Ceebros Developers vs State of Tamil Nadu

R. Subbiah, J.—This appeal is filed as against the order dated 17.11.2008 passed by the Respondent in Proceedings No. 26164/N5/2005,

whereby the Respondent has fixed themarket value of the subject property at Rs. 25,02,915/-onthe basis of Rs. 3,400/-per sq.ft. and directed

theAppellant to pay the deficit stamp duty.

The case of the Appellant, in brief, is as follows:

The subject property, namely, land bearing door No. 4,Bishop Garden Extension, Raja Annamalaipuram, Chennai,measuring to an extent of 2

acres 11 grounds 792 sq.ft.together with the buildings thereon, comprised inO.S. No. 11, R.S. No. 39598/1, C.C. No. 28 of Mylapore

RevenueDivision, Mylapore-Triplicane Taluk, Chennai District,originally belonged to M/S. Spencer & Company Limited,Chennai and they

purchased the same from Mr. Stanley WilsonEdwards and his wife Esther Marjorie Edwards in and by anabsolute sale deed dated 18.09.1957,

registered as DocumentNo. 3070/1957 on the file of Registrar of Madras-Chingleput.They also applied for ceiling clearance and the Urban

LandCeiling Authorities issued a certificate that theirholdings are not affected by the provisions of the TamilNadu Urban Land (Ceiling and

Regulation), Act, 1978, videProceedings dated 28.12.1990. Subsequently, on 27.07.1995,M/s. Spencer Company Limited entered into an

agreement withM/S. Sterling Horticulture and Research Limited for sale of the said property for an apparent consideration of Rs. 19.75lakhs. In

accordance with the provisions of Chapter II-C ofthe Income Tax Act, 1961, the parties to the said agreementduly filed a statement in Form 37-I

of the Income Tax Rulesfor scrutiny/issuance of a No. Objection Certificate by theappropriate authority, Income Tax Department, by

theirapplication dated 19.08.1995. During the course ofproceedings of the issuance of pre-emptive purchase order,a show cause notice dated

02.11.1995 was issued to thetransferor and transferee, namely, M/S. Spencer & CompanyLtd.,Madras and M/S. Sterling Horticulture and

Research Limited.

Subsequently, for the reason recorded by theappropriate authority in their pre-emptive purchaser orderdated 27.11.1995 u/s 269 (UD(1) of the

Income TaxAct, 1961 and in exercise of the powers vested by the Act,the Government of India decided to purchase the propertyfor a

consideration equal to the apparent considerationstated in the said agreement of sale and under section269(UE(1) of the Income Tax Act, the

property vestedabsolutely with the Central Government free from allencumbrances. Consequent to the order passed by theappropriate authority,

the Income Tax Department in termsof Order dated 27.11.1995, took possession of the subject property. Questioning the acquisition of the

property bythe appropriate authority, the transferee, namely,M/S. Sterling Horticulture and Research Limited filedW.P. No. 16777 of 1995 for

quashing the order of appropriateauthority dated 27.11.1995; but the said writ petition wasdismissed by this Court on 11.02.1997 holding that

theappropriate authority, functioning under the Income TaxAct, was well within the authority to acquire suchproperty. Aggrieved over the said

order, a writ appeal wasalso filed in W.A. No. 245 of 1997 and the same was alsodismissed on 03.11.2000. Aggrieved over the same, SLP

wasfiled before the Hon''ble Supreme Court, which was alsodismissed and thus, the order of the appropriate authoritywas confirmed.

Thereafter, the property was put up for sale inpublic auction by the Commissioner of Income Tax,Headquarters Office of the Chief

Commissioner of IncomeTax-II, Chennai-34. In the said auction, the ManagingDirector of the Appellant firm participated andsuccessfully

completed the bid for Rs. 22.15 crores, whichwas accepted by the Income Tax Department on behalf of theCentral Government and the purchase

consideration wasremitted by the Appellant to the vendor on various dates.

The Appellant has paid a sum of Rs. 1,77,20,000/-asthe stamp duty for the sale consideration of Rs. 22.15crores. Subsequently, u/s 47-A of

the Stamp Act,the said document was referred to the District RevenueOfficer for proper valuation, stating that he has reason tobelieve that the

market value of the property which issubject matter of conveyance has not been truly set forthin the document, who, in turn, has passed an order

dated25.04.2005 fixing the market value of the property atRs. 3,400/-per sq.ft.and directed the Appellant to pay thedeficit stamp duty of Rs.

