Report No. 67
Definitions in Sections 2(11) to 2(18)
5.1. Section 2(11)-"duly stamped".-
Section 2(11) defines the expression "duly stamped", as applied to an instrument. There are three broad requirements under the definition. First, the instrument must bear a stamp of not less than the proper amount; secondly, the stamp must be an adhesive or impressed stamp; and, thirdly, such stamp must have been affixed or used in accordance with "the law for the time being in force in India."
Though no change in this definition is needed, two observations are in order. First, the definition, like any other definition, should be taken as subject to the context, and construed in harmony with other provisions. For example, where duty has been remitted by notification under section 9 or a specific exemption is provided for under the relevant article, stamp need not be affixed. This aspect becomes material for the purposes, for example, of section 30, under which a person receiving money exceeding twenty rupees in amount etc. is bound to give a "duly stamped receipt" for the same.
Obviously, where an exemption has been granted by or under the Act for a particular class of receipts, there can be no obligation to affix a stamp on the receipt, and the giving of an unstamped receipt should be regarded as sufficient compliance with section 30. Secondly, the definition of 'duly stamped' speaks of adhesive or impressed stamps1 only. This is in conformity with sections 10 and 11; but it will be worthwhile considering the use of franking machines. This point will be considered at the appropriate place2.
1. For definition of 'impressed stamp', see section 2(13).
2. See recommendation as to section 10A (proposed).
5.2. Position in England.-
In England, it has been observed in one case1 that an instrument-in that case, a security-is duly stamped "either if it has actually borne the correct amount of stamp duty that it attracts or if it is exempt for stamp duty."
The expression "duly stamped" would seem to mean not only bearing a stamp of the proper value2, but also stamped at the right time3, in the proper manner4, with the proper description of stamp5 under the Stamp Rules, and duly cancelled6.
Thus, in the definition of the expression "duly stamped", a number of ingredients are implied, such as, provisions of the Act relating to description of the stamp, mode of affixing stamp and the like. A difficulty may arise where the amount of the stamp satisfies the law, but, in other respects, the instrument is not "duly stamped" as explained above. Under section 35, proviso, a deficiency in the amount of the duty can be rectified. But the situation where there is no deficiency in duty is not specifically covered by the proviso, though it would appear that the language of the proviso to section 35 is wide enough to cover such cases. Having regard to the fact that this is a recurring situation, it appears to be desirable to amend section 35, proviso (a), by a specific provision in this regard. This point will require consideration when section 35 is revised7.
1. I.R.C. v. Henry Enabacher & Co., 1963 AC 191 (209, 210): (1962) 3 WLR 1292: (1962) 3 All ER 843 (848) (per Lord Morris of Borth-y-Gest).
2. Section 3, et seq.
3. Sections 3, 17, 48 and 19.
4. Sections 13 and 14.
5. Sections 10 and 11.
6. Sections 12 and 13.
7. To be considered under section 35.
5.3. As regards the case of use of a stamp of improper description, it is covered separately1 under section 37, which allows the defect to be rectified by applying to the Collector.
1. Section 37.
5.4. Section 2(12)-"Executed" and "Execution".-
Section 2(12) defines the expression "executed" and "execution", used with reference to instruments, as meaning 'signed' and 'signature'. The meaning of 'sign' is explained in the General clauses Act1. Under section 3 of the Stamp Act, an instrument is chargeable with duty only if it is "executed". But, an acknowledgment is, under Article 1, chargeable with duty, if it is "written" or "signed" by or on behalf of the debtor. A discrepancy, thus, arises between the definition of "execution" (read with section 3) on the one hand, and Article 1 on the other hand. This will require2 consideration, when we consider Article 1.
1. Section 3(56), General Clauses Act, 1897.
2. For consideration under Article 1.
5.5. Section 2(13)-"Impressed stamp".-
The definition of "Impressed stamp" in section 2(13) needs no comments.
5.6. Section 2(13A)-"India".-
The expression "India" is defined, in section 2(13A) as meaning "the territory of India excluding the State of Jammu and Kashmir". The object of the definition is to indicate that the sections concerned refer only to the territories to which the Act extends. To carry out this, it was suggested1 that it should be revised as under:
"(13A) "India" means the territory of India to which this Act extends".
