High court stamps out unfair duty on resale of old properties

The stamp duty alone would have cost over a crore for the posh apartment in Tahnee Heights Cooperative Housing Society on Napean Sea Road

There's good news for Mumbaikars who've been eyeing old properties, but stayed away because of prohibitive stamp duty rates. In a landmark judgment, the Bombay High Court has put an end to the age-old practice of collecting stamp duty retrospectively on resale of old properties and imposing hefty penalty for past sale agreements that are now regarded as insufficiently stamped or not registered.

The high court was hearing a case regarding the resale of a posh 3,300-sq-feet (carpet area) apartment in Tahnee Heights Cooperative Housing Society at Napean Sea Road. The last time this apartment was sold was in 1979, when the owners had paid a stamp duty of Rs 10. This was in the good old days when an agreement could be formalised with stamp duty of Rs 5 or Rs 10.

Then, in December 1985, an amendment to the Maharashtra Stamp Act spelled out that stamp duty had to be paid at the ready reckoner rate declared every year by the government. Following this, the government even began to impose stamp duty retrospectively on resale of old properties for which nominal duty had been paid decades ago.

The case
Cut to November 2018, when the Napean Sea apartment was auctioned for R38 crore. The collector of stamps refused to register the new sale agreement unless stamp duty was paid on the earlier chain agreement, and penalty was paid for non-registration in 1979. The stamp duty alone would have amounted to nearly Rs 2 crore, if paid at the ready reckoner rate. The Sub Registrar of Assurances also declined to register the new buyer, Vijay Jindal's transfer document dated November 14, 2018, on the grounds that the anterior title documents to this very flat were insufficiently stamped.

Jindal, as he had bought the property through a Court Receiver auction, had approached the HC to get directives that the seller should bear the previous stamp duty and penalty. While one of the original owners, Lajwanti Godhwani, agreed, the other former co-owners refused. The high court was hearing their dispute. According to Advocate Ajay Panicker, who represented the plaintiff Lajwanti Godhwani and Others, "The flat located on the 19th floor of Tahnee Heights Cooperative Housing Society, measuring over 3,300 sq feet belonged to my client, who was a co-owner. Our clients' late father, with others, had purchased this flat in 1979, on a stamp duty of R10. It was not registered either."

Court order
What sets this case apart from other such disputes, however, is the judge's game-changing order: "Stamp is attracted by the instrument, not the underlying transaction, and not by any historical narrative in the instrument."

What this means is that stamp duty should not be calculated retrospectively for a property that was sold at a time when the law was different. Justice Gautam Patel, in his order on December 13, stated: "As regards the question of stamp duty on antecedent documents, there is no clear or well-considered response from that office.

Neither the officer present or Himanshu Takke, Assistant Government Pleader (AGP), is able to state under what provision of law old documents prior to the amendments to the Stamp Act could be legitimately or lawfully said to be "unstamped" or even insufficiently stamped if, according to the law as it stood at that historical point in time, the document itself was not liable to stamp in the first place."

The court further stated, "Takke agrees that any such assessment would have to be on the basis of the law as it stood at that time of the older transactions not at today's rates."

Property expert and advocate says many will benefit from HC order
Advocate Vinod Sampat, from the Stamp Duty and Registration Payers Association, said, "This is a good judgment which has brought clarity and many resale flat purchasers will benefit."

He added, "Stamp duty is levied on the market value of the property calculated on built-up area. In fact it is a settled position that the ratio of carpet and built-up area will vary from building to building, even if constructed by the same builder, but stamp authorities refuse to accept the same fact and add 20 per cent to carpet area to arrive at the built-up area."

"Section 3 of the Maharashtra Stamp Act stipulates that it is the instrument which is liable for stamp duty. I as a buyer, am executing an agreement with my seller, and I can only be held liable on that transaction. The authorities should recover stamp duty from the parties who had executed the document then," the lawyer said.

'Landmark ruling'
Advocate Ajay Panicker who represented one of the original owners of the apartment, said: "This is a landmark judgment by Justice Gautam Patel, as lakhs of old flats agreements are neither sufficiently stamped nor registered, and when the owners resell the flat, the collector of stamps, charges at the current rate and also imposes a penalty. With this order, this practice will come to an end."

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