Report No. 67
Facts to be Stated in Instruments-Sections 27-28
13.1. Section 27-Introductory.-
Section 27 provides that the consideration (if any) and all other facts and circumstances affecting the chargeability of any instrument with duty, or affecting the amount of the duty with which it is chargeable, shall be fully and truly set forth therein. Failure to do so is punishable, under another provision-section 64.1
What facts and circumstances affect the chargeability of the instrument or the amount of the duty, depends on the scheme as to the charge of duty and, in particular, on the article applicable to the instrument in relation to which the question arises. Confining ourselves to instruments dealing with property, we may state that there are four possible alternatives which could be thought of, for arriving at the amount of the duty chargeable, namely:-
(a) amount or value of the property as set forth in the instrument,2 or its equivalent;3
(b) value of the property, but not confined to the value as set forth in the instrument;4
(c) consideration as set forth in the instrument;5
(d) consideration for which the transfer is made, e.g., rent6
1. Section 64 (1) (a).
2. Eg. Articles 12(a), 23, 31, 55, 58 and 64.
3. Article 33 (gift).
4. This is hypothetical.
5. Article 23 (Conveyance).
6. Eg. Articles 35 and 63.
13.2. Connection with charging article.-
Thus, the manner in which section 27 operates in relation to a particular instrument largely depends on how the charging article is worded, that is to say, which of the various alternatives enumerated above is taken as the governing criterion in the charging article. For this reason, amendments made in, section 27 by some of the States cannot be commented upon unless the criterion adopted in the charging article is sought to be revised. In fact, it is the charging article which will be the principal subject for consideration, and an amendment of section 27 would really be consequential on the change to be made in the charging article. In regard to section 27, therefore, the discussion will be confined to those amendments which can be considered independently of the charging articles.
13.3. Orissa Amendment.-
In some States, an amendment has been made empowering the Registrar to hold an inquiry. The Orissa1 amendment is an example. Section 47A (Orissa) reads-
"47A(1). If the registering officer appointed under the Indian Registration Act, 1908, while registering any document relating to transfer of property, has reasons to believe that the value of the property or the consideration, as the case may be, has not been truly set forth in the instrument, he may, after registering such instrument, refer the same to the Collector for determination of the value or consideration, as the case may be, and the proper duty payable thereon.
(2) On receipt of a reference under sub-section (1), the Collector shall, after giving the parties a reasonable opportunity of being heard and after holding an enquiry in such manner as may be prescribed by rules made under this Act, determine the value or consideration and the duty as aforesaid and the deficient amount of duty, if any, shall be payable by the person liable to pay the duty.
(2A) The Collector may suo motu, within two years from the date of registration of any instrument not already referred to him under sub-section (1), call for and examine the instrument for the purpose of satisfying himself as to the correctness of its value or consideration, as the case may be, and the duty payable thereon and if after such examination, he has reasons to believe that the value or consideration has not been truly set-forth in the instrument, he may determine the value or consideration and the duty as aforesaid in accordance with the procedure provided for in sub-section (2); and the deficient amount of duty, if any, shall be payable by the person liable to pay the duty.
(3) Any person aggrieved by an order of the Collector under sub-section (2) or sub-section (2A) may, within thirty days from the date of the order, prefer an appeal before the District Judge and all such appeals shall be heard and disposed of in such manner as may be prescribed by rules made under this Act."
1. Section 47A inserted in Orissa by Orissa State Act, 1962 (35 of 1962), as amended by Orissa Act, 1965 (11 of 1965).
13.4. Scope of present section.-
In order to facilitate consideration of the question whether such an amendment should be recommended, it is desirable to examine the scope of section 27. The scope would be better understood if the following propositions are borne in mind:
(1) The revenue of the Government is protected by requiring the parties to make a true and full disclosure of all facts and circumstances having any bearing on the duty payable, failing which they must suffer the consequences of their false and defective statements.
(2) If it be found that the omission to state'the value of the property or the under valuation was intended to defraud the Government, then a prosecution would protect the Government against the attempted fraud.1
(3) In determining whether a document is sufficiently stamped, the document itself as it stands, and not any collateral circumstances which may be shown in evidence, must be looked into.2
(4) For the purpose of stamp duty, the valuation given in the instrument (where the value as set-forth is the test3 would have to be accepted. If there was an intentional under valuation, the fear of prosecution would protect the Government against the attempted fraud. There is no provision in the laws authorising the Collector to ascertain the value of the property with a view to causing the instrument to be stamped with reference to the value thus ascertained.4 If a document-e.g., a mortgage-deed-is silent regarding the consideration, or if it does not set-forth the circumstances from which it could be gathered that how much stamp duty is to be paid, then the Collector has no power to take any evidence to find out the consideration. The only thing left for him is to prosecute the executant for not complying with the provisions of section 27.5
1. (a) Board of Revenue, Madras v. K.R. Venkatarama Ayyar, AIR 1950 Mad 738. (b) Venkatswami (in re:), AIR 1953 Mad 941.
