STAMP DUTY IN RESPECT OF VARIOUS DOCUMENTS
RELATING TO PREMISES IN A CO-OPERATIVE SOCIETY
By Bankim P.Khona , Solicitor
Posted on 05 Feb 2000
Note : All the answers are given on assumption that the properties are situate within Greater Mumbai, because the stamp duty payable on the instrumental for immovable properties situate at different places is different.
Stamp duty on Agreement for Transfer of Share Flat :
Q.1. Is it necessary to pay the stamp duty exceeding Rs. 20/- on an Agreement for Transfer of shares in a co-operative society which gives to the Transferee the right to use and occupy a flat in a co-operative society ? If yes at what rate ?
Ans. The stamp duty payable on an Agreement for transfer of shares in a co-operative society, which gives to the transferee a right to use, occupy and enjoy a flat in a co-operative society exceeds Rs. 200/-. In the case of non-residential premises it is at the flat rate of 10% of the true market value. However, in the case of residential premises, the stamp duty payable on the agreement is as per Article 25 of the Bombay Stamp Act as under :-
“Article 25. Conveyance (not being a transfer charged or exempted under Article 59) –
On the true market value of the property which is the subject matter of the Conveyance –
(1) if relating to residential premises consisting of building or unit.
by, or in favour of, a co-operative housing society registered or deemed to have been registered, under the Maharashtra Co-operative Societies Act, 1960; or
to which the provisions of the Maharashtra Ownership Flats (Regulation of Promotion of Construction, Sale, Management and Transfer) Act, 1963, or the provisions of the Maharashtra Apartment Ownership Act, 1970 apply; or
by such society in favour of its member or incoming member whether in consequence of purchase of its shares or not; or
by a member of such society in favour of another member and incoming member whether in consequence of transfer of its shares to another member or not; and the value of which –
does not exceed rupees 1,00,000. — NIL
exceeds rupees 1,00,000 but does not exceed rupees 2,50,000 — 0.5 per cent of the value
exceeds rupees 2,50,000 but does not exceed rupees 5,00,000 – 1,250rupees plus 3 per cent of the value of above rupees 2,50,000
exceeds rupees 5,00,000 but does not exceed rupees 10,00,000 — 8,750 rupees plus 6 per cent of the value above rupees 5,00,000
exceeds rupees 10,00,000. 38,750 rupees plus 8 per cent of the value above rupees 10,00,000.
(2) if relating to land for construction of residential premises and falling under the descriptions in items (a), (c), or (d) of sub-clause section (1). – The same duty as is applicable under sub-clause (1).
Liability to pay Stamp Duty :
Q.2. Who is liable to pay the stamp duty in respect of the transfer of shares and flat in a co-operative society ?
Ans. The stamp duty in respect of transfer of shares and a flat in a co-operative society could be decided as regards payment by an agreement between the parties. Either one of them can agree to pay or they may agree to share in such proportion as they may agree amongst themselves. In the absence of such contract, under section 30(b) of the Bombay Stamp Act the same is payable by the transferee i.e. the purchaser.
Stamp Duty as per Market Value :
Q.3. On an Agreement for Transfer of share in a co-operative society the parties have paid the stamp duty as per the value stated in the agreement. However at the time stated in the agreement. However at the time of registration of such agreement the sub-registrar concerned insisted for the payment of the stamp duty as per the market value calculated on the basis of ready reckoned.
Whether the sub-registrar can do so ? If the stamp duty is not paid as demanded by the sub-registrar whether he can impound the agreement ? In such case what remedies are liable to the Transferor and the Transferee ?
Ans. The stamp duty on an agreement for transfer of shares in a co-operative society is payable on the true market value of the premises being transferred. The value stated in the agreement does not determine the stamp duty payable on the same. For the sake of convenience, the State Governmetn has introduced a Ready Reckoner as the market value of the properties in Greater Mumbai. Such Ready Reckoner is not a final word. The obligation of the party to pay stamp duty is provided under the Act on the amount of the true market value. If according to the party the market value is different than the market value calculated on the basis of the rate mentioned in the basis of the rate mentioned in the Ready Reckoner then the party cab refuse to pay additional stamp duty and the sub-registrar will be required to forward the document to the Collector under section 32 (a) of the Bombay Stamp Act for determining the correct market value and the stamp duty payable on the same. In case the party does not accept the decision of the Collector then the said party can go into appeal under section 32 (B) of the Act before the Dy. Inspector General of Registration and Dy. Controller of Stamps.
