Partly allowed

Atul Kumar Singh v. Commissioner Faizabad Division and 2 Others

Allahabad HC12 Jul 2023WRIC/1002092/2003

Case brief

AI extract

What is this about?

The High Court held that a permanent non-commercial building on the transferred property is part of the immovable property and liable for stamp duty valuation. However, the court quashed the order imposing penalty on the petitioner, as the State cannot claim ignorance of property conditions executing its own deed, while upholding the tax reassessment without penalty.

What did the court decide?

Quashed penalty; upheld valuation; reassessment order without penalty.

Atul Kumar Singh Vs Commissioner Faizabad… — Pension and Retirement Benefits | Allahabad HC (2023)

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Court No. - 20

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Case :- WRIT - C No. - 1002092 of 2003

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Petitioner :- Atul Kumar Singh Respondent :- Commissioner Faizabad Division And 2 Others Counsel for Petitioner :- S.K. Mehrotra,Anil Kumar Srivastava,Ram Ji Das,V.P.Das

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Counsel for Respondent :- C.S.C.

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Hon'ble Manish Mathur,J.

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Heard learned counsel for petitioner and Mr. Vikram Soni learned State Counsel appearing on behalf of opposite parties.

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Petition under Article 226 of Constitution of India has been filed seeking quashing of the notice dated 5th September, 2002, order dated 28th October, 2002 under Section 47-A of Stamp Act and the order dated 5th June, 2003 passed under section 56 of the Act whereby instrument of transfer dated 15th July, 2001 was found under valued and therefore appropriate valuation along with penalty and interest has been imposed.

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Learned counsel for petitioner submits that with regard to property in question, initially a registered agreement to sell was executed in favour of petitioner on 29th January, 2000. Possession in lieu thereof was also transferred to the petitioner. Before execution of any sale deed, the property being nazool in nature, as per government policy rights for conversion of lease to freehold rights was sought for and in pursuance of which, the petitioner having acquired nomination rights to apply for freehold, did so. In pursuance thereof, the District Magistrate concerned executed deed of transfer of freehold rights dated 7th February, 2001 registered thereafter on 15th February, 2001.

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Subsequently notice under section 47-A of the Act was issued to the petitioner on 5th September, 2002 culminating in passing of the impugned orders on the ground that petitioner did not disclose the fact that a residential building was constructed over the property in question, which as such was not valued and on that basis, the instrument of transfer was found to be under valued.

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Learned counsel for petitioner submits that the authorities concerned have erred in passing the impugned orders inasmuch as petitioner did not acquire any rights or title over the residential building constructed over property in question and by means of registered agreement to sell dated 29th January, 2000 as well as the registered deed for transfer of freehold rights, only rights over the land was acquired by petitioner but

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not over residential house over which the petitioner did not acquire any title and as such was not required to be valued.

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It has been further submitted that the deed of freehold rights excluded in favour of petitioner was executed by State Government through the Collector, Faizabad who even otherwise was having complete knowledge with regard to status and nature of the property concerned and as such it can not be assumed that there was any concealment by the petitioner particularly since the deed in question has been executed between the petitioner and State and not between private individuals.

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In the alternative, learned counsel for petitioner has submitted that since the State being the executor of the deed is fully aware of the facts and situation of the property in question, there can not be said to be any concealment of material fact due to which there was no occasion to impose any penalty on the petitioner.

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Learned State Counsel appearing on behalf of opposite parties has refuted submissions advanced by learned counsel for petitioner with submission that impugned orders have correctly indicated the fact that the agreement to sell dated 29th January, 2000 was accompanied with a transfer of possession over the property concerned and therefore was liable to be considered a deed of conveyance in terms of section 3 of the Stamp Act read with Article 23 (explanation) of Schedule I A of the Act and valued accordingly.

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Learned counsel has also drawn attention to the deed of freehold to submit that the deed itself indicates that in case the property in question would have any construction raised thereupon either on the date of execution of deed or even in future, petitioner would be liable to payment of taxes thereupon and as such also the liability of petitioner is clearly indicated.

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Learned counsel has also placed reliance on Section 27 of the Stamp Act read with Rules 3 and 4 of the U.P Stamp (Valuation of Property) Rules 1997 to submit that in case of transfer of immovable property with regard to non commercial building, the kind of construction and value of building would be liable to stamp duty. He has also placed reliance on the judgment rendered by Supreme Court in the case of Duncans Industries Limited versus State of U.P. passed in Civil Appeal No. 5929 of 1997 to buttress his submissions.

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Upon consideration of submissions advanced by learned counsel for parties and perusal of material on record, the

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question which arises for consideration is whether the petitioner would be liable to pay stamp duty for constructions raised on the property which is subject matter of instrument of transfer?

