Report No. 67

1.11. Amendments.-

During the period that has elapsed since 1899, the Stamp Act has been amended several times. The most important amendments were made in 1904, 1906, 1910, 1923, 1927 and 1955. The last mentioned amendment is the most important from the point of view of the territorial application of the Act.

The introduction of decimal coinage in 1958 necessitated extensive amendments in the Act1.

No comprehensive revision of the Act has, however, been attempted so far.

1. The Indian Stamp (Amendment) Act, 1958 (19 of 1958).

1.12. Stamp Duties in England.-

In England, stamp duties were first imposed at the end of the 17th century1; they are now governed primarily by two Acts of Parliament, one imposing the duties2, and the other making numerous administrative provisions3. But it should be noticed that the Stamp Acts in England have been repeatedly amended by subsequent Finance Acts and Revenue Acts, and some of these amending Acts expressly direct that the relevant sections shall be read

"together with" or as "one with" the Stamp Act, 18914.

The fundamental principle on which the English Acts are based is the same as in India, namely, "the thing which is made liable to duty is an instrument5." Exemptions from duty in England are not given by notification, but are contained in the relevant Act. And, of course, it need not be stated that if a document does not fall under any of the enumerated categories, it is not liable to stamp duty. Examples of such documents in England are-affidavits, awards, bills of lading, coupons for interest, proxy for one meeting only, receipt for an amount less than two pounds, share certificates and statutory declarations6.

1. In 1964.

2. Stamp Act, 1891 (England).

3. Stamp Duties Management Act, 1891 (England).

4. Internal Revenue Commissioners v. Angus, 23 QBD 579 (589) (Lord Esher, MR).

5. Cf. section 1, Stamp Act, 1891 (England).

6. The list is not exhaustive.

1.13. It is well-known that one of the causes of the American revolution was the Stamp Act of 1765, introduced by George Grenville. The Act levied a duty on every "skin or piece of vellum or parchment or sheet or paper", used for legal documents, commercial transactions, etc.1 Opposition to this legislative measure in the American colonies was so strong, that the expenses of collection of the duty exceeded the revenue realised.

1. Encyclopaedia Britannica, Vol. 21, p. 306.

1.14. History of relevant constitutional provisions.-

We may now turn to the constitutional position in India. At the time when the Indian Stamp Act, 1899 (a Central enactment) was enacted, the duties levied under each of the several articles in its Schedule became part of central revenues, no part of it being specifically allocated to the provinces. A change was, however, introduced into this system by the Montford Reforms of 1919. Section 45A of the Government of India Act, 1919, enacted:

"45A. (I). Provision may be made by rules under this Act:

(b) for the devolution of authority in respect of provincial subjects to local Governments and for the allocation of revenues or other moneys to those Governments."

Devolution Rules were framed under this provision and rule 14(1) read:

"14(1). The following sources of revenue shall, in the case of Governors' provinces, be allocated to the local Government as sources of provincial revenue, namely:-

(b) receipts accruing in respect of provincial subjects.

(f) the proceeds of any taxes which may be lawfully imposed for provincial purposes.........."

Schedule I to these rules classified subjects of Legislative power into two heads, Central and Provincial-Part I and Part II respectively. Item 20 of Part II-List of Provincial subjects- ran in these terms:

"20. Non judicial stamps, subject to Legislation by the Indian legislature...."

Section 80A(3) laid down the formal requirements with which the Provincial Legislatures should comply before enacting these laws:

"80A(3). The local Legislature of any province may not, without the previous sanction of the Governor-General, make or take into consideration any law (a) imposing or authorising the imposition of any tax unless the tax is a tax scheduled as exempted from this provision by rules made under this Act; or

In pursuance thereof, the Scheduled Taxes Rules were framed which specified the taxes which might be imposed by the provinces either for their purposes or for the purposes of local authorities within them without the previous sanction of the Governor-General. In regard to stamp duties, item 8 of Schedule I to these rules enabled provincial legislation without previous sanction only in regard to-

"8. A stamp duty other than duties of which the amount is fixed by Indian legislature."

The result of this Scheme was that by virtue of the main provisions in section 80A(3)(a), the local legislature could legislate for the levy of stamp duties on the instruments included in the Stamp Act, 1899, only after obtaining the previous sanction of the Governor-General. Several Provinces took advantage of these provisions and enacted legislation on the subject of stamps after obtaining the previous sanction of the Governor-General under section 80A(3), making the proceeds part of Provincial revenues and amending the rates of duties imposed by Schedule I of the Indian Stamp Act, 1899.