Stamp Duty on Transfer of Shop :
Q.4. At what rate the stamp duty is payable on the agreement for Transfer of a shop in a co-operative society ?
Ans. A shop is non-residential premises and therefore, the concessional rates prescribed under Article 25(d) for residential premises do not apply. The stamp duty payable is 10% of the true market value of a shop, in the case of an agreement for transfer of shop in a co-operative society.
Stamp Duty on Transfer of Garage :
Q.5. At what rate the stamp duty is payable on an Agreement for Transfer of a garage in a co-operative society ?
Ans. The stamp authorities consider a garage to be non-residential and therefore, as in the case of shop stamp duty is payable at the rate of 10% of the true market value of the garage.
Q.6. What is the responsibility of the managing committee and society when flat / shares are transferred in case the proper stamp duty is not paid.
Ans. There is no responsibility on the Managing Committee and the Society when the flats/ shares are transferred without payment of proper stamp duty or any amount. It may be, however, stated that sometime back the Registrar of Co-operative Societies had issued a circular directing the societies not to transfer shares / flats unless proper stamp duty is paid. It is submitted that the Managing Committee is neither empowered nor does it possess a skill to determine the proper stamp duty payable on such an agreement.
Society’s responsibility for payment of Stamp Duty :
Q.7. Whether society is responsible for payment of stamp duty on an Agreement for transfer of shares and flat in a co-operative society ?
Ans. The Society is not responsible for payment of stamp duty on an agreement for transfer of a flat and shares in a co-operative society. The responsibility to pay the stamp duty is only that of the transferor and / or transferee.
Stamp Duty on Allotment Letters Issued by Society
Q.8. A co-operative society has purchased a plot for construction of residential building
for its members out of the funds contributed by its members. When such society issues allotment letters to its members for allotting flats how much stamp duty is payable on such allotment letters ?
Ans. In the case where a co-operative society has purchased a plot for construction of residential building for its members out of the contribution by its members, the allotment letter to its members for allotment letter to its members for allotment letter to its members for allotment of a flat does not attract any stamp duty.
Non-payment of proper Stamp Duty on previous Agreement :
Q.9. By an Agreement dated 1st March 1991 prepared on Rs 10/- stamp paper Mr. A. a member of a co-operative society in Bombay transferred his five shares and a flat to Mr. B for the consideration of Rs. 8,00,000/-. The said agreement dated 1st March, 1991 is not registered. The conveyance of the building and the land in favour of the society has yet not been executed by the builder and the owner of the land. The society admitted Mr. B as member and transferred the five shares and the flat to the name of Mr. B. By another Agreement dated 1st February, 1996 Mr. B transferred his said five shares and the said flat to Mr. C for the consideration of Rs. 13,50,000/-. The stamp duty amounting to Rs. 66,750/- has been paid on the said Agreement dated 1st February, 1996. The said Agreement dated 1st February, 1996 is duly registered with the sub-registrar concerned. Whether the said Agreement dated 1st March, 1991 is properly stamped ? If not who is responsible for payment of stamp duty on it ? Whether Mr. C can be called upon by the stamp authorities to pay the deficit stamp duty including the penalty if any on the said Agreement dated 1st March, 1991 ? In this case whether at the time of execution of the conveyance of the building and the land in favour of the society Mr. C will be required to pay and additional stamp duty in respect of his flat inspite of the fact that his Agreement dated 1st February, 1996 is duly registered.
Ans. The Agreement dated 1st March, 1991 which is prepared on Rs. 10/- stamp paper is not properly stamped. The agreement was required to be stamped with the amount at the rate prescribed under Article 25(d) of Schedule I to the Bombay Stamp act. On the amount of Rs. 8 lakhs being the true market value, on 1st March, 1991 for the said agreement the stamp duty payable was Rs. 33,000/-. The responsibility to pay the stamp duty was that of the transferor and / or transferee. I.e. MR. A. and / or MR. B as per their agreement with regard to the payment of stamp duty and in absence of such an agreement the responsibility was that of Mr. B, the transferee, Mr. C. who has agreed top purchase the said shares and the premises is not liable to pay any stamp duty and in absence of such an agreement the responsibility was that of Mr. B, the transferee, Mr. C. who has agreed to purchase the said shares and the premises is not liable to pay any stamp duty and / or penalty on the said agreement dates 1st March 1991. The authorities cannot recover the same from Mr. C. In the case of convyance of property where stamp dutyis paid and agreement is registered no additiopnal stamp duty will have to be paid for the said flat.
