Adjudication of Proper Stamp Duty
By M.K. Gokhale, Deputy Supt. Of Stamps (Retd.)
Section 31 of the Bombay Stamp Act, 1958 provides about the adjudication of proper Stamp Duty. The applicant under this section has to submit an instrument executed or unexecuted and previously stamped or not for the purpose of opinion to the collector of stamps and for this purpose, the applicant has to pay a fee of Rs. 50/-. On receipt of the application of adjudication and the instrument, the collector has to form his opinion as regards its chargeablity and then express his opinion to the applicant. Sub Section (4) of Section 32 of the Act proves that when the instrument is brought to the collector for adjudication within one month from the date of its execution, the person liable to pay stamp duty within 60 days form the date of service of the notice of demand in respect of the stamp duty adjudicated by the collector. If the applicant failed to pay the said stamp duty within the stipulated period of 60 days, the person is liable to pay a penalty at the rate of two percent per month or part thereof, from the date of execution of such instrument.
It is therefore necessary to pay stamp duty within 60 days from the date of the demand notice served by the collector to avoid levy of penalty.
In view of the penal provision in sub-section (4) of section 32 of the Act, the applicant should take care to submit the unexcelled document for adjudication under section 31 of the Bombay Stamp Act, 1958. In case of unexecuted instrument the collector has no power to levy penalty and if the applicant does not agree with the determination of Stamp Duty, he can withdraw his document from adjudication.
National Co-op. Hsg. Fed. Conference moots exemption of stamp duty and registration fee
By A.T. Bureau
The 19th Conference of the Chief Executive of apex Co-operative Housing Federation, organised by the National Co-operative Housing Federation of India on 20th May 2000, at Kochi, urged the State governments to (I) exempt housing co-operative from payment of stamp duty and registration fee (ii) contributed liberally towards the share capital of their respective apex. Federations so as to strengthen their financial base thereby enabling them to raise their borrowing power and (iii) allot 30% of the acquired land for housing purpose to housing co-operatives.
The following are some of the recommendations made by the conference.
* The LIC, NHB and HUDCO should be allocated more funds to housing co-operatives in order to enable them to meet the targets smooth under the two million housing programme
* The National Housing Bank should reduce its rate of interest from 12.0% to 11%.
* The NHB should contribute towards share capital of apex Federations to raise refinance upto 12 times of their net owned funds.
HUDCO should provide loans to apex federations on the basis of security of floating charge. It should not charge processing fee and front end fee from apex federations. It should reduce interest rate by 1% on block loans to apex Federations.
* The State Governments, which have so far, not constituted special committees on housing co-operatives in their respective States, should be requested to do so immediately. The conference was presided over by Shri S.N. Sharma, Chairman NCHF, who is a Minister in the Madhya Pradesh Ministry.
In his speech, Shri Sharma said that in line with the National Agenda, a two million housing programme has been launched since 1998-1999 under which, the Union government has fixed a target for co-operative sector to build one million houses each year predominantly for weaker sections and low income groups in the country. He informed the conference that during the year 1998-99 housing co-operatives completed the construction of about 17,000 units in urban areas with the loan assistance received from the apex federations. He proudly mentioned that the progress made by co-operatives during 1998-99 was well appreciated by the Government of India.
* Shri Sharma advocated for the Policy Support to housing co-operatives as envisaged in the National Housing and Habitant Policy in order to achieve the targets for house construction smoothly and efficiently besides adequate flow of funds from LIC, NHB and HUDCO allocation of 30% of land acquired for housing purpose by State Government exemption from payment of stamp duty and registration fee, proper legal frame work and liberal contribution in the share capital of apex Federations by State Governments.
Shri Sharma also said that the separate model law on Housing co-operatives, prepared in association with NCHF, was still under the consideration of the government of India. Efforts were being made to set it finalised early so as to provide proper legal frame work to housing co-operatives for their smooth functioning. He pointed out that funds raised by apex Federations from funding agencies had become expensive to members of housing cooperatives compared to the prevalent interest rate on housing finance offered by other agencies. In this connection, he referred to the interest rates offered by the LIC and NHB, which were still on higher side.