1,35,94,864/-. Challenging thesaid order, the Appellant has filed an appeal before theRespondent, wherein the Respondent confirmed the

orderpassed by the District Revenue Officer and dismissed theappeal, by his order dated 17.11.2008. Aggrieved over thesame, the present

appeal has been filed.

The only ground raised by the learned Counsel for the Appellant is that the property was purchased in publicauction, which was held at the

instance of the income taxdepartment and the upset price fixed by the departmentitself would amount to the market value of the property.Under

such circumstances, it cannot be said that the marketvalue of the property has not been truly set forth sincethe property was sold in public auction

by the income taxdepartment and hence, there is No. possibility for wilfulunder valuation of the property with an intention tofraudulently evade

payment of stamp duty by the Appellant.Under such circumstances, the order passed by theRespondent is not legally sustainable. In support of

hiscontentions, the learned Counsel has also placed relianceon the decisions reported in Devi Narayanan Housing Devpt. P. LTD. v. IG of

Registration (2007) 5 MLJ 1337, M.D. Dilli Babu v. CMDA (2007) 7 MLJ 416, V.N. Devadoss Vs. Chief Revenue Control Officer-cum-Ins.

and Others, and A.J. Mapillai Mohadeen Vs. Sub-Registrar, Registration Department and Others, .

Per contra, the learned Government Advocateappearing on behalf of the Respondent has made hissubmissions, by supporting the order passed

by the Respondent.

In view of the submissions made by the learnedcounsel on either side, the question that arises forconsideration is,

When the subject property had been purchased inpublic auction held at the instance of the income taxdepartment, whether the Respondent has

power to directthe Appellant to pay the deficit stamp duty on theground that there is deliberate under-valuation of theproperty with an intention to

fraudulently evadepayment of proper stamp duty ?

At this stage, it is appropriate to rely thejudgments relied on by the learned Counsel for theAppellant, which are giving a fit answer to the

saidquestion. In V.N. Devadoss Vs. Chief Revenue Control Officer-cum-Ins. and Others, , the Hon''ble SupremeCourt has held as follows:

The Stand of the State is that what hasbeen disclosed is clearly a sale value and the samecannot be termed as market value. There is fallacyin

this argument.

Market value is a changing concept. Theexplanation to Sub-rule (5) makes the position clearthat value would be such as would have fetched

or would fetch if sold in the open market on the dateof execution of the instrument of conveyance. Here,the property was offered for sale in the

open marketand bids were invited. That being so, there is noquestion of any intention to defraud the revenue ornon disclosure of the correct price.

The factualscenario as indicated above goes to show that theproperties were disposed of by the orders of BIFRand AIFR and that too on the

basis of value fixed by ASG. The view expressed by the Assets Sales Committee which consisted of members such as representatives of IDBI,

Debenture Holders, Government of West Bengal and Special Director ofBIFR. That being so, there is No. possibility of anyunder valuation and,

therefore, Section 47A of theAct has No. application. It is not correct asobserved by the High Court that BIFR was only amediator.

Sale has been defined u/s 54 ofthe Transfer of Property Act, 1882 (in short ""the TPAct""). Although the Act has not included thedefinition of

sale, Section 2(10) of the Act defines""conveyance"" as including a conveyance on sale.Every instrument and every decree or final order ofany civil

court by which property whether immovableor movable or any estate or interest in any propertyis transferred to, or vested in or declared to be

ofany other person, inter vivos, and which is nototherwise specifically provided for by Schedule I orSchedule I-A, as the case may be.

On the facts of the case it cannot besaid that Section 47-A has any application because there is No. scope for entertaining a doubt thatthere

was any undervaluation. That being so, theHigh Court''s order is clearly unsustainable and isset aside. The registration shall be done at theprice

disclosed in the document of conveyance. Thereis No. scope for exercising a belief that the marketvalue of the property which is the subject-

matter ofconveyance has not been truly set forth with a viewto fraudulently evade payment of proper stamp duty.

