Himalaya House Co. Ltd., Bombay v. Chief Controlling Revenue Authority

332 IUMALAYA HOUSE CO. LTD. BOMBAY _v._ CHIEF CONTROLLING REVENUE AUTHORITY _February_ 1, .1972 [K. S. Hl!GDB AND P. JAGANMOHAN REDDY, JJ;] _Indian Stamp Act_ (2 _of_ 1899), _Sch.·I;art. 23-Dtterml"'1ion of.value_ _of consideration_ _by_ _Revenue-How_ _should_ _be_ _done._ 'The lessee of a plot of land from Government sub-leased it and tho sub-lessee built a building on it consisting of flats, shops and officles. 11» .sub-lessee assigned the rights of occupation of those &ts etc. under various ## c **D** agreements. 1bereafter, the appellant-company was incorporated and the .sub-lessee pwported to assign all his rights in the building to the appellant-company. In the pre3111blo to tho deed it was recited that the company bad been formed foi" the bettor admiJligtration of .the building and for the ,protection of the interests of tho persons occupying the flats etc., and that tho su!Hessee had ugroed to assign to tho appellant-company all his interests in the land and the building. The consideration mentioned in 1he document waa nil and the document bore a stamp of 12 amr.is. When _it_ waa presented for registration, the authority impounded the deed, held <hat the appellant<,bmpany was formed of and for the pei"SOns who b&d purch3aed the fiats etc., that tho real consideration for the aasigrunent wos made up oartly of what was paid by the occupiera of the flats etc., and determined the stamp duty and penalty under s. 40 of the Stamp Act, 1899. . . On a reference to the High Court it was held, that the article in the Schedule to the Sbmp. Act applicable is ~ 23. On the question of .consideration, however, while one Judge held that the consideration was 'nil' as mentioruod in the deed, the majority held that the Revenue was not bound to accept the quantum of consideratiOll mentioned in the deed, that the deed incl:>rporated into itself the various agreements entered into #### between !he sub-lessee and the persons to whom rights were assigned in f the flats etc., and that the consideration was the total amount payable to <he sub-lessee by those assignees. Allowing the appeal to this Court, HELD : (I) Before the terms and conditions of an agreement 03D ·be "Said to have been incorporated into another document, it must be shown that the parties intended to do so. In the present case, the mere reference . G **to** **the** **earlier** **transactions** **in** **the** **deed** **did** **not** **amount** **to** **an** **incorpOration** ;;n it of the te'rms and conditions of those transactions, ~338 F-H] (2) In view of s. 27 of the Stamp Act the parties to a; docwnent are required to set forth in the document fully and. truly, the coilsideratioo (if any) .ind all other facts and c)ircumstances affecting the chargeability of that document with duty. But a failure to do so is merely pllJ!isl>al!le under s. 64 of the Stamp Act. There is no provision empowemjg ·the **H** Revenue authorities to make an independent inqwry of the ·.value of the -property conveyed for determining the duty, even usuming that the .charging words in art. 23 do not mean that the Revenue 111118t b&ve regard **A** **B** #### c **D** E _**1**_ '.HIMALAYA HOUSE _v._ REVENUE AUTHORITY _(Hegde,_ J.) 333 only to what the parties to the instrument have elected to state the consideration to be, but can assess the duty upon the value of the considera tion as disclosed upon an examination of the terms of the instrument as a whole. [339 A-DJ (3) There is a Jong line of decisions of the High Courts holding that the Legislature had not empowered the Revenue to make an independent inquiry M regards the valuation of the right sought to be assigned. Thal view IS correct and the question must also be held to be settled bY _stare_ _decisls._ (340 D-FJ _Ramen Chetty_ v. _Mohomed_ _Ghouse,_ I.L.R. 16 Cal. 432, _Sakhart:m_ _Shankar_ v. _Ranu:handra_ _Babu_ _Mohire,_ I.L.R. 27 Bom. 279, _Muhammad_ _Muzafjar_ _A.Ii,_ In re. IL.R. 44 All. 339, _Sri_ _Siloart:olfn_ _Ramal/a_ & _Anr._ v. _State_ _of Bihar,_ I.L.R. 39 Pat. 228 and _Bharpet Mohammad_ _Hussain_ _Sahib_ & _A.nr._ v. _District_ _Registrar,_ _Kurnool,_ I.L.R. [1964] A.P. ), approved. ( 4) In any event, there was no basis for holding that the consideration for the deed was the '<IIllOllnt ~eceived by the sub-lessee from tloe persons to whom he assigned rights in the fiats etc, Those penona ccquired an independent right and title.-whether perfect or not~n before the impounded deed was executed, and their rights did not 11ow from the impounded deed. (340 F-0] The Judgment of tl1e Court was delivered by **Hegde,** _**l.