Registration fee & stamp duty payers association’s stand only Leave & Licence
By A.T. Bureau
As per Section 55 of The Maharashtra Rent Control Act, 1999 Registration of Leave and Licence Agreement has been made compulsory with effect form 31/03/2000. The Registration Fee and Stamp Duty Payers association along with various property related associations had filed their objection for the stamp duty on refundable deposits as well as levy of Stamp Duty on Leave and Licence Agreement Representatives of the Association had met the Honourable Chief Minister Shri Vilasrao Deshmukh, the Honorable Revenue Minister Shri Ashok Shaven as well as the Senior Officers at Mantralaya. The difficulties being faced by the stamp duty payers were brought to the 2000/2120/CR/592/M-I has been issued stating that a token registration fee of Rs. 1,000/- would be levied on Leave and Licence Agreement if the property is situated in Municipal Corporation limits and of Rs. 500/- if the property is situated in the other areas irrespective of the deposits, type of the premises or size of the premises. According to the verbal information receive from the authorities Leave and Licence Agreement has to be stamped on Rs. 20/-. However no mention is made about levy of stamp duty in the abovesaid Notification. This could give power to the authorities to interpret the documents as that of Lease. It is the belief of the Association that Professionals would advise their clients to draft agreements of Leave and Licence with renewal clauses rather than drafting lease agreements so that the tax payers can save money on payment of stamp duty. The Government could loose crores of rupees because of drafting error. This is on our opinion is a legal loopholes which will have to be plugged by the authorities.
The above Notification dated 8/6/2000 proposes to levy Registration Fee of Rs. 1,000/- or Rs. 500/- depending on the place where the property is situated from the date of publication of the Gazette. The Maharashtra Rent Control Act, 2000 has come into effect from 31st March, 2000 and all those persons who have executed the documents between 31/3/2000 & 8/6/2000 could unnecessarily be penalized. This definitely had not been intention of the Government.
With the registration of Leave and Licence being made compulsory it would not be surprising that the cash stripped Municipal Corporations would collect information about Leave and Licence Agreements and start issuing notices for levy of higher property tax to the owners of property which have been given on Leave and Licence. The Licensor has to pay not only excess property tax, but also society non-occupancy charges as well as income tax on the income.
The Association appreciate the steps taken by the Revenue Authorities of charging less amount as Registration Fees as well as willingness to accept the practical suggestions being made by the various property related associations with regards to Leave and Licence Agreement. However a written clarification from the Revenue Department stating that the stamp duty of Rs. 20/- only will be levied on Leave and Licence Agreement will be of immense help in clarifying the above said issue.
The Registration Fee and Stamp Duty Payers Association is thankful to the media for expressing the views of the members of the public particularly the Real Estate Community as regards levy of Stamp duty on Leave and Licence Agreement.
PAYMENT OF STAMP DUTY
By A.T. Bureau
The Registration Fee and Stamp Duty Payers Association has brought to the notice of the Honourable Minister for Revenue as well as the Inspector General of Registration that as of date franking facilities are available to the residents of the Mumbai at Town Hall, Shaheed Bhagat Singh Road, Near Reserve Bank of India, Mumbai – 400023 and at MMRDA Building, Bandra Kurla Complex, Bandra (East), Mumbai – 400051. It has been the suggestion of the Association that franking facilities should be available at the central Suburbs also. In this connection, the Association has also pointed out that as of date, franking facilities are available at the Central Suburbs also. In this connection, the Association has also pointed out that as of date, franking facilities are available at only two places i.e. Mumbai City and in Western Suburb. No facility for payment of Stamp Duty within a few kilometers distance is available to the lakhs of residents between Dadar to Mulund and Wadala to Mankhurd. As a result of the same, huge amount of cash to be carried out by the members residing in the Central Suburbs.
The Association has been given to understand that having regards to the practical difficulties faced by the residents of the Central Suburbs, the authorities are considering installation of franking machine at Ground floor at the Chembur office in the month of April 2000. The address of the Sub Registrars Office is Ground floor, New Administrative Building, Phase II, Ramkrishna Chemburkar Marg, Near Chembur Fine Arts Hall, Chembur (East), Mumbai – 400071. When the franking facilities would start at Chembur, it would be a big relief to the Stamp Duty Payers at Central Suburbs.
The Association also requests the authorities to accept the cash at all the office upto a sum of Rs. 50,000/-. At present only cash upto Rs 25,000/- is accepted by the authorities. The Association also requests the authorities that they should deliver the franked documents on the same day to the parties so that they should deliver the franked documents on the same day to the parties so that the mental related transactions, the parties executed the documents only after the proper stamp duty has been paid on the documents.
The Association had through its press release in 1999 requested the authorities that the map of various places in Maharashtra as well as the market value of various localities of Maharashtra should be available to the common man through the medium of internet. The Association is given to understand that the website with the market value of property will be available on the Internet very shortly.
