Report No. 67
8.11. Recommendation.- We, therefore, recommend the insertion of a new section on the following lines:-
"3A. Effect of exemption under an article in the First Schedule.-Where, by virtue of an exemption provided for under an article in Schedule 1, an instrument is exempted from duty, the instrument shall, in the absence of an express provision to the contrary; be exempt from duty under every other article also."
8.12. Section 3B-Instruments executed outside India.-
A document executed outside India is, at present, liable to stamp duty, even if it is already stamped with the duty chargeable under the law of the foreign country where it was executed, provided the document is received in India.1 There are special provisions for bills of exchange payable otherwise than on demand, and for promissory notes, drawn or made out of India, and accepted or paid or presented or endorsed, transferred or otherwise negotiated in India.2 But, in general, the document has to be stamped within the prescribed time after being received in India, if the other conditions of chargeability are satisfied.
1. Section 3(c) (See supra).
2. Section 3(b).
8.13. Relief against double taxation.-
We are of the view that some provision is needed for relief in respect of documents which have already been stamped under the law of a foreign country where the document was executed. With the growth of international commerce, such occasions are likely to increase, and, while it may not be necessary to grant an exemption for all cases, a limited exemption as to transactions with or between Indian citizens in respect of documents executed outside India and properly stamped under the law of the foreign country, could be inserted.
The Indian legal system has several laws containing provisions relating to relief against double taxation. A precedent, for example, is furnished by the Income-tax Act.1 In that Act, there are two provisions dealing with double taxation-one is confined to cases of agreement with foreign countries, while the other is not so confined. The former-section 90-is as follows:-
"90. Agreement with foreign countries.-The Central Government may enter into an agreement-
(a) with the Government of any country outside India for the granting of relief in respect of income on which have been paid both income-tax under this Act and income-tax in that country; or
(b) with the Government of any country outside India for the avoidance of double taxation of income under this Act and under the corresponding law in force in that country; and may, by notification in the Official Gazette, make such provisions as may be necessary for implementing the agreement."
In the Estate Duty Act2 also, there is a provision for avoidance or relief of double taxation, with respect to estate duty, as follows:-
"30. The Central Government may enter into an agreement with the Government of any reciprocating country for the avoidance or relief of double taxation with respect to estate duty leviable under this Act and under the corresponding law in force in the reciprocating country and may, by notification in the Official Gazette, make such provision as may be necessary for implementing the agreement.
Explanation.-The expression "reciprocating country" for the purposes of this Act means any country which the Central Government may, by notification in the Official Gazette, declare to be a reciprocating country. There is another precedent in section 131 of the Trade Marks Act.3
1. Sections 90 and 91, Income-Tax Act, 1961.
2. Section 30, Estate Duty Act, 1953.
3. Section 131, Trade Marks Act, 1958.
8.15. Need for relief.-
In the light of these precedents, and also on principle, we have carefully considered the suggestion, and we are in broad agreement with it. We do not, however, think that the proposed provision should be confined to transactions with or between Indian citizens. It could extend to all documents. At the same time, we are of the view that the grant of such relief should be on the basis of reciprocity only, and in pursuance of an agreement-as in the Trade Marks Act.1
We, therefore, recommend the insertion of the following section in the Act:-
"3B(1). With a view to the fulfilment of a treaty, convention or arrangement with any country outside India which affords to instruments executed in India the same concessions as can be granted under this section in respect of instruments executed outside India, the Central Government may, by notification in the Official Gazette declare such country to be convention a country for the purposes of this Act.
(2) Where an instrument is executed in a convention country and is brought into the territories to which this Act extends, the instrument shall, if duly stamped in the convention country under the law of that country, be deemed, for the purposes of this Act, also to be duly stamped".
1. Section 131, Trade Marks Act, 1958.
[Cf. section 131, Trade Marks Act, 1958.]
8.16. Section 4.-
The simple case of one instrument effectuating a transaction is dealt with by the general provision in section 3; but there might be cases where there are several instruments effectuating a transaction. The ordinary rule is that stamp duty is levied on an instrument, and not on a transaction. But, if this rule is applied literally and without exception, then there might be practical hardship and unnecessary inconvenience. To deal with such a situation, some special provisions are usually considered desirable in the Stamp laws•of all countries. In our Act, the situation of several instruments used to effectuate a single transaction is dealt with in section 4.