We, however, prefer an alternative course-deletion of the definition of "India." Though that would involve extensive consequential changes in numerous sections where the expression "India" occurs,2 we are of the view that it is a preferable course. We shall presently indicate our reasons for this.
1. Minutes of 20th December, 1974.
2. Sections 2(6), 2(11), 2(13A), 2(16A), 3(b), 3(c), 19, 18, 17, 20, 32(3) Proviso, 33(2), and 50 Proviso.
5.7. Section 2(13A)-"India".-
The word-'India' appears in the following sections:-
Section 3(b), 3(c), Section 17,
Section 32(3), proviso,
Section 50, proviso.
5.8. We are of the view that the definition of "India" should be deleted, since it is not appropriate that such an artificial definition should continue on the statute book. At present, the definition has been inserted as a technical device because several sections use the expression "India". We are recommending the substitution, in the substantive sections, of the expression "territory to which the Act extends" in all cases where the substantive provision, when speaking of "India", is intended to apply only to the territories now artificially defined as "India". We may mention that most of the replies1 received to our Questionnaire have also agreed with the view that the definition should be deleted.
Let us now come to the consequential changes. In section 2(6)-"chargeable"-and section 2(11)-"duly stamped"- the expression "India" should be modified by substituting, "territories to which this Act extends."
In section 2(16A), the expression "India" may be retained. The effect will be to cover "marketable security" sold in any stock market in the State of Jammu and Kashmir.
With reference to section 3(b) and section 3(c), which relate to certain negotiable instruments and certain other instruments executed outside "India" and brought into "India", the deletion of the definition in section 2(13A) of "India" will mean that instruments executed outside India will not be required to be stamped, and "Ikidia" will, of course include the State of Jammu & Kashmir. This consequence is intended. Hence, "India" occurring for the first time in section 3(b) and 3(c) should be retained. But the word "India", where it occurs for the second time in sections 3(b) and 3(c), should be modified by substituting the expression "territories to which this Act extends", since that portion refers to things to be done within the territories to which the Act extends.
In section 17, in the phrase "instruments executed in India", the expression "India" may be modified by substituting "territories to which this Act extends".
In section 18(1) (time of stamping), the word "India" may be retained where it occurs for the first time. But it may be modified where it occurs for the second time. This section is the converse of section 17.
In section 19, (bills etc. made out of India), the expression "India" may be modified where it occurs for the first time, third time and fourth time, and retained where it occurs for the second time-"drawn or made out of India".
In section 20, the word "India" may be retained. The section relates to money expressed in any currency other than that of India.
In section 32(3), proviso (a), the word "India" may be modified, since it refers to instruments executed in the territories to which the Act extends. Documents executed in Jammu & Kashmir should fall outside section 32(3), proviso (a).
In section 32(3), proviso, clause (b), where the word "India" where it occurs for the second time, it may be modified. Where it occurs for the first time, it may be retained.
In section 33(2), the expression "India" may be modified.
In section 50, proviso (a), it may be modified at both the places.
1. Question 8 of the Questionnaire.
5.9. Section 2(14)-"Instrument".-
Section 2(14) gives a definition of "instrument" as including every document by which any right or liability is or purports to be created, transferred, limited, extended, extinguished or recorded.
Attention should be drawn to the last word "recorded", which does not usually occur in provisions relating to instruments in other enactments.1 The words "records" is obviously needed, in the Stamp Act, as otherwise the duty on "acknowledgment" and the duty on "memorandum of agreement"-to take only two examples-would not be a duty on an instrument". And, since it is well-known that "the thing which is made liable to duty is the instrument",2 this amplification in the definition is welcome.
On the other hand, however, it is not to be overlooked that every document "recording" a transaction is not taxable. Apart from cases where an express provision exists-as in the two examples of acknowledgment and memorandum of agreement referred to above-a document which does not itself deal with the right in the particular manner, but merely records a past "dealing with the right", would not, merely because it records such dealing, be regarded itself as an instrument containing a transaction of that type. This aspect becomes material in respect of a few instruments-e.g., an instrument of partition.3
1. See, e.g., section 17, Registration Act.
2. I.R.C. v. Angus, (1889) 23 QBD 579 (589) (Lord Esher, M.R.).
3. Section 2(15)-"Instrument of partition".