The Association further states that on account of the recent amendments to the Rent Act all transactions relating to rental premises will have to be compulsorily registered. This will increase the pressure of work at the Sub Registrars for the city of Mumbai. It is not surprising to find that because of heavy work load a lot of pressure is there on the Sub-Registrars. At times, one has to spend more than five hours just to register a document. Also the precious time of the Tax payers is wasted in complying with the bureaucratic formalities. The stamp duty rates for transfer of tenancy as per Article 5 (g-d) of the Bombay Stamp Act 1958 are the same for all the areas of the city of Mumbai which is Rs. 1,000 per sq.metre for commercial premises and Rs. 100/- per sq.metre for residential premises. There is a wide-up gap in the prevailing prices at Nariman Point, Peddar Road, Govandi & Charkop. Yet from the stamp duty point of view on transfer of tenancy the stamp duty liability is the same. The Association herewith requests the newly appointed Inspector General of Registration Shri Bhoge to reduce the hardships of the common man and take pragmatic steps to simplify the Bombay Stamp Act 1958 and appoint more staff at the Sub Registrars Office to reduce the hardships of the tax payers.
Stamp Duty on Leave & License Agreement
By Bankimchandra Khona, Solicitor
Under Section 55 of The Maharashtra Rent Control Act, 1999, now even an Agreement for Leave & Licence needs to be registered. Therefore, the question of payment of stamp duty on Leave and Licence Agreement arises. There is no specific provision made for payment of stamp duty on Leave & Licence Agreement under Schedule I of the Bombay Stamp Act, 1958. Hence the stamp duty of Rs.20/- becomes payable under Article 5(h) of Schedule I of Bombay Stamp Act.
2. It has been stated that Stamp Authority / Registration Authority proposes to levy stamp duty by treating a Leave & Licence Agreement as a Lease and to levy stamp duty as per Article 36 of Schedule I of the Bombay Stamp Act. Article 36 of Schedule I of Bombay Stamp Act is with regard to the stamp duty payable on a lease. There is no mention therein whatsoever about a Leave & Licence Agreement.
3. Can Stamp and Registration Authorities equate Leave & Licence with a Lease ? Can the Authorities, therefore, insist on levying stamp duty on a Leave & Licence Agreement not Rs.20/- but as per Article 36 depending upon the period of the Licence ? There will be a vast difference in payment of stamp duty as per Article 36 of Schedule I of the Bombay Stamp Act and as per Article 5 (h).
4. It is respectfully submitted that the Leave & Licence and Lease / Tenancy Agreement are two entirely different kinds of document which have different legal implications and effect.
5. The Lease is defined u/s. 105 of the Transfer of Property Act, which reads as under :-
“105. Lease defined.- A lease of immovable property is a transfer of a right to enjoy such property, made for a certain time, express or implied, or in perpetuity, in consideration of a price paid or promised, or of money, a share of crops, service or any other thing of value, to be rendered periodically or on specified occasions to the transferor by the transferee, who accepts the transfer on such terms.
6. A Licence is defined u/s. 52 of the Indian Easements Act, 1882. The said Section 52 reads as under :
“Where one person grants to another, or to a definite number of other persons, right to do, or continue to do, in or upon the immovable property of the grantor, something which would, in the absence of such right be unlawful and such right does not amount to an easement or an interest in property, the right is called Licence”.
Lease and Licence are defined under two different statutes.
7. The essential distinction between a Lease and a Licence is that in a Lease, there is transfer of interest in the property while in the case of licence, there is no such transfer although the Licensee acquires only a personal right to occupy the property. This principle has been confirmed by number of High Courts and Supreme Court judgements (AIR 1968 S.C. 175 (178), AIR 1989 S.C. 1816 (1990), Second Law Report 381, etc.).
8. U/s. 56 of the Easements Act, a Licence is personal and the Licence cannot be transferred by the Licensee, whereas Lease, except in the case where Bombay Rent Act is applicable, is transferable. Under Section 108(B)(j) of the Transfer of Property Act, the Lessee is not only entitled to transfer his leasehold right but can also mortgage or sub-lease the whole or any part of his interest in the property, whereas the Licensee cannot transfer or mortgage or grant sub-license to any person. The Licensee cannot sue a stranger in his own name, whereas the Lessee is entitled to sue a stranger on his own name. The License is revocable by the Licensor under Section 60 of the Easements unless it falls within two exceptions mentioned in that Section, the Lease is not by the Lessor. The licence comes to an end when the Licensor makes an assignment of his interest in the property, whereas a lease continue to be valid and binding on the Assignee of the Lessor when the Lessor assigns and transfers his interest in the property which is called a transfer of “reversionary right”.
