Report No. 67
State Amendments to Section 27
In the U.P.,1 sub-section (2) has been added in section 27, the original section being numbered as sub-section (1). The new-sub-section is as follows:-
"(2) In the case of instruments relating to immovable property chargeable with an ad valorem duty on the value of the property, and not on the value set forth, the instruments shall fully and truly set forth the annual land revenue in the case of revenue-paying land, the annual rental or gross assets, if any, in the case of other immovable property, the local rates, municipal or other taxes, if any, to whiCh such property may be subject, and any other particulars which may be prescribed by rules made under this Act."2
The Orissa amendment has been already referred to.3
Then, there is a Madras amendment which adds market value in section 27, and substitutes that test in Article 33.
The validity of the Madras amendment was challenged before the Madras High Court, under Articles 14 and 19(1)(f) of the Constitution, on the ground that this became a tax on property.4 The challenge failed.
The Act at issue was the Indian Stamp (Madras Amendment) Act, 1967, sections 8 and 10, which required the mention of the "market value" in an instrument and provided for its determination where it is suspected to be understood. The attack was based on the ground that the duty under the amendment would fall not on the instrument, but on the market value and market value was uncertain. It would, therefore, be unreasonable. The High Court, however, held that the stamp duty even under the amended Act, was a duty on an "instrument" as defined in the Stamp Act. The charge was on the instrument, and not on the amount or consideration indicated in the document, which was but a measure of, or the basis for the computation of the extent of, liability to stamp duty and not on the market value any more than on the consideration mentioned therein. The Court held that:5
"the object of the amending Act being to avoid large-scale evasion of stamp duty, it is not meant to be applied in a matter of fact fashion and in a haphazard way. Market value itself, as we already mentioned, is a changing factor and will depend on various circumstances and matters relevant to the consideration. No exactitude is, in the nature of things, possible. In working the Act, great caution should be taken in order that it may not work as an engine of oppression. Having regard to the object of the Act, we are inclined to think that normally the consideration stated as the market value in a given instrument brought for registration should be taken to be correct unless circumstances exist which suggest fraudulent evasion. Even in such a case, we trust that disputes will not be raised in petty sums. Unless the difference is considerable or sizable and it appears patent that the amount mentioned in the document is a gross under-value no disputation as to value is expected to be started."
The Court held that the amendment had not shifted the chargeable event from an instrument to market value and the duty after the amending Act was still on the instrument, and that the amending Act was within the competence of the State Legislature.
1. U.P. Act 18 of 1938.
2. See also Rajasthan Act 16 of 1966.
3. Para. 13.3, supra.
4. State of Tamil Nadu v. Chandrasekharam, (1973) 2 MIA 89 (DB) (MIJ issue 26th July, 1973)
5. State of Tamil Nadu v. Chandrasekharam, (1973) 2 MLJ 89 (91, 92).