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With regard to aforesaid question, it is evident that initially the petitioner had acquired rights of possession and user over property in question by virtue of agreement to sell dated 29th January, 2000 whereby possession over the property was also transferred to him. Before execution of any sale deed, in pursuance of policy of the government, petitioner applied for freehold of the property and a deed of transfer of freehold rights in favour of the petitioner was executed by State Government through the Collector concerned vide deed dated 7th February, 2001, registered on 15th February, 2001. It is relevant that the deed itself indicates that petitioner would be liable to pay taxes on any construction made on the property concerned either on the date of execution of deed or even in future or even with regard to construction raised in future. Although the said condition does not specifically indicate stamp duty but it does indicates liability being fastened upon the petitioner for payment of dues and taxes on constructions raised on the property.

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As per explanation of Article 23 also, an agreement to sell an immovable property where possession is delivered before execution or at the time of execution or is agreed to be delivered without executing conveyance, such an agreement would be deemed to be a deed of conveyance and stamp duty thereon is required to be paid as per provisions of Section 47-A of the Act. In terms thereof, the agreement to sell executed in favour of petitioner on 29th January, 2000 was clearly a deed of conveyance. Nonetheless since the deed relvant for the purposes of adjudication of this case is not deed of agreement to sell but the freehold deed, it would also be relevant to advert the judgment rendered by the Supreme Court in the case of Duncants Industries Limited (supra) wherein the question framed was whether by conveyance deed, plant and machinery fastened on the land on a permanent basis could also be deemed to have been transferred and valued for the purposes of stamp duty payable.

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With regard to aforesaid question, Supreme Court has agreed with the finding of the High Court concerned that plant and machinery being embedded in the earth permanently with an intention of running the factory concerned without any intention of the party to remove the same for the purpose of any sale etc. would deemed to be a permanent fixture and would therefore be deemed to be an immovable property capable of valuation for the purposes of stamp duty with regard to its

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execution of sale deed. The Supreme Court has noticed that from the recitals in the agreement of sale in the aforesaid case, the conveyance deed conveyed not only the land but the entire fertilizer business including plant and machinery but the said factor would not in the considered opinion of this court, make the aforesaid judgment distinguishable since plant and machinery situate on the property in question were deemed to be a part of the immovable property and therefore subject to stamp duty as per the deed on the basis that such a plant and machinery being permanently embeded on the land in question would form a part and parcel of the property which was subject matter of deed of transfer.

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Upon applicability of aforesaid judgment, in the present facts and circumstances of the case, although the deed of transfer does not pertain to any transfer of business but nontheless it is a fact that property in question contained an immovable property in the nature of non commercial building which was a permanently affixed feature of the property which is subject matter of instrument of transfer. In the considered opinion of this court, since the petitioner does not indicate any aspect with regard to removal of the non commercial property nor its subsequent sale distinct from the land on which it is situate, the construction erected on the land in question would therefore form a part and parcel of the property which is subject matter of the instrument of transfer and would therefore be liable to valuation along with the instrument of transfer in accordance with provisions of the Stamp Act.

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The said aspect also finds support from the provisions of section 27 and Section 47-A of the Act read with Rules 3 and 4 of the Rules of 1997 whereby the nature of the building situate on the land which is subject matter of instrument of transfer is a relevant factor for the purposes of valuation of the deed.

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In view of the discussion made herein above, it is evident that the building erected on the property which is subject matter of instrument of transfer being a permanent fixture on the aforesaid property was liable to be valued along with the deed of transfer.

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So far as imposition of penalty is concerned, the submissions of learned counsel for petitioner appear to be correct that the deed of freehold would not fall within realm of a deed executed between private parties since it has been executed by the State Government through the Collector concerned for which purpose necessarily reports from the relevant authorities must have been before Collector concerned before execution of deed of freehold. The State as such can not

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be assumed to be unaware of the situation and condition of the property sought to be transferred particularly in its right of eminent domain. As such it does not appear to reason for the State Government to state that there was concealment by the petitioner at the time of execution of deed. As such this court finds imposition of penalty upon the petitioner to be improper.

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In view of aforesaid, the impugned order dated 28th October, 2002 passed under section 47-A of the Act is quashed partly so far as it relates to imposition of penalty upon the petitioner. The order dated 5th June, 2003 passed under section 56 of the Act also accordingly is partly quashed by issuance a writ in the nature of Certiorari with regard to upholding the imposition of penalty upon petitioner. The valuation inferred upon the non commercial building on the property is however upheld.

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It is made clear that reassessment of tax liability of petitioner would be done taking into account the under valuation at the rate of Rs.1,30,900/- with interest from Ist June, 2002 as has been indicated in the impugned order itself without adverting to the amount of penalty.

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Resultantly the writ petition is party allowed in terms of aforesaid directions. Parties to bear their own costs.

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Order Date :- 12.7.2023 prabhat

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Digitally signed by :- PRABHAT KUMAR High Court of Judicature at Allahabad, Lucknow Bench

Atul Kumar Singh v. Commissioner Faizabad Division and 2 Others

Case brief

What is this about?

What did the court decide?

Atul Kumar Singh v. Commissioner Faizabad Division and 2 Others

Case brief

What is this about?

What did the court decide?

What the court decided

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