9. Now U/s. 7 of Maharashtra Rent Control Act, 1999, the licence and tenancy are separately defined. The licence is defined under the Rent Act u/s. 7(5), and the tenancy is defined u/s. 7(15) of the said Act.
10. The basic test to distinguish a Lease from Licence is the intention of the parties.
11. Explanation B of Section 24 the said Rent Act, states that an Agreement of Licence in writing shall be conclusive evidence of the facts stated therein. In view of Explanation (B) to Section 24, once it has been mentioned in an Agreement that same is Leave & Licence Agreement, then it is a conclusive evidence of the fact that it is a Licence and not a Lease and that intention of the parties is to have a licence and not a lease. In view of the said provision, now it is not open for anybody much less Stamp Authority to contend when Agreement is of Leave & Licence that the same is Lease. In case of licence for residential premises, Owner/Licensor is entitled and has to proceed u/s. 24 of the said Act, whereas in tenancy agreement for recovery of possession, the Lessor is entitled to initiate ejectment proceedings under Chapter IV of the Rent Act and under Section 33 of the said Act has to file a suit in the Court of Small Causes at Mumbai .Therefore, there are two different provisions under the Rent Act in respect of the recovery of possession by the Licensor and by the Landlord/Lessor. There are other various provisions under the Rent Act where distinction is made between the Agreement of Tenancy and the License.
12. In case of recovery of possession by the Lessor or Landlord to which provisions of said Maharashtra Rent Control Act applies, will have to file a suit for ejectment in Small
Causes Court only. Whereas in case of licence of a residential premises, the proceedings are to be taken u/s. 24 before the Competent Authority.
13. In view of Explanation B to Section 24 of the Rent Act, once the document states that it is a licence granted by the Licensor to the Licensee, it is conclusive proof that it is a licence and that it was the intention of the parties that it has to be Licence and not Lease. Such document will be covered by the Easements Act, the Licensee will not be entitled to transfer, mortgage, grant sub-licence. The licence, on the death of Licensee, will come to an end. It is submitted that in such circumstances, the licence being personal permission, it is not open for Stamp Authorities to say that even though Agreement is of Leave & Licence but it could be construed as a Lease. it is respectfully submitted that Stamp Authority in view of specific provision of Explanation 24 of Rent Act cannot treat a Licence as Lease on the ground that document is not licence but in fact it is lease.
14. The interest and right of a lessee or tenant are heritable under the Transfer of Property Act as also under the Bombay Rent Act. But the right to use premises is not heritable in case of Leave & Licence. On the death of a Licensee, his heirs will not inherit a right as a Licensee to use the premises. Therefore, considering the definition of the Lease and Licence, both are different under all relevant Acts. Both Agreements have different meanings, legal effects and consequences. It is abundantly clear that lease and/or tenancy agreement is distinct from Leave & Licence Agreement. One cannot treat a Leave & Licence Agreement as a Lease and claim stamp duty as per Article 36 of Schedule I of Bombay Stamp Act.
Stamp Duty on tenancy Agreement and
Leave & Licence Agreement
By Bankimchandra P.Khona
From 1st April, 2000 a Tenancy Agreement and a Leave & licence Agreement under section 55 of the new Rent Act are required to be in writing and registered.
Question will arise as to payment of stamp duty on such Tenancy Agreement and Leave and licence agreement First we will consider the provisions of Tenancy Agreement.
Agreement of monthly tenancy will be required to be stamped under Article 36A(I) of Schedule 1 of the Bombay Stamp Act. The stamp duty leviable shall be same as is leviable on conveyance under clauses a, b, c or d as the case may be of Article 25 for the whole amount of rent payable or the amount of average annual rent, whichever is lower. It is possible to interpret Article 36A(1) of Schedule 1 of Bombay Stamp Act in two different manner. In case of monthly tenancy, is it amount of average annual rent or is it only monthly rent required to be ascertained and on such average annual rent or monthly rent stamp duty will be payable as per the applicability of clause a,b,c,d or e of the said Article 25 of Schedule 1 of Bombay Stamp Act ? The words used in the said Article is for the whole amount of rent payable or amount of average annual rent whichever is lower. It is submitted that the monthly tenancy is for a month and continue till it is terminated. Therefore, the period of tenancy is only a month and stamp duty should be calculated on a monthly rent and not on average annual rent. In case of Mumbai, for (a) the non-residential premises and (b) the residential premises which are not part of a co-oeprative housing society building or to which Maharashtra Apartment Ownership Act, 1970 does not apply Stamp Duty is 10%. However, in case of residential premises of a building belonging to a co-operative housing society or the premises to which Maharashtra Apartment Ownership Act, 1970 applies Stamp Duty shall not be 10 per cent but as per the schedule of Stamp Duty which is lower and wherein the maximum rate is 8 per cent. In short, Article 36 of Schedule I of the Bombay Stamp Act will cover the payment of Stamp duty on monthly tenancy agreement.
