The Supreme Court recently held that the classification of a property under a master plan is not determinative of stamp duty liability, as the actual use of the property is the relevant consideration while determining its valuation.

A bench of Justice J.B. Pardiwala and Justice K. Vinod Chandran set aside the Rajasthan High Court's judgment, which had classified the property as commercial for stamp valuation purposes merely because, in addition to manufacturing activity, the property was also being used for the sale of manufactured products.

“The manufactured items definitely had to be sold and if the premises is used for such sale too, even retail sale, it cannot lead to a conclusion that the property is one used for commercial purposes, as distinguished from an industrial purpose.”, the Court said, while disagreeing with the High Court's view.

The case concerned a property covered by a gift deed, which had been registered as residential land. The Sub-Registrar, however, conducted an inspection and found the property to be commercial, noting that it was being used as a showroom in the name of Sodhi Carpets and that several commercial establishments were operating in the surrounding area.

The Collector under the Rajasthan Stamp Act subsequently inspected the property and found that a manufacturing activity/factory was being operated from the premises. The Rajasthan Tax Board agreed with the Collector after considering both inspection reports and the relevant State Government circular.

The High Court, however, reversed the concurrent findings of the statutory authorities. It held that a property could be treated as industrial only if it was situated in an industrial area and the activity carried out was exclusively manufacturing. Since manufactured goods were also being sold from the premises, the High Court treated it as a commercial property.

Aggrieved by the High Court's decision, an appeal was filed before the Supreme Court contending that the property was being used for industrial purposes, as it was registered as a factory under the Factories Act, 1948 and also registered as an industry with the District Industries Centre, Jaipur.

Allowing the appeal, the judgment authored by Justice Chandran rejected the State's contention that the property should be classified as commercial, rather than industrial, merely because it was not geographically located within an industrial area.

“The circular requires that at the time of execution of the document, if the land is being put to industrial use or is situated in a RIICO Industrial Area or has been converted to industrial purpose, then it shall be valued at the industrial rate. Hence, our finding, that the user determines the valuation of the land, as distinguished from the classification, even as per the Master Plan as submitted by the learned Government Advocate.”, the Court said.

The Court particularly relied on the language of the State Government's circular, which, according to it, focused on the user of the land rather than the classification of the area.

"The High Court clearly erred in stipulating a test which does not come out from the circular of the State Government providing for valuation of different properties, specifically of industrial, residential and commercial properties.", the Court said.

As a result, the appeal was allowed, thereby restoring the orders passed by the statutory authorities.

Cause Title: Harinder Singh Sodhi Versus State of Rajasthan and Ors.

Citation : 2026 LiveLaw (SC) 869

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Appearance:

For Petitioner(s) :Mr. Anant Kasliwal, Sr. Adv. Mr. Vaibhav Kasliwal, Adv. Mr. Bhargava V. Desai, AOR Mr. Shivam Sharma, Adv. Mr. Utkarsh Vats, Adv. Ms. Prakriti Rastogi, Adv. Ms. Surbhi Tuli, Adv.

For Respondent(s) :Mr. Shiv Mangal Sharma, A.A.G. Mr. Shivansh B. Pandya, Adv. Mr. Saurabh Rajpal, AOR