**_ Both these appeals, the former by certificate and the later by special leave arise from the decision of the High Court of Bombay in a reference under section 54 _of the Bombay Stamp Act. CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 660 of 1967 and 58 of 1972. Appeals by certificate/ special leave from· the judgment and decree dated August 11112, 1964 of the Bombay High Court in Civil Reference No. 6 of 1959. ##### S. T. Desai, P. C. Bhartari, J. B. Dadachanj{, 0. C. Mathur and _Ravinder Narain,_ for the appellant (in both the appeals). _V._ _!J._ _Desai_ and _B._ _D._ _Sharma,_ for respondent No. 1 (in both ~e appeals). I . When Civil Appeal No. 660 of 1967 came up for hearing on a previous occasion, objection was raised as to the maintainability of the appeal on the ground that the High Court was not compeG tent to grant a certificate in the case under Art. 133 of the Consti• tution. At that stage, the appellant sought a.n adjournment of the appeal so as to enable it to move this Court for special leave against the impugned decision. That prayer was allowed by this Court. Thereafter the appellant sought and obtained special leave of this Court to appeal against the decision in question. Hence Civil H Appeal No. 58 of 1972 came to be filed. In view of this aPJlCI!]., we may now proceed on the basis that Civil Appeal No. 660 of 1967 stands withdrawn and the same is disposed of accordingly. Hereafter we shall only deal with Civil Appeal No. 58 of 1972. 334 SUPREME COURT REPORTS (1972] 3 S.C.R. The facts leading up to this appeal are as follows :On November 18, 1950, plot No. 79 at Palton Road, Bombay, admeasuring about 1,368 square yards was leased by the Government of Bombay for a period of 999 years from June 26, 1942 to one Lily Investment Corporation Ltd. On December 11, 1950, the said Lily Investment Corporation Ltd, gave a sub-lease of the said plot of land to Uttamchand Tulsi\las for a term of 999 years (less one day), from June 26, 1942. Thereafter Uttamchand constructed a building called "Himalaya House" on that plot consist· ing of several flats, shops and offices. Under various agreements, he appears to have assigned the right of occupation in those flats, shops and offices t.o several persons. One such agreement was with one Motiram Shewarama Vallicha. That was in respect of one flat. That agreement is in the record. As the High Court has placed considerable reliance on that document, it is necessary to quote the relevant clauses therein _viz._ 2, 5 and 16. Those clauses read thus: "2. That the Party hereto of the Second Part hereby agrees to acquire the block bearing No. 12 on the ground floor of the said building for the total sum of Rs. 10,000 (Rµpees ten thousand only). J ## _c_ D #, G H _S._ That the possession of the said block shall be deli vered to the party hereto of the Second Part provided all the amounts due under this agreement and particularly indicated in condition No. 3 hereof are paid by the party hereto of 1jhe Second Part to the Party hereto of the First Part and upon the delivery of such possession the party hereto of the Second Part shall be entitled to the use and occupation of the said block without hindrance PROVIDED NEVERTHELESS that nothing contained in these presents shall be construed as a demise in law of the said leasehold lands or any part thereof or the build ings thereon, such demise to take place only upon the transfer by a formal conveyance to a Co-operative Society or Incorpora1)ed body to be formed as hereinafter agreed. 16. That the party hereto of the First Part shall form a co-operative society or any other incorporated body recognized in law and the partY hereto of the Second Part shall join such co-operative society or any other incorporated body. The party hereto of the First Part agrees to convey transfer or assign to the said society or any other incorporated body as the case may be the aforesaid lands and buildings provided that the costs and expenses in connection with the A 8 HIMALAYA HOUSE _v._ REVENUE AUTHORITY _(Hegde,_ _J.)_ 335 requisition of such society or incorporated body, as well as the costs of preparing, approving, engrossing and stamping the Assignment, Transfer, or Deed of Conveyance required to be executed by the party hereto of the First Part shall be borne by such society, or the incorporated body as the case may be." On June 28, _1955,_ the appellant company was incorporated and registered under the provisions of the Indian Companies Act, 1913. On December 30, 1955, Uttamchand purported to assign all his rights in the building to the appellant company under a deed. In the preamble to that Deed after tracing Uttamchand's tille to the property, it is recited "AND WHEREAS the Assignee ### c Company has been formed for the better administration of the 0 E F tille to the property, it is recited "AND WHEREAS the Assignee Company has been formed for the better administration of the said building and for the protection of the interes.ts of the persons occupying flats, offices and shops therein AND WHEREAS the Assignor has agreed to assign to the Assignee all his interests in the said piece of land and building." Clause 1 of that Deed pro## vides as under :- · "l. The Assignor _(i.e._ Respondent No. 2) doth hereby for no consideration assign into the Assignee _(i.e._ the Appellant Company) ALL THAT the piece of land comprised in the before recited Lease together with the buildings a!]d erections now standing and being thereon toge~her with all rights easements and