It may be pointed out that under Article 36, in addition to the Rent, if any fine or premium or money is advanced or to be advanced in addition to the rent fixed, then on such fine or premium or money advanced or to be advanced, additional duty is payable as per Article 25 of Schedule I of Bombay Stamp Act, i.e. 10 per cent in case of non-residential premises and residential premises which are not within the co-operative housing society buildings or the premises to which the provisions of Maharashtra Apartment Act does not apply and in case the premises of a building of a co-oeprative housing society or to which the Apartment Act, applies, the concessional rate as state hereinbefore shall apply.
Explanation I of Article 36 provides that rent paid in advance shall be deemed to be premium or money advanced within the meaning of said Article. Therefore, any rent paid in advance will be considered as premium or money advanced and on the same, stamp duty at aforesaid rates will be required to be paid.
Explanation II of said Article further provides that if the tenants agrees to pay recurring charges such as Government revenues, the landlords’ share of municipal rates or taxes which are required to be paid by the landlord, then such amount shall also be deemed to be part of rent and naturally such rate or taxes or shares will attract stamp duty at the aforesaid rates of 10 per cent or concessional rate of depending upon the nature of the premises.
Some times the question arises as to what happens to the interest-free security deposit. Will they be considered as fine or premium ?
Will any stamp duty be payable on the same ?
We are told that Stamp Authorities consider the income which the landlord will earn of the said security deposit as rent and such yearly income is being added to the rent and the stamp duty is claimed by the stamp authorities on such amount. In our respectful submission, there is no provision under the Stamp Act to recover any stamp duty on interest free security deposit which is required to be returned on the determination of tenancy or any income which would be earned out on the same or any assumed income. There is a provision for recovery of such stamp duty and therefore by any letter or order or circular or notification, stamp duty authorities cannot claim or recover any stamp duty. It is being said that there is internal letter or circular for recovery of such stamp duty. It is submitted that under no letter or writing or circular such recovery can be made as stamp duty unless the same squarely falls within any one or more Articles of Schedule I of Bombay Stamp Act. Therefore, in our opinion, no extra stamp duty could be levied for interest-free security deposit which is required to be returned at the determination of tenancy or before that. Such deposit is neither fine nor premium nor any amount advanced.
It is also being claimed or said that under the provisions of Article 5(g-d), stamp duty is payable on the are of the tenanted property. The said Article 5 (g-d) applies in a case where tenancy rights are being transferred by a tenant himself. The said Article 5(g-d) has no application when landlord creates tenancy in favour of a tenant. It is submitted that Article 5(g-d) has no application in case of new tenancy agreement between the landlord and tenant.
In short, stamp duty will be payable either at 10 per cent or at concessional rate only on the consideration of rent received or fine or premium paid or any money advanced or to be advanced or payment of share of the landlord to Government Revenue, cess, municipal rates or taxes.
Now we will consider payment of stamp duty on Leave & Licence Agreement
Leave & Licence Agreement and the Tenancy Agreement are both different types of Agreement. The tenancy agreements are governed by the Transfer of Property Act and the Maharashtra Rent Control Act. The Maharashtra Rent Control Act. The Leave and Licence Agreement are governed by the Easement Act and Maharashtra Rent Control Act. The Maharashtra Rent Control Act also distinguishes between Leave and Licence Agreement are governed by the Easement Act and Maharashtra Rent Control Act. The Maharashtra Rent Control Act also distinguishes between Leave & Licence Agreement and Tenancy Agreement and therefore both of them are not same.
We are told that Stamp Authorities apply Article 36 of Schedule I of Bombay Stamp Act and claim of stamp duty on Leave & Licence Agreements. In our humble opinion, Article 36 of Schedule I of Bombay Stamp Act cannot and does not apply to Leave and Licence Agreement. Leave and Licence Agreement falls within Article 5(h) of Schedule I. As there is no such specific provision of Leave & Licence Agreement under Schedule I, Article 5(h) will apply and only stamp duty of Rs. 20/- is required to be paid. No stamp duty could be recovered under Article 36 of Schedule I of Bombay Stamp Act. Such a demand is not legally valid. Leave & Licence Agreement will attract Stamp duty of Rs. 20/- only irrespective of period of Licence, Licence fee, Security Deposit, advance payment of compensation or Licence fee or payment of share of Taxes and cess payable by the Licensor.
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