2. Raman Chetty v. Mohamed Chause, 1899 ILR 16 Cal 435.
3. Except for local amendments-e.g., Orissa amendment.
4. Muhammed Muzaffar Ali (in re:), AIR 1922 All 82 (2) (FB).
5. Miran Baksh v. Comp., AIR 1945 Lah 69.
13.5. Observations of the Supreme Court.-
In Himalaya House Co. v. C.C.R.A., AIR 1972 SC 899 (904, 905), the Supreme Court held:-
"It is true that in view of section 27 (of the Indian Stamp Act), the parties to a document are required to set forth in the document fully and truly the consideration (if any) and all other facts and circumstances affecting the chargeability of that document with the duty or the amount of the duty with which it is chargeable. But a failure to comply with the requirements of that section is merely punishable under section 64 of the Stamp Act. No provision in the Stamp Act empowers the Revenue to make an independent inquiry of the value of the property conveyed for determining the duty chargeable."
After reviewing the High Court decisions, the Supreme Court observed:-
"The legislature may have had good reasons for not empowering the Revenue to make an independent inquiry as regards the valuation of the right sought to be assigned.".
In this case, it was held that there was no basis for holding that the consideration for the impounded assignment deed, which had declared that there was no consideration, was the total amount received by the assignor under the agreements entered into between him and the persons to whom he had assigned certain rights in the flats, offices and shops in the building. It was held that those persons had an independent right of their own, and that their rights did not flow from the impounded assignment deed. It was, therefore, held that the consideration to be taken into account under Article 23 (conveyance) was nil, as the assignment deed itself mentioned that there was no consideration, and there was no intention to incorporate the other agreements into this deed which, therefore, could not be taken into account for the purpose of calculating the duty on the impounded document.
13.6. Allahabad case.-
In one Allahabad case,1 the Godavari Sugar Mills, being the owner of property consisting of land, buildings and machinery, purported to sell these to the Somaiya Organics for a certain consideration. The sale-deed recited that the land and buildings were conveyed for a certain amount X, while the balance represented the price of machinery, vehicles, stores and other goods which were treated as movable items and the transfer of which had been completed by manual delivery. The Advocate-General, on of behalf of the State, argued that the intention of the sale-deed was to transfer the entire properties of the Godavari Sugar Mills and that the machinery, vehicles etc. were also transferred by the deed, and the value of these properties too should be taken into account.
The High Court did not accept this contention. It held that the deed was intended to transfer only the property mentioned in Schedule A and the buildings situated therein, and not the movable properties. The High Court observed-"The authorities constituted under the Act have to adjudge the duty chargeable on a deed as presented by the executants. It is not permissible for them to embark upon an enquiry as to what the intention of the parties was when executing the deed, and then to fix a duty on such items of property which in their opinion the parties contemplated to transfer. The fact that the sale-deed contains recitals in respect of other transactions between the parties would not affect the duty, in case the deed which is sought to be registered does not affect transfer of these properties."
Therefore, the addition of the balance amount representing the price of the machinery, vehicles etc. for purpose of calculating the duty, was uncalled for.
1. Somaiya Organics v. C.C.R. Authority, AIR 1972 All 252.
13.7. Madras view.-
In earlier Madras decisions,1 it had been held that the value of an instrument creating a settlement of properties was the value set forth in the instrument, and not the market value of the property. In a later decision,2 the Madras High Court reviewed its earlier cases, and said that 'value', unless the term in any enactment suggests the contrary, most of course, mean the real value, the real value of property of the nature of land and houses being ordinarily and not suitably estimated by determining what the property would fetch, if sold in the open market. In other words, value ordinarily meant 'market value'. However, the High Court held that no machinery was set up in the Stamp Act for ascertaining the true value of the property or the consideration, as the case may be, and it would be clearly impracticable to cast the burden on the Registrar in each case to ascertain what the true market value is. Since the Registrar is not empowered to conduct an enquiry himself as to the market value, the value must be set out in the document itself.
1. (a) Reference, ILR 1 Mad 350.
(b) Reference, ILR 8 Mad 453 (FB).
(c) Reference, ILR 20 Mad 27.
2. Joint Secretary figard of Revenue, Madras v. V.R. Venkatarama Ayyar, AIR 1950 Mad 738 (FE).