Can circle rate be the sole criteria for determination of stamp duty applicable upon conveyance on immovable property?

INTRODUCTION:

The present legal update concerns the query that has been confounding vendors/buyers of immovable property viz-a-viz calculation of stamp duty in the State of Delhi and seeks to answer their concerns when they are forced to pay stamp duty on the basis of circle rate prescribed by the Government of NCT of Delhi instead of the market value/consideration exchanged between the parties.

ANALYSIS:

Usually in a transaction involving conveyance of immovable property, the parties pay the stamp duty on market value of property, calculated either on the basis of circle rate prescribed by the Government of NCT of Delhi or on the basis of consideration exchanged by the Parties (whichever is higher). However, considering that the circle rates have not been amended since the year 2014, problem arises when the market value on the basis of circle rate of the immovable property is higher than the consideration exchanged for the property and the parties to the conveyance are forced to bear the additional burden by paying stamp duty on the basis of circle rate even though the consideration exchanged between the parties is less than that.

In such a scenario, it may be of interest to the readers that circle rate is not the sole criteria for determination of market value for payment of stamp duty and the parties to the conveyance are well with-in their rights to challenge the calculation of stamp duty on the basis of circle rate instead of the consideration exchanged between the parties.

For stating so, reliance may be placed herein upon the decision of High Court of Delhi in the case titled “CTA Apparels Pvt. Ltd. VS. Government of NCT of Delhi Collector of Stamps (Writ Petition (c) No. 3587 of 2018)” and later upheld in the case titled “Government of NCT of Delhi Collector of Stamps v. CTA Apparels Pvt. Ltd. vs. CTA Apparels Pvt. Ltd. (LPA No. 278 of 2019)”, wherein, the High Court after due analysis of the facts of case and while quashing the Orders passed by the Collector of Stamps and the Additional District Judge, held that the parties to conveyance cannot be forced to pay stamp duty on the basis of circle rate prescribed by the Government of NCT of Delhi and the collector while performing his duties under Section 47A of the Indian Stamp (Delhi Amendment) Act, 2001 cannot mechanically rely upon circle rates that have not been revised for several years and the same has to be done on the basis of numerous factors.

In the aforementioned case, where a property was being sold vide a sale deed, the parties were being asked by the Collector of stamps to pay stamp duty on market value of Rs. 71,61,59,700/- (Rupees Seventy One Crore Sixty Nine Lakhs Fifty Nine Thousand and Seven Hundred Only) determined on the basis of circle rate, instead of consideration of Rs. 36,00,00,000/- (Rupees Thirty Six Crores Only) decided by the parties and recorded in the said sale deed.

When the said Order of Collector of Stamps, which was later upheld by the Additional District Judge, was challenged in the aforementioned case before the High Court, the High Court while remitting it matter back to Collector of Stamps for fresh valuation of market value of the property in question, held that:

In Para viii of heading titled as ‘Reasons’ in the case titled as “Government of NCT of Delhi Collector of Stamps v. CTA Apparels Pvt. Ltd. vs. CTA Apparels Pvt. Ltd. (LPA No. 278 of 2019)”:

“ …. (a) Circle rate at the best can be one of the factors for determination of the valuation and nothing beyond that;

(b) Circle rate is nothing, but, a guidance given by the higher ranking Administrative Officer to the subordinate officer whenever any instrument comes up for registration under the Act. On the basis of this circle rate, the Registering Authority can, at best mechanically determine the valuation of the instrument, but, whenever the dispute arises, the exact market valuation, ought to be arrived at, by the Collector as mandated by Section 47A of the Act. Circle rate cannot be mechanically followed by Collector, as a sole factor, to determine market value of the property in question.

(c) The Collector must give proper notice to the concerned parties along with all the documents upon which the Collector places reliance, including the sale deeds of the surrounding properties.

(d) The circle rates will be one of the factors for the Collector whenever he determines the value;

(e) The valuation of the property in question depends upon the varieties of factors like:

• The area of the plot in question or the property in question;

 • The use of the property in question; • Nature of property in question like new property and ten years old property.

• The width of the road upon which the property is situated;

• The nature of the adjacent properties;

• The nature of use of the adjacent properties, e.g., if an adjacent property is of a commercial nature, then the sale consideration fetched is bound to be different and if the adjacent property is a              public convenience constructed by the Government, then the sale consideration fetched by the property in question can be entirely different;

• The existing market factors varies time to time, whereas, the circle rates are usually prescribed on a much prior point of time…;

• The urgency of the sale by the owner of the property and if it is a distress sale;

• The need of the purchase of the property as, e.g., if the adjacent property owner wants to purchase at any cost the neighbouring property, the price the owner will fetch will be higher.”

CONCLUSION:

Thus, on the basis of discussion contained hereinabove, it might be concluded that:

1. Circle rate is not the sole factor to determine the market value of property, but rather one of the various factors used for determination of market value;

2. Circle rate cannot be mechanically followed by the authorities and any conduct in such regard is contrary to provisions of Section 47A of the Indian Stamp (Delhi Amendment) Act, 2001.

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