Admission or Retirement or Both

Duty on Gross Amount by Incoming Partner or Net of

Withdrawals by Outgoing Partner

◦ What if Deed of AOP?

Covered under Art.47?

Art. 25 - Conveyance or Art 5 @ 0.2%?

© PRAVIN P. SHAH & CO. 43

◦ LLPs very popular

◦ LLP: Owner contributes land &

Builder contributes finance + labour

◦ SD under Art.5 or 25 or 47

5% or 0.2% or Rs. 100

Is it a Partnership?

Is it a Conveyance?

Is it an Agreement?

© PRAVIN P. SHAH & CO. 44

Instrument – Art 46

◦ Co-owners separate of property divide it

◦ Includes Arbitration Award ordering Partition

◦ If Distribution amongst other than Co-owners / those

not having an interest in property – Not Partition

Could be a Settlement

Father distributing self-acquired properties amongst 4

Daughters – Settlement not Partition

© PRAVIN P. SHAH & CO. 45

◦ 2% of the MV of Separated Shares of property

◦ “Separated Share” meaning:

Largest share remaining after partition is that from which other

shares are separated

4 Members: 3/4th to Father and balance 1/4th split between 3

members - Duty on 3/4th or 1/4th

If all are equal shares = subtract any one share & SD on balance

Practical Reality

© PRAVIN P. SHAH & CO. 46

◦ Not a Will

◦ For distributing property amongst his Family / Others

for whom he provides / dependants

◦ SD as on a Conveyance (3-5%) on sum settled or

FMV of property settled

◦ Settlement v Gift: If intention is to make provision for

Grantee then Settlement – very thin line

© PRAVIN P. SHAH & CO. 47

◦ All Gifts : Same as Conveyance

◦ If Gifts to Family : Lower of Conv. Rate or 2% of

FMV of the property gifted

Family : Spouse, Sibling, Lineal Ascendant / Descendant

of the Donor – Not as wide as s.6(1) of Companies Act or

s.56 of the Income Tax Act

Definition given in MSA is a restrictive definition

When definition is restricted to certain relations only, then

same cannot be extended to cover those not specified, e.g.,

cousins.

© PRAVIN P. SHAH & CO. 48

◦ Lineal Ascendant / Descendant : Not defined

Relatives in a straight line

Grandfather, Father, Son & Downwards

Q. Grandmother, Mother & Daughter

Grandmother, Mother & Son

- Are they Lineal Ascendants / Descendants?

What about adopted children?

No clarity

© PRAVIN P. SHAH & CO. 49

◦ Relatives covered under s.56 but not MSA

Spouses of Siblings; Uncles & Aunts; Spouses of one’s

Lineal Ascendant / Descendant; Lineal Ascendant

/Descendant of Spouse & their Spouses

◦ Relatives covered by Cos Act but not MSA

Spouses of children & grandchildren and express

provision for step-brothers and step-sisters

© PRAVIN P. SHAH & CO. 50

◦ In restructuring of family owned and run businesses

execution of a Release Deed was a popular mode

◦ One co-owner renounces his share in favour of

another co-owner

◦ Share of other co-owners in the property enlarged

◦ Stamp duty friendly earlier

Earlier SD of Rs. 200 only

Lesser SD compared to a Gift Deed

© PRAVIN P. SHAH & CO. 51

Asha K Bajaj (Bom)

◦ Mother, son, daughter: Co-owners

◦ Release Deed in favour of Mother by children

Shailesh Harilal Poonatar (Bom)

◦ Sister and brother were co-owners in mother’s property

received by them under her will

◦ Sister released her interest in favour of brother by a Release

deed

© PRAVIN P. SHAH & CO. 52

◦ To plug this loophole: Amendments to Art.52:

SD @ 5% on MV of property released

If release of ancestral property to siblings / parents / spouse /

children / grand-children / their legal heirs – SD of Rs. 200 only

Must be to defined relatives only – different than Gift relatives

Q. What is “ancestral property”?

Property received from sons –ancestral property?

Property inherited by male from father / grandfather /great grand

father – ancestral property?

© PRAVIN P. SHAH & CO. 53

◦ Actionable Claims :

Claim to any debt which is not secured or

Beneficial Interest in movable property

E.g., : Loans, Right under a Contract

◦ S.130 of TP Act : Actionable Claims can be

transferred only by written document

◦ SD as on a Conveyance of Movables @ 3% of

Consideration value

© PRAVIN P. SHAH & CO. 54

◦ Firm Co. u/s. 565 of Cos. Act (“Part IX”)

◦ Transfer of Undertaking from Firm to Co.?

Statutory provision – ROC must Incorporate Co.

Separate Conveyance reqd.?

Statutory vesting of property

SD payable on such Conversion?

Also applies to Conversion of Firm / Co. into LLP

© PRAVIN P. SHAH & CO. 55

No SD on Wills

FS MOU

◦ If only records what has taken place or contains terms & recitals of FS

– No Regn.

◦ If brings about FS / creates interest in IP– Regn.

◦ Imp. SC Cases: Kale / Tek Bahadur / Maturi Pulliah

◦ On same analogy SD should also not be payable

◦ CCRA v Abdul Karim Ebrahim Balwa

Doc. recording fact of FS and manner of Settlement

Only a record of Fact – No SD as on Agr. / Conveyance / Partition or

Settlement

◦ Practical reality??