1.15. Act of 1935.-

The Government of India Act, 1935, effected a substantial change in the law in relation to stamp duties, carrying to its logical result the provision of the Devolution Rules and the practice that prevailed thereunder. It also introduced a dichotomy, so far as the provinces were concerned, between the substantive law relating to the levy and collection of the duties including the machinery therefor on the one hand, and the rate of levy on the other hand. The White Paper proposals started this cleavage by listing "Stamp duties which are the subject of legislation by the Indian Legislature at the date of the Federation" in the exclusively Federal List I, and "stamp duties other than those provided for in List I" as a source of Provincial Revenue.

This rather vague form received clarification in the report of the Joint Parliamentary Committee. In their revised lists, "Fixation of, rates of stamp duty in respect of bills of exchange, bills of lading, cheques, letters of credit, promissory notes, policies of insurance, proxies and receipts", was made exclusively Federal (item 53 of List I), while "fixing of rates of stamp duty in respect of instruments other than those mentioned in item 53 of List I" was put in as item 32 in List II-the exclusively Provincial List. The legislative power to enact Stamp Laws in general, as distinguished from the "fixation of rates of duty", was assigned to the Concurrent List (item 10), which read "Law of non-judicial stamps, but not including the fixation of rates of duty." These recommendations of the Joint Parliamentary Committee were adopted by the framers of the Government of India Act, 1935. The instruments mentioned in item 53 of List I, set out above, were allocated to the exclusively Federal. List I (item 57)-but instead of the words "fixing of rates of stamp duty", the expression "rates of stamp duty" was used.

1.16. Legislative Entries.-

The Constitution of India followed, in this respect, the pattern of the Government of India Act, 1935. Entry 91 of the Union List reads: "rates of stamp duty in respect of bills of exchange, cheques, promissory notes, bills of lading, letters of credit, policies of insurance, transfer of shares, debentures, proxies and receipts", while Entry 63 of the State List provides for legislation in regard to "rates of stamp duty in respect of documents other than those specified in the provisions of List I with regard to rates of stamp duty". Entry 44 of the Concurrent List deals with the power to make a law in relation to stamp duties as distinguished from the rates of stamp duty in these terms. "Stamp duties other than duties or fees collected by means of judicial stamps, but not including rates of stamp duty."

1.17. Present constitutional position.-

The Constitution has a number of other provisions relevant to stamp duties. Of these, Article 246 and the Seventh Schedule are relevant in regard to the legislative power to levy stamp duties. Articles 265, 268 and 269(e) are relevant mainly as regards the distribution of the revenues. The former is more important, for the purposes of a consideration of the Stamp Act.

1.18. Briefly, the scheme provided for in the Constitution is as follows:

(a) Under Article 246, such stamp duties as are mentioned in the Union List1are levied by the Union, but, under Article-2=68, each State in which they are levied, collects and retains the proceeds (except in the case of Union Territories).

The documents are specified in Entry 91, Union List:

"91. Rates of stamp duty in respect of bills of exchange, cheques, promissory notes, bills of leading, letters of credit, policies of insurance, transfer of shares, debentures, proxies and receipts."

(b) Other Stamp duties are levied and collected by the States, by virtue of the legislative entry in the State List, already quoted below2:-

"63. Rates of stamp duty in respect of documents other than those specified in the provisions of List I with regard to rates of stamp duty."

(c) And the Concurrent List.3 contains the following entry:-

"44. Stamp duties other than duties or fees collected by means of judicial stamps, but not including rates of stamp duty."

This entry deals with the general subject of stamps. Provisions other than4 those relating to rates of duty are, thus, within the legislative power of both the Union and the States.

(d) Broadly speaking, therefore, except as regards Union Territories, Parliament's legislative power extends to:-

(i) rates of stamp duty on the specified documents;

(ii) machinery provisions, in respect of all documents.

1. Schedule 7, List 1, entry 91.

2. Schedule 7, List 2, entry 63.

3. Schedule 7, List 3, entry 44.

4. For convenience, provisions not relating to rates may be referred to as "machinery provisions".

1.19. The position can be stated in the form of a Chart as-follows:

The Constitutional Provisions Concerning Stamp Duties

Union list Entry 91.	State List Entry 63.	Concurrent List Entry 44.
Rates of Stamp duty in respect of bill of exchange, cheques, promissory notes, bills of lading, letters of credit, policies of insurance, transfer of shares, debentures, proxies and receipts.	Rates of Stamp duty in respect of document other than those specified in the provisions of List I with regard to rates of stamp duty.	Stamp duties other than duties or fees collected by means of judicial stamps, but not including rates of stamp duty.

1.20. Thus, the power of the Union extends to the whole field of stamp duties, except that as regards rates of stamp duty in the States, it is confined to the specified documents. It is plenary as regards machinery provisions. Full use, however, has not so far been made of Parliament's legislative power in relation to machinery provisions.