Paras Nath vs State Of U.P. And Others
2019 Latest Caselaw 6270 ALL

HIGH COURT OF JUDICATURE AT ALLAHABAD
 
 

Court No. - 6
 

 
Case :- WRIT - C No. - 96 of 2004
 

 
Petitioner :- Paras Nath
 
Respondent :- State Of U.P. And Others
 
Counsel for Petitioner :- Anil Kumar Mishra
 
Counsel for Respondent :- C.S.C.
 

 
Hon'ble Yashwant Varma,J.

Heard Sri Anil Kumar Mishra, learned counsel for the petitioner and Sri Sanjay Goswami, for the State respondents.

This petition impugns the orders passed by the respondents in proceedings initiated under the provisions of the Indian Stamp Act, 1899 [hereinafter referred to as the "1899 Act"]. In terms of the orders impugned, the respondents have proceeded to levy stamp duty on a notice of surrender which was issued by a tenant to the landlord/petitioner. The petitioner is stated to be the owner of certain land not covered by the provisions of the U.P. Zamindari Abolition and Land Reforms Act, 1950 [in common parlance and in revenue records referred to as "Non-Z.A. land"]. He is stated to have given the same on lease to a tenant. That tenant, on 2 January 1998, issued a notice evidencing his desire to surrender the lease. The notice was also accompanied by a declaration set out on paper embossed with stamp of Rs. 10. The respondents appear to have taken the view that the aforesaid notice was liable to be treated as an "instrument" covered under the provisions of the 1899 Act and consequently subjected to stamp duty since according to them, it evidenced a transfer of lease interest in immovable property. Pursuant to the proceedings so drawn the petitioner was put to notice and after considering the defense which was set up, the impugned order came to be passed by the Stamp Collector on 23 April 2003. That order has been affirmed in appeal by the competent authority in terms of its judgment rendered on 6 October 2003. In terms of the orders impugned, the respondents have taken the view that the notice of surrender was liable to be registered under the provisions of the Registration Act, 1908 and that the petitioner deliberately did not place the same before the registering authorities in order to evade payment of stamp duty. They have proceeded to treat the instrument as one of conveyance and held it liable to be subjected to duty under the 1899 Act computed on the basis of the market value of the property comprised in the instrument.

Sri Mishra, learned counsel for the petitioner, has contended that the notice was not an instrument as defined under the Act and that since it was never presented for registration, no duty was leviable thereon. It was submitted that the tenancy was created under the provisions of the United Provinces Tenancy Act, 1939 [hereinafter referred to as the "1939 Act"]. Under the provisions of that enactment according to the learned counsel, a transfer or surrender of lease interest was not liable to be registered since such a transfer or surrender could have been affected even orally. Sri Mishra submits that the document in question has wrongly been treated as a conveyance and subjected to duty based upon the market value of the property comprised therein.

Rebutting these contentions, Sri Goswami submits that the notice of transfer as drawn clearly falls within the ambit of the expression "instrument" as defined under the 1899 Act since it clearly proceeds to record the factum of surrender and consequential extinguishment of the rights which vested in the tenant in favor of the petitioner. Sri Goswami submits that since the instrument purported to record an extinguishment of rights which were created in favour of the tenant it clearly fell within the meaning of the expression "instrument" as defined by Section 2(14) of the 1899 Act. Insofar as the issue of chargeability of the instrument is concerned, Sri Goswami fairly concedes that even if the notice be treated as an instrument it would at best be liable to tax in accordance with Article 61 of Schedule I-B of the 1899 Act and not as a conveyance. Article 61, it becomes relevant to note deals with the issue of duty payable on a surrender of lease. To this extent, Sri Goswami submits that the view as taken by the respondents would not merit acceptance.

Having considered the rival submissions, the Court notes that undisputedly the notice that was issued by the hereditary tenant in terms of the provisions made in the 1939 Act purported to record the extinguishment of rights that had been conferred by the petitioner on that tenant. The notice itself was referable to the provisions made in Section 82 of the 1939 Act. While it is true that such a surrender could also be made orally, as has been contended by Sri Mishra, that issue need not detain this Court since admittedly in the facts of this case a written notice was issued by the tenant embodying his intent to surrender the lease interest which was created.