© PRAVIN P. SHAH & CO. 56

◦ MV Concept

Wef 1980, SD on several Inst. is on FMV of property

◦ SD is on Market Value - Higher of :

FMV :

Price which such property would have fetched

if sold in the open market

on the date of execution of the instrument;

OR

Consideration stated in the instrument

© PRAVIN P. SHAH & CO. 58

Market Value of Property

◦ Ready Reckoner for Mumbai (Jan-Dec)

RR divides Mumbai City / Suburbs

various Village Nos. and Names

Village Zones & Sub-Zones

Sub-Zone has different CTS Nos. for various properties.

◦ RR not applicable if Agr. Consideration ≤ 10% of RR

RR: 250,000/m2 & Agr: 225,000/m2 or Higher

© PRAVIN P. SHAH & CO. 59

Market Value of Property

Using RR for a Property – 9 Steps

1. Division / Village No. & Name

2. Zone & Sub-Zone

3. CTS No. of Land

4. Type, e.g., Residential, Office, etc.

5. Built-up Area / BUA (BUA = 1.2 * Carpet Area)

Not for Carpet Area or Super Built-up Area

6. MV Rate for Property (In Sq. Mtr. = 10.764 Sq. Ft.)

7. Special Factors

8. Prescribed + / - Adjustments to Rate

9. MV for SD = Adj. Rate * BUA

© PRAVIN P. SHAH & CO. 60

Market Value of Property

◦ Special Factors : Depreciation

On old buildings as per age of structure

Ranging from Nil for 2 year old structure to 70% for 60

years + structure

Proof of Age must : OC / BCC, Municipal Assessment,

Electric Bill / Telephone Bill

© PRAVIN P. SHAH & CO. 61

Market Value of Property

© PRAVIN P. SHAH & CO., CAs 62

◦ Inherent problems of RR Valuation

RR does not consider :

Differences in Buildings located within the Same Area ~ condition

of buildings, amenities, surroundings, view, proximity to slums,

etc.

Differences between Flats in the Same Building ~ condition of

flats, higher floor premium, sea view, front and back flats, etc.

Distress sale

Impact of Regulations ~ CRZ, Forest Land, Cessed Property

◦ RR for 2013:

Several Properties fall in more than one Zone of the

same Village

Which Rate should be adopted – Higher or Lower?

E.g., Colaba – CTS 103

Zone 1/2 – Rs. 5,30,800/ sq.mt

Zone 1/6 – Rs. 2,60,600 / sq.mt

Difference for 1 sq. mt = Rs. 2,70,200 – Over 100% Increase

Difference in Duty @ 5% = Rs. 13,510 per sq. mt.?

© PRAVIN P. SHAH & CO. 63

◦ J. Jayalalitha (SC)

RR value not final

Prima facie basis for FMV

Tax payer can prove actual FMV

Guideline Value not the last word

RR value not sacrosanct but only a

factor to be considered

Jawajee Nagnatham, (SC)

SD RR has no statutory

base or force.

Can’t form foundation to

determine FMV

Comparable sale

instances possessing

same / similar

advantageous features

furnish basis to determine

FMV

© PRAVIN P. SHAH & CO., CAs 64

© PRAVIN P. SHAH & CO., CAs 65

◦ Mohabir Singh (SC)

Valuation Guidelines only serve as prima facie material

Property value varies from place to place & even from locality to

locality in the same place

No absolute higher / minimum value can be predetermined

Value would depend upon prevailing prices in the locality in

which land is situated

Prasadnagar Co-op Society (Bom)

RR sheerly are guidelines & declaration of "prima

facie" FMV and nothing more

© PRAVIN P. SHAH & CO., CAs 66

Ponnavolu Sasidar (AP)

Registrar can’t take a stand that he will only look at RR and

nothing more

Chamkaur Singh (P&H)

RR Guidelines of ISA are totally without jurisdiction & void

Fin. Min. Speech - F. B. (No.2) 1998

SD Values are Arbitrary & do not reflect the true MV - bona fide

transactions could be hit

◦ Chandra Bhan Agarwal (Kol ITAT) u/s.50C

FMV = price it would ordinarily fetch on sale in the open market

Best price which vendor can reasonably obtain

All factors having any depressing or appreciative effect on the

value of property have to be considered

Value can’t be stated in abstract form and varies from time to time

Factors to consider ~ locality, situation, general appearance in the

area, availability of shopping and marketing facilities, conditions of

public ways, transportation, availability of utilities, etc.

PRAVIN P. SHAH & CO., CAs 67

Seller: Higher Tax u/ss.50C

or 43CA

Buyer : Deemed Tax

u/s. 56(2)(vii)(b)

Buyer: Higher Stamp Duty

Higher VAT in 1%

Composition Scheme

PRAVIN P. SHAH & CO., CAs 68

© PRAVIN P. SHAH & CO. 69

SD

Value

SD Payment

Seller’s Tax –

S.50C / S.43CA

VAT Property

Tax

Buyer’s Tax –

S.56(2)

◦ Implications of Unstamped Instrument

Can be impounded by Public Officers, e.g., Income Tax

Officers, ROC, etc.

Inadmissible in evidence, cannot be acted upon by a

Public Office, cannot be registered

Creates / affects no right, title or interest in property

Penalty of 2% p.m. Max = Twice the Duty Amount

© PRAVIN P. SHAH & CO. 70

Max. validity of Stamp Paper : 6 months?

◦ Yes, under MSA

◦ No provision in ISA

◦ S.54 of ISA

Holder of Paper can seek refund of duty within 6 months of date of

instrument

6 mts period is for refund & not for validity

No impediment to a paper being purchased more than 6 mts prior to

date of instrument

- Thiru Pillai (SC) under ISA

© PRAVIN P. SHAH & CO. 71

© PRAVIN P. SHAH & CO. 72