Report No. 67
The Indian Stamp Act, 1899
Genesis of the Report
1.1. Importance of the Act.-
This Report relates to the Indian Stamp Act, 1899 which is a fiscal enactment of daily importance to the citizens. A proposal for taking up the Act for revision was announced by the Law Commission soon after its initial constitution,1 but, somehow, this work was not taken up because the Commission was busy with other subjects. When the Commission was reconstituted in 1971, its terms of reference were widened, and revision of laws in the light of directive principles was included within those terms.
Having dealt with several laws which were of importance from the point of view of directive principles, the Commission took up the Stamp Act. Meanwhile, on several occasions, suggestions have been received by the Commission from various sources, for considering amendments in specific sections of the Act. Those suggestions have been duly taken into account, as also the replies received to our Questionnaire, in making the recommendations contained in the succeeding Chapters.
1. F. 2.9/56/L.C. II (Notes) (Note dated 14th May, 1957); F. 3(57)L.C. II, S. No. 1.
1.2. Nature of Stamp laws.-Of the corresponding English Act, it has been stated by one reviewer1-
"Of all the branches of revenue law, none, in the experience of your reviewer, is one-half so dull as stamp duties; and there is none on which it is more difficult to express an opinion with any degree of certainty. The reason in each case is that this subject has no underlying principles; it springs basically from the Schedule to the Stamp Act, 1891, which was accurately described by Lord Reid in Inland Revenue Commissioners v. Henry Ansbacher and Co., 1963 AC 191 (204), as 'a mere conglomeration of unco-ordinated provisions."'
This aspect shows the difficulty of revising the Act.
1. Book review of Farrand Stamp duties for the Conveyancer, (1963), 107 Solicitors' Journal, 849.
1.3. Preliminary aspects.-
Before we proceed to mention the broad lines on which revision of the Act could be usefully considered, we think it necessary to deal with certain preliminary questions, not only by way of introduction but also in order to draw attention to the constitutional position concerning legislation in respect of stamp duties, and other aspects of importance.1
1. See discussion as to 'lines of-revision', infra. 67.7
1.3A. Nature of Stamp Duties.-Stamp duties, as is evident from the Act, are paid by affixing a stamp, either impressed, or, in some cases, adhesive, to the instrument required to be stamped. Under section 3, it is the instrument which is chargeable with duty. It follows, therefore, that if a legal transaction can be The Indian Stamp Act, 1899 67.307 effected orally, no stamp is required, because there is nothing to which the stamp can be affixed, and because the charging section levies a duty on an instrument only. In general, therefore, it would be correct to say that "the thing which is made liable to duty is an instrument",-as was observed with deference to the [English law by Lord Esher MISR.1 A similar view was expressed by Rowlatt, J.- a distinguished authority in taxation law2 and has been reiterated in the House of Lords.3
This is what Rowlatt J. observed:-
"The Stamp Act deals not with the commercial effect of the transaction, but deals with the vehicles; and you look at the vehicle to see what it does."
In the House of Lords, it was stated:-
"Yet the law with regard to liability to stamp duty is clear enough. The duty is charged upon instruments, if they exist and come within any of the categories prescribed by the Act."
"It is not charged upon transactions. Thus, property such as chattels, which by law pass on delivery, can be transferred from one owner to another without attracting duty. Again, though an agreement for sale may be chargeable ad valorem, since the Act has so required, an oral agreement for the sale of property involves no charge to duty because no instrument is brought into existence to effect or to record it.4"
1. Internal Revenue Commissioner v. Angus, (1889) 23 QBD 57%(589).
2. (1933) 1 KB 173 (179): 148 LT 164 (166).
3. 1960 AC 206 (227, 231, 238): (1959) 3 WLR 898 (899, 904, 910); affirming (1958) 2 All ER 443.
4. (1957) 3 WLR 898 (901) (HL) per Lord Radcliffe.
1.4. Charging provision-Interpretation of.-
It is also well-established that if the charging provision does not, on a proper construction, apply to the particular instrument, then duty is not leviable.1 At the same time, if the charging provision applies, then duty is leviable unless, of course, the citizen can bring himself within a specific exception. About hundred and forty years ago, Taunton J., pointed out2 that "the law upon the subject of stamp is altogether a matter positivi juris. It involves nothing of principle or reason, but depends altogether upon the language of the Legislature."
1. Gurr v. Scuddy, 11 Exch 190 (191) (Lord Chief Baron Polloch).
2. Morley v. Hall, (1834) 2 Dowl 494 (499, 497).
1.4A. Sanction for the charging provision-Its relationship to judicial procedure.-
One of the major sanctions for ensuring that instruments are duly stamped, is the provision1 that an unstamped document is not to be admissible except in certain cases. It is well established also that if a document is, not admitted for want of stamp duty, secondary evidence of its contents-even where otherwise permissible under the law of evidence-cannot be given, and this shows the importance of the Stamp Act, not only as a measure of fiscal legislation but also in relation to judicial proceedings.
