'Stamp Duty Cannot Be Charged On Lease Agreement By Imputing Intention To Create Lease In Future': Bombay High Court

The Bombay High Court has held that stamp duty cannot be levied on an agreement to lease by imputing an intention to create a lease in future, when the document does not effect a present demise of the property. The Court observed that an agreement to lease, which merely confers a licence to enter upon land for a limited purpose pending fulfilment of stipulated conditions, does not create any right, title or interest in the immovable property and therefore cannot be treated as a “lease” for the purposes of levy of stamp duty under Article 36 of Schedule I to the Maharashtra Stamp Act, 1958.Justice Abhay Ahuja was hearing a writ petition filed by Deepak Fertilizers and Petrochemicals Corporation Limited, challenging orders passed by the Collector of Stamps and the Chief Controlling Revenue Authority treating the “Agreement to Lease” executed between the petitioner and CIDCO as a lease and demanding a deficit stamp duty of ₹26,14,695 along with interest and penalty. CIDCO had introduced a scheme for allotment of residential plots in Navi Mumbai for staff housing of industrial units, pursuant to which the petitioner was allotted a plot after payment of the entire premium. The agreement executed thereafter expressly described the petitioner as a licensee for a period of four years, permitted entry upon the land solely for the construction of staff quarters, and provided that a formal lease for 60 years would be executed only upon completion of construction and fulfilment of contractual conditions.The Court closely examined the clauses of the agreement, and held that the language unequivocally established that no present demise was intended or effected. It noted that Clause 2 of the agreement clearly provides that nothing in these presents shall be construed as a demise in law of the said land hereby agreed to be demised. It observed:“The said Agreement to lease does not create a present demise and is therefore not chargeable with stamp duty along with penalty and interest under Article 36 of Schedule I of the Stamp Act.”The Court rejected the contention that by the said Agreement, the intention of the parties was to enter into a lease, and that the term license used in the said agreement is used so as to avoid immediate payment of stamp duty. The Court rejected the Revenue's contention that deletion of Explanation III to Article 36 altered the legal position, holding that the explanation merely reflected the settled principle that stamp duty as a lease is attracted only when there is an immediate and present demise. The Court emphasised that the intention to create a lease in future cannot be equated with the creation of a lease in praesenti.Accordingly, the High Court quashed the orders passed by the Chief Controlling Revenue Authority and the Collector of Stamps, as well as the demand notice issued for recovery of stamp duty, interest and penalty. The writ petition was allowed, and the agreement dated 13 October 1995 was held not liable to stamp duty as a lease.Case Title: Deepak Fertilizers and Petrochemicals Corporation Limited v. The Chief Controlling Revenue Authority, Maharashtra State & Ors. [WRIT PETITION NO. 5635 OF 2005]Click Here To Read/Download Order

'Stamp Duty Cannot Be Charged On Lease Agreement By Imputing Intention To Create Lease In Future': Bombay High Court

Saksham Vaishya

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