appurtenances thereto belonging and together with all the right title and interest whatever of the Assignor in the building known as Himalaya House EXCEPT AND RESERVED as in the before' recited Lease more particularly mentioned TO HOLD the same unto the Assignee or .all the residue now unexpired of the term of years granted by the before recited Lease SUBJECT to the rent reserved by and to the Agreements convenants and conditions contained in the before recited Lease henceforth on the part of the Assignee to be paid observed and perforn1ed." . The said document bore a stamp of annas 12 only. When the G same was presented for registration, the Sub-Registrar of Bombay impounded the same and sent it to the Assistanf Superintendent of Stamps, Bombay .. That officer by his letter dated June 26, 1956 mfonned the appellant company that "as it was formed of and for the ~erson~ who had purchased the flats in lhe buildi'ng, the real cons1deral!on for the Assignment was made up partlv of H what was paid by the flat holders and the status of the appellant ##### company was t~at of the nominee of the flat holders so far as the Assignment was concerned." He further stated that in the absence of any mention of consideration in the document, the then value 9-887 Sup;CI/72 . ' 336 SUPREME COURT REPORTS [1972] 3 S.C.R. of the premises was an index of the consideration. He purporting A to act under section 40 of the Indian Stamp Act, determined the stamp duty at Rs. 95,997 after valuing the building at Rs. 16,00,000. Further he imposed a penalty of Rs. 20,000. He called upon the appellant company to pay the stamp duty as well as the penalty. On re~eipt of that communication, the appellant company applied to the Chief Controlling Revenue Authority to B revise othe order of the Assistant Superintendent of Stamps or in the alternative refer the matter to the High Court for its opinion. Thereafter the Chief Controlling Revenue Authority made the reference referred to earlier to the High Court. He submitted two questions for the opinion of the High Court, _viz_ : "(!) Whether Himalaya House Co. Ltd. the Assignee in the Assignment dated 30th December 1955 is tlie nominee of the several flat holders who have purchased the flats in the Himalaya House and whether the Assignment in queStion is a Conveyance or a sale for a price whkh has passed from the hand of the flat holders long before t.he date of assignment. ### c **D** ( 2) Whether it was competent to the Assistant Superintendent of Stamps, under section 40 of the Indian Stamp Act, 1899 (now section 39 of the Bombay Stamp Act, 1958) to go beyond the terms of the document when i4 is mentioned in E the doc.ument that no. consideration is passed and assess the stamp duty in the manner mentioned by him in his order dated the 26th June 1956." The matter came up for hearing before a bench of Jihree Judges of the Bombay High Court presided 0 ver by the learned Chief Justice. **F** At the hearing, the learned Judges opined that the questions submitted by the Chief Controlling Revenue Authority were not appropriate and, therefore, they recast those questions as follows:- ' "l. Under which article in Schedule I to the Stamp Act should the "Assignment Deed in question be stamped? 2. If Article 23 applies in this case, what is the consideration for the Assignment Deed ?" G All the Judges unanimously held that the Article applicable to the case is Article 23 in the FirsU Schedule to the Indian Stamp Act, which will be !lereinafter referred to as "the Stamp Act". But **H** while answering the second question, the learned Chief Justice and Naik. J. opined that "the consideration for **the** Assignment **Deed** is A B ## c **D** E F HIMALAYA HOUSE _v._ REVENUE AUTHORITY _(Hegde,_ J,) 337 the total amount which was payable to the Assignor Tulsidas . under the agreements between him and the persons to whom he had, under those agreements, given the right to occupy the fiats, offices and shops in the building." But Mody J. differed from his colleagues and came to the conclusion that "the consideration is as mentio,ned in the Deed .of Assig11I11ent itself _i.e._ no considera **tion."** Uttamchand formed part of the consideration for the Assignment Deed in question. Naik J. went a little further and held that alternatively the Deed in question can be considered as a "gifti" under Art. 33 of Schedule I to the Stamp Act Mody J. opined that there is no basis to ho!d that the agreements entered into between Uttamchand and the various persons to whom the fiats, offices and shops had been assigned were similar to the agreement entered into between him and_ Motirmn Shewarama VaJlicha. He held that on the basis of the mate!ial before the Court, it was·not possible to cc;>me to the conclJ!SJ'?n that they had entered into agree _I_ All the Judges unanimously came to the conclusion that the consideration mentioned in the document is nil. This conclusion is obvious because Cta)I_se 1 of \he Assig11I11ent Deed says that the Assignor assigns his rights 'for no consideration'. All of them were also unanimous in their conclusion