1. Section 35.
1.5. Charging and machinery provisions.-
Usually, legislation relating to stamp duties has to provide for several matters of detail as well as of substance. It is not necessary at this stage to enumerate all those matters, or even to analyse them. But it would be useful to point out here that such legislation-as, indeed, any taxing statute-usually comprises two broad categories of provisions, namely, charging provisions and machinery provisions. The charging provisions lay down the charge of tax, while the machinery provisions create the machinery and lay down the procedure for the assessment, collection and refund of the tax. This distinction has not merely been of academic interest, because, under the Constitution,1 the legislative power is demarcated in terms of (a) rates of stamp duty, and (b) stamp duties. In the ensuing discussion, provisions relevant to stamp duties other than the rates of stamp duty will be referred to as machinery provisions, for the sake of convenience.
1. See infra.
Principles for the interpretation of stamp laws are broadly the same as that for the interpretation of other taxing statutes, namely, an ambiguity in a charging provision is ordinarily resolved in favour of the citizens, but where the citizen claims the benefit of an exemption, he has to bring himself within it. The major difficulty which the courts experience in construing the Stamp Act-apart from those attributable to defective drafting-can be said to arise out of the fact that often there is no rational principle forming the basis of the levy of a duty on a particular document or the levy of a higher rate of duty on a particular document in contrast with smaller duties levied on other analogous documents.
1.7. History of stamp duties.-
The idea of raising revenue for the State from the transactions of its citizens originated in Holland1. The first stamp law was passed in Holland in 1624. In England, it was first adopted under Charles II but, under the reign of William and Mary, it assumed a definite shape and thereafter various statutes were passed requiring stamps on various instruments among the English people2.
1. M.N. Basu Indian Stamp Act, (1954), p. (vii).
2. Position in England in detail is dealt with, infra.
1.8. Stamp Duties in India-The Regulations.-
In India, the first stamp law was Regulation 6 of 1797, which was limited in its extent to Bengal, Bihar, Orissa and Benaras. Various stamp Regulations were subsequently introduced in the sister provinces of Bombay and Madras. By sections 16 and 21 of the Bengal Regulation 6 of 1797, all written obligations, except Bills of Exchange above Rs. 50 in value, were made chargeable with ad valorem duty, ranging from four annas to one rupee. With a few exceptions, all other instruments as well as all copies were made chargeable according to the quantity of matter engrossed on the stamp paper (the stamp paper varied in size and value, from two annas to one rupee). The immediate occasion for this Regulation was the abolition of the tax for the maintenance of police establishments, leviable on "Indian Merchants and Traders."
1.9. Although the stamp duties under this Regulation were primarily intended to compensate, for the deficiency in the public revenue occasioned by the abolition of the tax on merchants etc., this Regulation paved the way for a series of later enactments relating to stamp duties. Regulation 7 of 1800 introduced a fresh set of provisions as to stamp duties, and it may be of interest to note, that for the first time, a specific provision was introduced for stamping an acknowledgment for the receipt of money at the same rate as the rate prescribed for an instrument creating an obligation. The stamp duty on many other deeds was doubled, and a provision was also introduced to enable the holder of an unstamped document to get the defect as to stamp rectified, by presenting it to the Collector.
To check the practice of forging of stamps, Regulation 13 of 1806, Regulation 7 of 1809 and Regulation 12 of 1810 made further additions or modifications regarding the sale and authentication of stamp papers. Certain changes were made by Regulation 12 of 1812, Regulation 16 of 1813 and various other Regulations, passed from 1814 to 1829. In Madras, Regulation 8 of 1818 (sections 9, 10 and 11), mainly modelled on Bengal Regulation 7 of 1800, contained the principal provisions as to stamp duties, followed by Regulation 2 of 1813 and Regulation 13 of 1816 as modified by Regulation 2 of 1825. In Bombay, the first enactment relating to stamp duty was Regulation 14 of 1815, followed by Regulations passed in 1827 and 1831.
1.10. Stamp Acts in India.-
So much as regards the Regulations. In 1860, the first Act relating to stamp duties (Act 10 of 1860) was enacted in India. It repealed all the existing Regulations. Prior to this Act, there had been some amending Acts1, adding to the law contained in the Regulations. The Stamp Act of 1860 was amended the same year, and repealed and replaced by Act 10 of 1862. The Stamp Act of 1862 was amended in 1865 and 1867, and was finally repealed (as regards stamp duties) by Act 18 of 1869. The last mentioned Act was replaced by the Stamp Act of 1879 (Act I of 1879), which was the immediate predecessor of the present Stamp Act. The Stamp Act of 1879, during its short life, underwent numerous alterations (it was amended 9 times),2 and was ultimately repealed by the Stamp Act, 1899, which contains the present law on the subject.
1. Act 14 of 1840; Act 9 of 1842; Act 15 of 1859.
2. Act 9 of 1881; Act 1 of 1888; Act 5 of 1888; Act 18 of 1889; Act 6 of 1889; Act 20 of 1890; Act 12 of 1891; Act 96 of 184; Act 13 of 1897.