Stamp Duty on Exchange of Flat :
Q.10. Whether any stamp duty is payable when flats are inter-transfers within the members of these society ? Can society allows such inter-transfers without execution of proper agreement to transfer and patyment of stmap duty ?
Ans. Inter se transfer of flats among the members of the society is an exchange and the stamp duty shall be paid as per Article 32 of Schedule I to the Bombay Stamp Act. The Stamp duty payable on the exchange and the stamp duty shall be paid as per Article 32 of Schedule I to the Bombay Stamp Act. The stamp duty payable on the exchange is as per conveyance i.e. payable under Article 25(d) of Schedule I to the Bombay stamp Act. It is necessary to execute a Deed of Exchange for transfer of flats among the members. The Deed of Exchange will be required to be stamped at the concessional rate under Article 25(d) of Schedule I to the Bombay Stamp Act.
Q.11. In view of the decision of the Bombay high Court in the case of Usha Arvind Dongre vs. Suresh Raghunuth Kotwal whether it is necessary to pay stamp duty on transfer of shares in a co-operative society ? Please also consider the judgement of the Bombay high Court in the case of Hanuman Vitamin Foods Pvt. Ltd. (AIR 1990 Bombay 204).
Ans. The judgement of the Bombay High Court in Usha Arvind Dongre vs. Suresh R. Kotwal (1991 CT). 507) was in the matter was discussed therein and decided under the provisions of section 17(1) (d) of the Indian Registration Act. The issue of stamp duty was not involved and, therefore, the provisions of the Bombay Stamp Act were not gone into in the said judgement. The said judgement was delivered by a single Judge of the Bombay High Court, whereas the judgement in the case of Hanuman Vitamin Foods Pvt. Ltd. (A.I.R. 1990 204) was specifically on the issue involving the stamp duty payable on the agreement in the case of sale of shares of the Co-operative Society and the flat. According to the said decision, the stamp duty is payable on such agreement for sale of shares wherein a right to use and occupy the flat and premises is attached to the ownership of shares. The said decision was of a Division Bench and therefore, in view of the decision in the case of Hanuman Vitamin Foods Pvt. Ltd. The stamp duty is payable on the transfer of shares in a co-operative society.
Stamp Duty on Conveyance :
Q.12. At what rate the stamp duty is payable on a conveyance of a building and the land in favour of a co-operative society by the builder and the owner of the land ? Whether the members of the society who have paid stamp duty on their respective agreement for purchase of flats are not required to pay any additional stamp duty or whether such members gets adjustment of the amount of stamp duty paid by them on their respective agreement and are required to pay the balance stamp duty based on the market value of their respective flat on the date of execution of conveyance ?
Ans. The stamp duty payable on a conveyance of a building and the land thereunder in favour of a co-operative society by the builder and / or the owner of the land shall be paid on the true market value of each unit viz., flat, shop etc. All non-0residential units will attract stamp duty at 10% of the true market value and the documents in respect of each residential unit viz., flat, flat etc., (other than shop) will be required to be, stamped at the concessional rate as provided under Article 25 (d) of Schedule I to the Bombay Stamp Act. However, for the purpose of calculating the market value the date of the agreemetn will be concsiderd and not the date of conveyance; and that the stmp duty will be at the rate prevalent at the date of the conveyance and not the date of the agrement of the flat purcahsed.
Stamp Duty on Sale of Balance F.S.I. :
Q. 13. Whether direction of Commissioner not to register the society unless the stmp duty paid by all the memebrs be challenged ? Is it not against the provisions of Maharashtra Co-operation Societies Act ?
Ans. It is difficult to correctly opine or reply to this query. But in my humble opinion it is an obligation and duty of every citizen to pay requisite stamp duty on the agreement to purchase a flat and therefore the agreement which is not properly stamped cannot be taken into consideration the direction given by the Commissioner not to register such Society unless all person have paid stamp duty on their respective agreement may not be invalid. The direction given by the Commissioner asking all the intending members to comply with the provisions of the Bombay Stamp Act and pay stamp duty could not be considered against the provisions of the Maharashtra Co-operative Societies Act. 1960.
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