that for finding out the consideration, the concerned authorities (who will be hereinafter referred to as 'Revenue') cannot tra•,'\ll outside the document;_ it should be 'as set forth therein'. But the majority took the view that the Revenue was not bound to accept the quantum of consideration mentioned in the document; it could determine the same by taking into consideration the facts available from the impounded document. They fur(her held that the impounded document incorporates into itself the various agreements ·entered into between Uttamchand and the various persons to whom he had assigned certain rights _in r~sQCct of flats, offices and shops referred to earlier. In their view, t;he consideration paid by those persons to G H ments witl1 Uttamchand sumlar to the agreement, entered into between Uttamchan4 and Motiram Shewarama Vallicha. He further ~eld that on a P!ain reading of the Assignment Deed, it is ~ot Pc;>SS1ble to come to the con~lusion that !he terms and condi· lions Ill !he agreements entered mto by Uttamchand with those to ~horn he hll;d assigned fiats, offices and shops,.were incorporated mto. the Ass1gnl'llent D_eed. . None of the Judges upheld the conclusi<>n of the Assistant Superintendent of Stamps that the appellant company is a nominee of the persons to whom !he flats, offices and shops had been assign##### ed; nor did they agree with his conclusion that if in a document, the value of the rights assigned is not mentioned, it is permissible for the Revenue to assess their value independently. 338 SUPREME COURT RE!'OR.TS [1972] 3 S.C.R. The contention tha_t the appellant company is a nominee of the various persons to whom flats, offices and shops had been assigned was not pressed before us; nor was it urged before us that the Revenue is competent to make an independent assessment of the value of the rights assigned. Though at one stage, it was feebly suggested that the Deed of Assignment may be considered as a giit but that contention was not elaborated; nor do we see any merit in that contention because in the first place, it does not purport to be a gift; secondly, the valuation of "gift" under Article 33 of the First Schedule has to be made on the same basis as the valuation of a "conveyance" under Article 23 of that Schedule. Article 3 3 specifically says 1;hat the duty payable on a gift deed will be "same as a conveyance for a consideration equal to the value of the property as set forth in such instrument." For the purpose of this case, we shall proceed on the assumption, without deciding, that the charging words in Article 23 of the Stamp Act_ "where the amount or value of the consideration for such conve~ance as set forth therein" do net mean that the Revenue must have regard only to what the parties to the instruments have elected to state the considetation to be, but the duty must be assessed upon the amount or value of the consideration for the transfer as disclosed upon an examination of the terms of the instrument as a whole. We are of the opinion that the learned Chid Justice and Naik J. were not justified in holding tha~ the D"~u of Assignment incorporates into itself the various. agreements entered into between Uttamchand and the persons to whom he assigned flats, offices and shops. The only reference to tlhose pc.rsons in the Deed of Assignment is in the preamble .wherein it is stated ''AND WHEREAS the Assignor having erected a building known as Himalaya House on the said piece of land had granted to certain persons the right to occupy flats. offices and shops in the said building AND W~REAS llhe Assignee Company has been formed for the better administration of the said building and for the protection of the interests of the persons occupying the ilats. ofllces and shops therein." These clauses merely refer to the earlier transactions. · They do not' incorporate into the Assignment Deed the earlier agreements. with the persons referred to therein. Mere reference_ to some earlier transactions in a document does not amount to an incorporation in that document, of the terms and conditions relating thereto. From the language used in the Assignment Deed, it i~ not possible to come to the conclusion that the tem1s and conditions of the earlier transactions have been made a part of that Deed. Furllher barring one particular agreement, other agreements were not before the Court. Therefore, it is not possible to know what the terms and conditions p[ those agreements were. Before the terms and conditions of an A B ### c D E G H A B ### c D I 11 G H HIMALAYA HOUSE _v._ REVENUE AUTHORITY _(Hegde,_ J.) 339 agreement can be said to have been incorporatd into another document, the same must clearly show that the parties thereto intended to incorporate them. No such intention ·in available in this case. It was urged that in view of section 27 of the Stamp Act, it was permissible fo~ the Revenue to look into the terms and conditions of the agreements entered into by Uttamchand with the various persons to whom he had assigned fiats, offices and shops •. particularly in view of the fact that