Report No. 67
Scheme of the Articles
Having concluded our consideration of the sections, we proceed to a discussion of the articles in the First Schedule to the Act. The First Schedule to the Stamp Act contains the arithmetic of stamp duties. The Schedule is to be read with section 3, clauses (a) and (c) of which specifically refer to this Schedule. The rates of duties on various instruments are given in articles arranged alphabetically. These articles (65 in number) levy a duty either of a fixed sum or according to value or, in some cases, according to the duty leviable on some other instrument under another specific entry. The last mentioned category could raise nice problems, for example, where the duty on the other instrument is raised.
It is not easy to trace the rationale underlying the rate of stamp duty prescribed in each article. However, the classification attempted below might throw light on some of the features of the scheme of taxation. The charging articles can be divided into two principal groups, namely, those charging duty ad valorem and those charging a fixed duty. In regard to ad valorem duties, again, there are three principal patterns which may be noticed. There is, first, the group of instruments falling under the category of bonds. Secondly, there is the group of instruments falling under the category of conveyances. Thirdly, there is the group of instruments which are chargeable ad valorem in some other manner, for example, bills of exchange, debentures, mortgage deeds in certain cases and policies of insurance. In fact, the charging entry as to Mortgage Deed-Entry 40-itself illustrates, in its three clauses (a), (b) and (c), the three different patterns of i duty.
26.3. Economics value.-
Apart from this possible classification of instruments on the basis of ad valorem duty and fixed duty, there are other considerations which enter into the picture. As to the division between ad valorem duty and fixed duty, the selection seems to depend primarily on the economic value of the rights created or transferred by the instrument. On this principle, many instruments relating to immovable property or creating a charge thereon are selected for ad valorem duty. Similarly (even where the instrument does not relate to immovable property), if it is possible to predicate with reasonable certainty that the right created is of a certain monetary value, ad valorem duty is adopted, as in the case of mortgage deeds of movables.
On the other hand, where the proprietary or monetary aspect is not prominent or easily ascertainable and the principal object of entering into the instrument or executing the instrument is not directly one of a proprietary or monetary character, then fixed duty is adopted. This is illustrated by the charge on adoption deed, affidavit, agreement, articles of association of a company, award and the like. This is not to say that in every case where the monetary or proprietary element is directly involved, the legislature has necessarily selected the imposition of an ad valorem duty. Considerations of prompt execution of business or other aspects of convenience might have induced a different choice-as is illustrated by the articles charging duty on promissory notes.
26.4. Selection of duty.-
Assuming that the case is one where a. fixed duty would be appropriate, the amount of duty to be selected could vary in theory. In fact, the duty does vary from one anna (now 10 paisa) to Rs. 500. What particular amount should be chosen, must not have been a very easy matter for the legislature, but here also certain broad principles seem to have been borne in mind. For example, much depends on the question whether the document merely furnishes evidence of a transaction, or whether it goes further and creates a right. This consideration seems to have regarded as relevant in fixing the duty on acknowledgments and agreements, so that an acknowledgment is chargeable with a duty only of one anna. while an agreement is chargeable with a duty of 8 annas.
That documents constituting mere evidence receive a sympathetic treatment is also illustrated by the charging article relating to certificate (Article 19), share warrant (Article 65) and the like Again, it is on the principle that a document which really evidences a certain fact need not be chargeable with ad valorem duty, that a receipt carries only a fixed duty, not fluctuating with the value of the money or other property the receipt whereof is acknowledged.
26.5. Nature of the right.-
Of course, "agreement" is a very wide term, and depending on the nature, value, extent or duration of the right created or transferred, the legislature naturally decided to impose, on specific types of agreement, a higher fixed duty. It is apparently on this principle that an apprenticeship deed is made chargeable with a duty of Rs. 5, because the rights created thereunder may be expected to endure for a long time and would increase considerably the earning capacity of the beneficiary. The nature of the right created or potentially created seems to have been regarded as relevant in charging a duty of Rs. 25 on the articles of association of a company. Here a number of persons are interested, and a new corporate entity is brought into being, representing a pooling of resources and talent. The nature of the right created might also have been one of the considerations for charging a duty of Rs. 500 for entry as an advocate.
Even within the category of instruments appropriate for fixed duty, considerations of convenience or the urgency of the matter might have induced the legislature to adopt a liberal view, as is illustrated by the comparatively small amount of duty fixed for bills of lading, protest of Bill or Note, protest by the Master of a ship, and the like. Apart from these legal and commercial considerations, and economic aspects, the legislature may also regard, as relevant, certain matters of policy. It is on this basis that an assignment of copyright is exempted from the duty. Otherwise chargeable as on a conveyance and, again, it is on this principle that numerous exemptions have been granted by the legislature in respect of documents otherwise chargeable as receipts.
26.7. Number of considerations.-
From this discussion, it is clear that a host of considerations enter into the legislative determination of the amount of stamp duty to be properly charged. This discussion may appear to be academic; but unless one is conscious of these aspects, one is likely to miss the point in the scheme for charging tax under the Act.
26.8. Scope for Improvement.-
The articles themselves are numerous, and might appear to have been devised meticulously. The alphabetical arrangement is undoubtedly convenient, and there is sufficient cross-referencing--a feature not often noticed in legislative measures. Notwithstanding this scaffolding of categories created by the legislature for building up its own scheme of taxation, disputes do arise in practice as to whether a particular instrument falls in one category or the other. In so far as such disputes arise from the unavoidable fact that human relationships are of an infinite variety and people do not always enter into transactions with the articles of the Stamp Act in mind, such disputes may be difficult to avoid.
But, in so far as the disputes arise by reason of obscurity or ambiguity in the description of an instrument in a particular article or by reason of avoidable overlapping, with a view to considering whether any improvement could be devised, so that disputes might be reduced in frequency and complexity, even if they cannot be totally eliminated. Such amendment would reduce the occasions for resorting to the provisions in sections 4 to 6 of the Act-provisions which might be described as designed to operate in the last resort when the court must decide the dispute one way or the other in order to determine the proper amount of duty chargeable.
26.9. Direction in which amendments will be considered.-
Since the rates of stamp duty on many of the instruments mentioned in the Schedule fall within the State Legislative List; it is not our intention to suggest any substantial changes regarding the rate structure in respect of those instruments. Apart from this, even in respect of instruments falling in the Union Legislative List, it is not our intention to suggest any substantial changes in the rate structure. This is, however, subject to the qualification that such rationalisation as appears to be necessary, and as can be achieved without affecting the rate structure basically, will be considered in both cases. The desirability of considering verbal improvements in many of the articles will also be borne in mind. When the Act was revised in 1899, several changes were made in the Schedule. First, the alphabetical order was improved. Secondly, the legislature removed exemptions from their position in a separate "schedule of exemptions", and placed them in the schedule of duties under the articles to which they referred.
Thirdly, the ascertainment of duty was made more direct and more easy. For example, the three tables of duty under the heads of bill of exchange, bond and conveyance were, at that time, drawn up in a very curtailed form. When considerable amounts were involved, it was impossible, without the aid of paper and pencil, to make out from the different tables, the duty payable on a particular instrument. By expanding the tables, the legislature made it easy for a person by a reference to the schedule to ascertain directly what the particular duty was. Nevertheless, there was no attempt made to go into each article from the print of view of public convenience or ease of understanding. It will be our endeavour to suggest improvements wherever practicable, bearing in mind the limitations to which we have already referred.