The section is, however, confined to transactions of sale, mortgage or settlement. The broad rule is chargeable with the duty prescribed in the First Schedule, and each of the other instruments is chargeable with a duty of one rupee, instead of the duty, if any, prescribed for it in the First-Schedule. Under sub-section (2), the parties may determine for themselves which of the instruments so employed shall, for the purposes of sub-section (1), be deemed to be the principal instrument. But there is a proviso to the effect that the duty chargeable on the instrument so determined shall be the highest duty which would be chargeable in respect of any of the said instruments so employed.
8.17. Position in England.-
In England, the principle is the same, but is not confined to conveyances. Referring to the situation where a single transaction is effected by more than one instrument, an English writer says1:-
"The general rule in these cases (which is sometimes stated expressly in the Act). In that ad valorem duty is not paid more than once, and that fixed duty is only paid more than once where each instrument taken by itself attracts a stamp, e.g., because it is a deed."
Thus, in England, in a case of a contract comprising an offer and acceptance2-3 under hand, one 6d, stamp is sufficient, "which logically should be affixed to the acceptance."4
1. Monroe Stamp Duties, (1964), p. 31.
2. A written offer accepted orally or by conduct requires no stamp; Carlill v. Carbolic Smokeball Co., (1892) 2 QB 486: on appeal (1893) 1 QB 256.
3. For detailed discussion, see Appendix.
4. Monroe Stamp Duties, (1964), p. 31.
Having considered all aspects of the matter, we see no reason why the principle enacted in section 4 should not be extended to all transactions. Such cases may not be many; but the example of a gift or partition should be cited.1 The section should, in our opinion, be extend to all cases where several instruments are employed for completing any transaction. This view has been generally favoured in the replies to our Questionnaire.2
Also, in our view, there is no need to charge duty on the supplementary instrument. On this point, we accept a suggestion made to us3 by the Gujarat Bar Council. If this approach is accepted, it will be necessary to make other consequential changes also. We, therefore, recommend that section 4 should be revised as follows:-
1. Cf. (1828) 2 Moo 375, cited in Halsbury's, 3rd Edn., Vol. 33, p. 296, para. 518, f.n. (1).
2. Question 22.
3. S. No. 74 (Gujarat Bar Council) under Q. 22 of the Questionnaire issued by the Commission.
Revised Section 4
4(1).- Where, in the case of any transaction, several instruments are employed for completing the transaction, only the principal instrument should be chargeable with the duty prescribed for it in Schedule I, and each of the other instruments shall, instead of being chargeable with the duty prescribed for it in that Schedule, be exempt from duty.
(2) The parties may determine for themselves which of the instruments so employed shall, for the purposes of sub-section (1), be deemed to be the principal instrument:
Provided that the duty chargeable on the instrument so determined shall be the highest duty which would be chargeable in respect of any of the said instruments employed.
8.19. Section 5.-
So much as regards section 4. Its converse is to be found in the next section. Under section 5, any instrument comprising or relating to several distinct matters shall be chargeable with the aggregate amount of the duties with which separate instruments, each comprising or relating to one of such matters, would be chargeable under this Act. This section is the converse of section 4, and deals with cases where one instrument comprises or relates to several distinct matters. Here again, the general rule that stamp duty is levied on an instrument and not on a transaction has had to be explained-this time, in the interests of revenue-by providing that such instrument will be chargeable with the aggregate amount of the duties with which separate instruments, each comprising or relating to one of such matters, would be chargeable under the Act. It is, again, in the interests of revenue that it overrides the next section,1 which deals with instruments coming within several descriptions in the First Schedule.
1. See the opening words of section 6-"Subject to the provisions of the last preceding section."
8.20. Criticism noted.-
No doubt, the apparently simple provision in section 5 is not devoid of difficulties in its application. A writer on the law of Stamps1 says: "Scarcely any subject, within the range of the Stamp Laws, is of so embarrassing a nature, in practice, as that which falls under the division of 'Instruments' relating to several distinct parties or matters'."
However, such difficulties cannot be solved by an amendment of the law, and it is difficult to devise a better and more precise formula.
1. The late Mr. Tilsley, quoted by Donogh Stamp Act, (1935), p. 188.