the impounded document makes reference to those agreements. We are not able to accept that contention. Section 27 prescribes that "The consideration (if any) and all other facts and circumstances affecting the churgeability of any ins~rument with duty, or the amount of the duty with which it is churgeable shall be '.ully and truly set forth therein." It is true that in view of this provision, the-parties to a docu-. ment are requireµ 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 Acf em· powers the Revenue to make an independent inquiry of the value of the property conveyed for determining the duty chargeable. Article 23 is the Article that governs the charging of stamp duty on "conveyance". That Article' to the extent relevant for our pre· sent purpose reads : "23. Conveyance (as defined by section 2(10) no~ being #### a transfer charge or exempted under section 52Where the amount or value of the consideration for such conveyance as set forth therein .......... " This Article bas come up for consideration before various High Courts on a number of occasions. In _Ramm Chetty_ v. _Mohamed_ _Ghouse(_ _[1]_ _)_ the Calcutta High Court held that in determining whether a document is sufficiently stamped for the purpose of deciding upon its admissibility in evidence, the document itself as it stands, and not any collateral circumstances which may be shown in evidence must be looked at. In _Sakharam_ _Shankar_ _and_ _Others_ v. _Ramchandra_ _Babu_ _Mohire,_ (') it. was held that in determining the question whether a particular docwnent is sufficiently stamped, the Court should look at the instrument as ii stands. A Full Bench of the Allahabad High Court in the matter of _Muhammad_ _Muzaf]ar_ _Ali(')_ held that if in a deed of gift the value of the property dealt with is not set forth, the deed does not require any stamp, and it is not within the competence of the Collector to have the said property valued in order to assess the duty (I) (!LR 16 Cal 432). 2 (!LR 27 Bom 2791. Pl (!LR 44 All. 339). 340 SUPREME COURT REPORTS (1972] 3 S.C.R. payable. If, however, the value of the property is intentionally omitted with a view to defraud the Revenue, a prosecution will lie und~r section 64 of the Stamp ~ct. A Division Bench of the Patna High Court in _Sri_ _Sitaram_ _Rama/ia and Another_ v. _State_ oj _Bihar(')_ held 1that die Collector had no power under section 40 of the Stamp Act to embark upon an inquiry with regard to the market value of the properties covered by the document! and require the payment of further stamp duty in accordance with his finding as to valuation and, therefore, that the impugned orders of the Collector, Commissioner and the Board were _ultra_ _vires_ and were liable to be set aside under Article 227 of the Constitution. Therein the Court was c.!Jnsidering the scope of section 5 8 of the Stamp Act which requires ·that an instlrument of settlement should be stamped with the same <,luty asl a bond "for a sum equal to the mnount or value of th~. property settled as set forth in such settlement."' The Court observed that the words 'as set forth in the settlement" in the section refer back to the word "value" and not to the words "property settled". Recently the same view was taken by the A,ndhra Pradesh High Court in _Bharpet_ _Mohammad_ _Hussain_ _Sahib_ _and_ _Another_ v. _District_ _Registrar,_ _Kurnool(2)._ No decision taking a contrary view was brought to our notice. The question arisin_g for decision in this case is settled by _stare_ _decisis._ We are entirely in agreement with the view expressed in those decisions. Even if we had bleen inclined to place a different interpretation on Article 2}, we would have hesitated to do so in view of the long line of decisions to some of which we have already ma!le reference. 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. Under any circumstance, there was no basis to hold that the consideration for the impounded Deed is the total amount received by Uttamchand under the agreements, entered into between him and the persons (o whom he had assigned certain rights in the fiats, offices and shops in the building. Those persons had an independent right of their own. Their rights did not flow from the impounded Assignment Deed. Whether the title obtained by them was perfect or not, there is no denying of the fact thllt they had acquired valuable rights even before the impounded Deed was executed. A B ### c D E F G For the reasons menti,oned above, we allow this appeal and in place of the answers given by ihe High Court, we answer the ques tion formulated by that Court 11hus : "I. The Article applicable in this case is Article 23 in H the First Schedule to the Stamp Act, and <I) ~~(ILR 39~~ ~~Pat • 228).~~ (2) !LR. (1964) A.P. I. ) A B HIMALAYA HOUSE _v._ REVENUE AUTHORITY _(Hegde,_ _J._ j 341 2. the consideration is .as mentioned in the Deed of Asslgome.nt itself _i.e._ no consideration." The first respondent shall pay the costs·· of the appellant ip Civil Appeal No. 58 of 1972. There will be no order as to costs in Civil Appeal No. 660 of 1967. V.P.S.