Section 2 (14) of the 1899 Act, defines the expression instrument to include every document or record created or maintained by which any "right or liability, is, or purports to be, created, transferred, limited, extended, extinguished or recorded." Firstly, it must be recognised as an inclusive definition that must be accorded an expansive meaning. Secondly, any document by which a right or liability is "extinguished" or "recorded" would be covered within the meaning of that expression. The notice reduced in writing purports to record the relinquishment of rights and interests conferred by the petitioner on a hereditary-tenant. The relinquishment of rights by that tenant came to be recorded in the instrument which consequently constituted the repository of the bargain between the parties. It came to be a record of the extinguishment of a right which stood conferred on the hereditary tenant. It would, therefore, clearly be an instrument as defined under the 1899 Act.

The Court also finds itself unable to sustain the submission of Sri Mishra that the instrument was not chargeable to duty since it had never been presented for registration. It is by now well settled that the moment an instrument comes to be executed, it becomes chargeable to duty under the 1899 Act. This clearly flows from a conjoint reading of Sections 2 (12), 2 (14), 3 and 17 of the 1899 Act. An instrument becomes liable to tax under the 1899 Act the moment it comes to be executed. This flows plainly from section 17 of the 1899 Act when it provides all instruments chargeable with duty and executed by any person in India, to be stamped before or at the time of execution. It is thus manifest that the jurisdictional prerequisite for levy of duty under the 1899 Act is the execution of an instrument. Consequently, it must be held that the moment an instrument as defined under the 1899 Act comes to be made, signed or a signature put thereon, it would become chargeable to duty in terms of the provisions of Sections 3 and 17 of that Act irrespective of whether it is submitted for registration or not.

That takes the Court to the issue of chargeability of the instrument. Undisputedly, it would amount to a "Surrender of Lease" as considered and provisioned for in Article 61 of Schedule I-B. Before this Court, it has been conceded by the State respondents that the instrument, in any case, cannot be treated as a conveyance and consequently stamp duty could not have been levied on the basis of the purported market value of the property comprised in the instrument. In the case of a surrender of a lease, the instrument is liable to be charged with stamp duty payable on a bond for a consideration of Rs.1,000/- or the duty with which such lease is chargeable "whichever is less". Although Sri Goswami, learned counsel contended that a hereditary tenant holds the property in perpetuity with transferable rights, the Court notes that this would not make a "Surrender of Lease" liable to be subjected to duty in excess of that payable on a bond of Rs. 1000. This since the entry itself restricts the quantum of duty to the lesser of the two measures spelt out therein. Consequently irrespective of what may have been the tenure of the original lease, it would remain restricted to duty payable on a Bond for Rs. 1000. In that view of the matter, even if, the instrument were treated to be a lease in perpetuity, the stamp duty payable thereon would remain restricted to that payable on a Bond for a consideration of Rs.1,000/-.

In view of the above, the writ petition is partly allowed. The view taken by the respondents in respect of the chargeability of the notice to duty under the Indian Stamp Act, 1899 is upheld. However, the impugned orders insofar as they treat the instrument to be a conveyance are untenable and consequently they shall, to that extent, stand set aside. The petitioner is, in consequence, held liable to pay duty on the notice of surrender in accordance with the rates prescribed in Article 61 of Schedule 1-B of the 1899 Act and in light of the observations made hereinabove.

The matter shall stand remanded to the Collector who shall compute the stamp duty payable afresh and in light of the observations entered hereinabove. The petitioner shall be liable to pay the duty so adjudged within a period of two months from the date of communication of the decision of the Collector. Any sums paid or recovered from the petitioners in the interregnum pursuant to the impugned orders shall be taken into consideration while computing the liability of the petitioner afresh.

Order Date: - 1.8.2019

Arun K. Singh

(Yashwant Varma, J.)