Srf Limited vs State Of Madhya Pradesh And Ors.

on 29 November, 2004

Madhya Pradesh High Court Madhya Pradesh High Court Srf Limited vs State Of Madhya Pradesh And Ors. on 29 November, 2004 Equivalent citations: AIR 2005 MP 79 Author: R Menon Bench: R Menon ORDER Rajendra Menon, J. 1. Petitioner a registered company incorporated and registered under the Companies Act, 1956 having its factory at Malanpur Industrial Area, District Bhind, M. P., has called in question tenability of order the dated 7-11-2001 (Annexure-Q) passed by the Collector of Stamps, Bhind directing for payment of stamp duty and penalty on a document, executed in connection with transfer of certain property conveyed by the deed (Annexure-F) dated 13th June, 1996 so also the order passed by the Board of Revenue, the Chief Controlling Revenue Authority under the Indian Stamp Act, 1899 (Annexure-T) dated 3-1-2002 and the consequential demand notices Annexure-R and Annexure-S dated 12-11-2001 and 22-12-2001 demanding stamp duty of Rs. 23,72,50,000/- and a penalty of Rs. 5,09,05,000/-. 2. It is the case of the petitioner that originally their unit at Malanpur (M.P.) known as Tyre Cord Manufacturing Unit was owned by the 4th respondent M/s. Ceat Ltd., who were owners of the undertaking which included the leasehold land, building, immovable plant and machinery and other movable and immovable assets including rights and obligations of the business. 3. That, on 24-3-1995 vide Annexure-A, a resolution was passed by the shareholders of M/s. Ceat Ltd. to sell the Tyre Cord Division at Malanpur. On 29-6-1995, the Board of Director of the petitioners/Company also passed a resolution vide Annex ure-B approving the acquisition of the said Tyre Cord Division as a "going concern" for a consideration of Rs. 325 crores, Thereafter on the basis of the aforesaid resolutions a Joint Declaration Annexure-C dated 8/9-2-1996 was made by the petitioners so also by the respondent No. 4 to the effect that the respondent No. 4 has sold as a going concern the Tyre Cord Division owned by it at Malanpur and that the properties, licences, benefits of contracts and various other tangible rights relating to the business of the undertaking stand vested with the petitioner/company w.e.f. 8-2-1996. A copy of the joint declaration is filed as Annexure-C. Thereafter valuation of the properties took place, eminent valuers were appointed to value the properties and report submitted by the valuers have been filed as Annexure-D and E. 4. It is the case of the petitioner that based on the valuation report submitted by the valuers, the respondent No. 4 M/s. Ceat Ltd. executed a deed of conveyance in favour of the petitioner. The said deed dated 13-6-1996 is filed as Annexure-F to this petition and according to this deed 48 items mentioned in Schedule I thereof, consisting of immovable plant and machinery were transferred by M/s. Ceat Ltd. to the petitioners. The issue involved in this petition is with regard to payment of stamp duty on the aforesaid instruments/conveyance deed Annexure-F dated 13-6-1996. 5. After the deed was executed, petitioner presented the deed for registration to the Sub-Registrar, Gohad District Bhind. However on presentation, no orders were passed by the Sub-Registrar but according to the petitioner on 2-7-1996 they were informed that the Sub-Registrar has prepared certain reports Under Section 33 of the Indian Stamp Act, 1899. It is averred in the petition that subsequently Collector of Stamps, District Bhind sought guidelines in the matter from the Inspector General of Registration, Bhopal and the Inspector General of Registration gave certain guidelines which inter alia contains the procedure to be followed for assessment of stamp duty, valuation of the property in the manner provided for in the Act so also for obtaining opinion from the Office of Sales Tax and other authorities. According to the petitioner the aforesaid guidelines of the Inspector General of Registration were issued to the Collector. Even though the said guidelines were never supplied to the petitioner, it is the case of the petitioner that subsequently thereof on
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Srf Limited vs State Of Madhya Pradesh And Ors. on 29 November, 2004

