“Stamp Duty is only payable for additional area purchased under Re-development Agreement”: Bombay High Court

Bombay High Court: In a batch of petitions questioning the law regarding stamp duty levied on Permanent Alternate Accommodation Agreements (‘PAAA’) or Development Agreement (‘DA’) or a Redevelopment Agreement under the Maharashtra Stamp Act, 1958, the Division Bench of G.S. Patel and Neela Gokhale, JJ. held that stamp duty must be paid only on the additional area purchased during redevelopment. The Court made it clear that the interpretation in the present matter shall not be confined to the facts of these cases.

The matter relates to DA and PAAA connected with development and redevelopment of housing societies. The law providesfor levying stamp duty on purchase of a property. Stamping of DA is not disputed in the present matter, while the issue resonates around the Stamp Authority’s demand to stamp individual PAAAs for members or existing occupants on a value reckoned at the cost of construction. The present petition challenges various circulars issued by the State Government charging stamp duty on PAAAs and related guidelines.

Dealing with the question of “Is there a meaningful distinction to be made between the society and its members in the context of a re-development by an outsider (a developer)?”, the Court rejected the submission of existence of a juristic entity in ‘society’ without its members with the explanation that “a co-operative society without members is a creature unknown to law.” Through denial of contention that individual society members have rights independent of the society in dealing with third parties in the case of Aditya Developers v. Nirmal Anand Co-Operative Housing Society Ltd., 2016 SCC OnLine Bom 100, the Court clarified that once a person voluntarily becomes a member of society, he/she loses his individuality and subsumes within the identity of society.

The Court commented that the developer is not selling homes to society members after re-development. The Bench also acknowledged that everyone among the societies, developers and individual society matters accept their liability to pay full stamp duty on the additional area purchased. The Court said that the only stamp duty a member must pay is for any additional area that she or he actually purchases for consideration.

The Court scrutinized the specific provisions of Maharashtra Stamp (Amendment) Act, 2021 under which Article 5 relates to every kind of agreement or a record of an agreement or memorandum of an agreement and Article 5 (g-a). The Court said that such an agreement is treated on par with a conveyance under Article 25 of the Maharashtra Stamp Act, 1958. It further pointed towards Chapter II of the Act dealing with instruments that are liable to stamp and Sections 4, 5 and 6 pertaining to multiplicity.

The Bench referred to Prabha Laxman Ghate v. Sub-Registrar and Collector of Stamps, 2004 SCC OnLine Bom 74 challenging an amendment related to Article 5(g-a), DAs and societies, wherein the legislature’s intention to bring transactions otherwise not covered in the provisions within the ambit of the Stamps Act and subjected to duty was interpreted by the Court, which should not be limited to the facts of the case as opined by the Court in the present matter.

The Court examined the impugned circular dated 23-6-2015 which refers to Prabha Ghate (supra), but the exception to departure from or a variation of the DA is unsupported by the case mentioned as pointed by the Court. The circular dated 30-3-2017 referring to the circular dated 23-6-2015 communicates the requirement that DA between the developer, society and members should be treated as an incidental agreement under Section 4(1). The Court found no issue with this requirement, but the refusal to acknowledge PAAA for its essence and demand of a single document, tripartite or multi-tripartite in nature, which needs to be signed by everyone. The Court observed that if everybody signs the document, then Section 4(1) speaking of several instruments will have no application. The Court held that stamp authorities are legally not entitled to issue such a circular and it cannot be imposed under the Stamp Act. It further added that the circular cannot do something that the parent statute does not contemplate.

The Court held the circular dated 30-03-2017 unsustainable in law, which is liable to be quashed, and the circular dated 23-06-2015 excluding PAAAs from Section 4(1), being ultra vires of the Stamp Act, is also liable to be quashed.

The Court stipulated the following pointers through the present judgment and made it clear that these shall not be limited to the facts of the present matter:

• A DA between a cooperative housing society and a developer for developing society’s property (land, building, apartments, flats, garages, godowns, galas) requires to be stamped.

• The DA need not be signed by individual members of society as a mandate. Even if individual members do not sign the DA, it controls the re-development and society members’ rights.

• A PAAA between developer and an individual society member does not require to be signed on behalf of the society.

• Stamp cannot be levied twice. Once the DA is stamped, the PAAA cannot be separately assessed to stamp beyond the requirement of Rs. 100 under Section 4(1), if it specifically relates to rebuilt or reconstructed premises in lieu of the old premises used/occupied by the member. The same applies even if the PAAA includes an additional area available to the member, since it is not a purchase or a transfer but is in lieu of the member’s old premises. The stamp on DA includes reconstruction of every unit in the society building.

• If PAAA is limited to rebuilt premises in the absence of actual purchase for consideration of any additional area, such PAAA is an incidental document under Section 4(1) of the Stamp Act.

• PAAA between a developer and a society member must be additionally stamped if it provides for purchase for actual stated consideration and a purchase price of additional area beyond the area given to the member against the earlier premises.

• Assessing stamp on PAAA on construction cost of the new premises in lieu of old premises cannot be sustained.

• Reference to redevelopment and homes includes garages, galas, commercial and industrial use and every form of redevelopment of the society.

[Adityaraj Builders v. State of Maharashtra, 2023 SCC OnLine Bom 540, judgment dated 17-02-2023]

*Judgment authored by: Justice G.S. Patel.

Advocates who appeared in this case :

For Petitioners: Advocate Dharam Sharma, Advocate Ashraf Diamondwala, Advocate S. Murthy, Advocate Neha Shah;

For Respondents: AGP Jyoti Chavan, AGP Hemant Haryan, AGP Himanshu Takke, AGP Kedar Dighe, Advocate Sachin Chowdhari, Advocate Deepti, Advocate Abhishek Nikharge;

Amicus: Advocate Samit Shukla, Advocate Siddharth Shah, Advocate Anjali Shah and Advocate Anuj Sarla.