AP Stamp Act | Stamp Duty Leviable On Agreement To Sell Only When Possession Follows It : Supreme Court

The Supreme Court on Thursday (January 15) ruled that a stamp duty, as per the Andhra Pradesh Stamp Act, is not payable on an 'agreement to sell' which doesn't stipulates delivery of possession.

A bench of Justices BV Nagarathna and R Mahadevan delivered a ruling in the context of the Andhra Pradesh Stamp Act (“Act”), while setting aside the High Court's decision, which held that an agreement to sell amounted to a conveyance and required payment of stamp duty and penalty under Explanation I to Article 47A of Schedule I-A of the Act.

The case arose from a long-standing landlord-tenant relationship. The appellant had been a tenant in the suit property for over fifty years. In 2009, the respondent-landlady entered into an agreement to sell the property to him for ₹9 lakhs, of which ₹6.5 lakhs was paid as an advance. When disputes arose and the landlady denied the agreement, the tenant filed a suit for specific performance.

During the trial, the landlady objected to the marking of the agreement to sell in evidence, arguing that it amounted to a conveyance and required payment of stamp duty and penalty under Explanation I to Article 47A of Schedule I-A of the Andhra Pradesh Stamp Act. The Trial Court and subsequently the Andhra Pradesh High Court accepted this objection and directed that stamp duty and penalty be paid before the document could be exhibited, prompting the tenant to appeal to the Supreme Court.

Disagreeing with the High Court's decision, the judgment authored by Justice Nagarathna held that the agreement to sell in the present case could not be treated as a “deemed sale”.

The Court explained that an agreement to sell is chargeable as a sale only if it is “followed by” or “evidences” delivery of possession of the property agreed to be sold. This means that the possession must have a direct and intimate nexus with the agreement to sell. Possession that already exists independently of the agreement, such as possession as a tenant, does not satisfy this requirement.

Since the appellant's possession of the property was not in pursuance of the agreement to sell but was rooted in his tenancy of nearly five decades, the Court held that the Appellant need not pay the stamp duty and penalty.

“…the possession of the schedule property by the appellant herein was not following the agreement to sell nor was delivery of possession pursuant to the execution of agreement to sell as stipulated under the A.P. Stamp Act. It is only when the possession is acquired in relation to the execution of the agreement to sell, that it would be a deemed conveyance and stamp duty has to be levied as conveyance.”, the court observed.

“The High Court in fact misdirected itself in assuming that there was in fact a deemed conveyance between the respondent and the appellant herein. The appellant herein is not liable to pay any additional duty and penalty on the said instrument and neither is the said instrument liable to be impounded for the purpose of payment of duty and penalty. Hence, we find that the High Court was not right in sustaining the order of the Trial Court. Consequently, both the impugned orders of the High Court as well as the order of the Trial Court are set aside. The appeals are allowed in the aforesaid terms.”, the court held.

Cause Title: VAYYAETI SRINIVASARAO VERSUS GAINEEDI JAGAJYOTHI

Citation : 2026 LiveLaw (SC) 49

Click here to download judgment

Appearance:

For Petitioner(s) Mr. M Srinivas R Rao, Adv. Mr. Abid Ali Beeran P, AOR Mr. Saswat Adhyapak, Adv. Ms. Namita Kumari, Adv.

For Respondent(s) Mr. Anuj Kapoor, AOR Mr. Nandeesh Nanda, Adv. Mr. Shivom Sethi, Adv.