In (2007) 5 MLJ 1337 (supra), this Court has held as follows:

12 A harmonious construction and interpretationof the provision of Section 47-A and also the ruleshas made it clear that the value fixed by the

Courtcannot be deviated. When a property is purchased in acourt auction, the value fixed thereon should be thevalue truly fixed based on material

consideration. Ifany value other than the value fixed by the court istaken into consideration, then, it tantamounts toexceeding the jurisdiction made

under the law. Theauthorities concerned cannot sit on appeal over thecourt''s decision unless an appeal is preferred fromsuch an order. Therefore,

the value of the propertyin question for the purpose of determining the stampduty to be paid by the purchaser is the value fixedin the court auction

purchase which is arrived atafter an offer and acceptance and the amount offeredduring the auction and accepted by the Court wouldrepresent the

real market value of the property. Inthe instant case, the authority concerned has exceeded his jurisdiction by going beyond the valuefixed by the

Court. In the absence of any otherprinciple contrary to the above settled propositionof law, I am obliged to follow the proposition laiddown by this

Court in the case referred to above.

Admittedly, the property for registrationwas purchased by the Petitioner in a public auctionconducted in the open court and the

Petitionercompany was declared as the highest bidder and theoffer made by the Petitioner was Rs. 13.55 crores forthe property including land,

buildings andsuperstructure and the offer was accepted and thePetitioner too purchased the same and remitted thesale consideration of Rs. 13.55

crores in twoinstalments. Since the amount fixed by the court isto be taken as the real value of the property, thePetitioner presented the document

for registrationindicating the value of the document as Rs. 13.55crores. However, in the impugned order, theRespondent has fixed the guideline

value asRs. 15,24,60,000/-contrary to the settled principlethat the property purchased in court auction is thevalue determined by the court and

No. authority canfix any other value taking note of the surroundingcircumstances....

This Court in (2007) 7 MLJ 416 (supra), has held as follows:

In the present case, admittedly, the allotment of plot is made by the first Respondent, which is a a Government Agency and in such circumstances,

there isabsolutely No. question of concealment ofconsideration by the Petitioner. In view of the same,there is absolutely No. justification on the

part ofthe 2nd Respondent in refusing to register thedocument on the ground that the stamp duty should bepaid on the guideline value of the

property.

Yet another decision relied on by the Appellant is 2008 (5) CTC 239, wherein this Court has held as follows:

Section 47-A of the Act states that if theRegistering Officer appointed under the Indian Registration Act, 1908, while registering anyinstrument

of conveyance, exchange, gift, release ofbenami right of settlement has reason to believethat the market value of the property of which isthe subject

matter of conveyance, has not been trulyset forth in the instrument, he may, afterregistering such instrument, refer the same to theCollector for

determination of the market value ofsuch property and the proper duty payable thereon....

Power u/s 47-A of the Act canonly be exercised when the Registering Officer hasreason to believe that the market value of theproperty, which

is the subject of conveyance, hasnot been truly set forth, with a view tofraudulently evade payment of property stamp duty.Mere lapse of time

between the date of agreement will not be the determining factor that the documentis undervalued and such circumstance by itself isnot sufficient to

invoke the power u/s 47-A of the Act, unless there is lack of bona fides andfraudulent attempt on the part of the parties to thedocument to

undervalue the subject of transfer witha view to evade payment of proper stamp duty....

The law is well settled and this Court, ina number of decisions, has held that unless there isa fraudulent attempt on the part of the parties tothe

document to evade payment of proper stamp dutyand a determining factor that the document isundervalued for some reasons, the authority

cannotexercise his power arbitrarily without any basis.The power should be exercised with great caution andcare should be taken to ensure that it

does notoperate as an engine of operation. It has also beenfurther observed that normally the considerationstated as the market value in an

instrument broughtfor registration should be taken to be correct,unless the circumstances exist to suggest fraudulentevasion....

A reading of the above judgments would show that only when the registering officer has reason to believe that the market value of the property

has not been truly set forth in the instrument with a view to evade stamp duty, he may refer the same to the Collector for determination of the

proper stamp duty payable thereon. When the property is sold in a public auction held by theGovernment Department, certainly there is No.

possibilityfor not setting forth the true market value in theinstrument. Under such circumstances, there is nojustification on the part of the registering

officer toinsist for the stamp duty to be paid, as claimed by them.Hence, in my considered opinion, the order passed by theRespondent insisting

deficit stamp duty to be payable bythe Appellant is liable to be set aside and when theproperty is purchased by the Appellant in an auction heldat

the instance of the income tax department, the valuefixed thereon should be the value truly fixed based onmaterial consideration. Therefore, the

impugned orderpassed by the Respondent is hereby set aside.

Consequently, the civil miscellaneous appeal is allowed. No. costs.