notice from the authorities, representative of the petitioner/Company i.e. Chief Manager appeared before the Collector Stamps submitted objections, proceedings took place and the Collector of stamps passed order Annexure-J on 30-6-1998 and directed the petitioner to pay stamp duty of Rs. 2.03 crores on the conveyance/instruments treating the valuation of the property to Rs. 303 crores. Aggrieved by this order, petitioner preferred a revision before the Board of Revenue Under Section 56 and 57 of the Indian Stamp Act, 1899 and the Board of Revenue passed the order Annexure-K on 11-5-2000 remanding the matter to the Collector with a direction to conduct spot inspection, issue notice Under Section 47A and after considering the guidelines/orders of the Inspector General of Registration, give opportunity of hearing to the petitioner and thereafter pass fresh orders. 6. On 11-1-2001 notices were issued to the petitioner, they submitted detailed reply to same. It was the case of the petitioner before the authorities concerned that the undertaking in question is a movable property and even if the undertaking includes certain immovable items as its components while considering the question of assessing stamp duty on the conveyance/instruments in question duty is payable only for the property transferred under the instruments which according to the petitioner consisted of 48 items mentioned in Schedule I. Various other objections were raised and in sum and substance, contention of the petitioner was that valuation of the property has to be done not on the basis of transaction entered into between the parties but for the purpose of payment of stamp duty on the instrument value of properties indicated therein is to be taken into consideration as it is only this property which is transferred by the deed in question presented for registration and the authorities cannot travel beyond the conveyance deed for the purpose of making assessment and valuation for payment of stamp duty. However the Collector passed the impugned order Annexure-Q on 7-11-2001 assessing the valuation of the property 'on the basis of the transfer being made of a going concern and valuing the transfer to be one for the entire undertaking valued at Rs. 325 crores. Accordingly, petitioner/ company were directed to pay additional stamp duty and penalty as indicated in the order. Revision petition was filed by the petitioner before the Board of Revenue Under Section 56(4) of the Indian Stamp Act, 1899, which was rejected by the Board on 3-1-2002. In the meanwhile the demand notice Annexure-R and S were also issued, which are impugned in this petition. 7. Challenging the tenability of the aforesaid orders and actions, this petition has been filed. Shri K. Parasaran, learned Senior Counsel who had appeared for the petitioner taking me through various documents available on record and in particular making emphasis on the point that stamp duty is to be charged on the instruments and not on the transaction entered into between the parties made various submissions. 8. It was submitted by learned Sr. Counsel that by the joint declaration Annexure-C transfer of the undertaking and the property had already taken place between the petitioner and respondent No. 4 and after the aforesaid transfer, nothing further was required to be done by the petitioner for taking over the assets of respondent No. 4 and to carry on with the business. However by way of abundant caution and to protect the interest of the petitioner with reference to third party right, the deed in question was executed only for the purpose of transferring the 48 items mentioned in the aforesaid instruments Annexure-F. Taking me through the instruments in question it was submitted by learned senior counsel that the same was executed only for the purpose of transferring the 48 items described in First Schedule to the said instruments and in the entire instruments these items were referred to as "superstructures". It was emphasized by him that what was transferred by the instruments was the "superstructures" mentioned therein and valuation of the conveyance on the basis of the value of the aforesaid "superstructures" was made and stamp duty was accordingly paid. It was submitted by learned Sr. Counsel that travelling beyond the documents in question, respondents have assessed the valuation of the entire property at Rs. 325 crores on the basis of collateral material collected by them which is not permissible while considering the question of charging stamp duty on an instrument. Accordingly, it is the case of the petitioner that the resolution and transaction may have been made for the purpose of transferring the entire undertaking but while considering the question of payment of stamp duty on a instrument, the revenue should be concerned with value of the property being transferred by the instrument and in this particular case what was transferred by the instrument in question being only the "superstructures" i.e. the 48 items mentioned in Schedule 1 to the instruments stamp duty was payable only on value of the
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Srf Limited vs State Of Madhya Pradesh And Ors. on 29 November, 2004

aforesaid property and for nothing more. 9. It was argued by learned Sr. Counsel that the authorities have travelled beyond the documents and when Section 53A of the Transfer of Property Act, permits transfer of undertaking in the manner done by the respondents imposing and charging duty on the document by going beyond the stipulation and conditions contained in the instruments is not permissible. It was submitted by learned Sr. Counsel that transfer of the undertaking took place on 8-2-1996. It was a completed transaction by which possession of the property was given to the petitioner and on a already concluded transaction, no stamp duty could be charged, that too, when this transaction did not require any registration. It was emphasized on behalf of the petitioner that while exercising power Under Section 33 of the Stamp Act, the revenue authorities are only required to examine the instruments and assess duty on the instruments, property which does not form part of the transfer by the instruments can-. not be charged for the purpose of payment of stamp duty. It was submitted that even though proceedings were conducted Under Section 33 but infact the authorities have exercised powers Under Section 47-A (M. P. Amendment) to the Stamp Act and in doing so have acted arbitrarily. It is submitted that Section 47-A will not apply to a incorporated Company in view of the explanation No. 2 to the aforesaid Section. It was also emphasized that in view of Section 53A of the Transfer of Property Act, the transaction in question could be done even without conveyance and in that view of the matter, it was submitted that the order is unsustainable. Learned Sr. Counsel during the course of arguments had contended that petitioner and 4th respondent may have transferred the entire undertaking but. what was transferred by the instruments was not the undertaking, it was only the "superstructures" mentioned therein and therefore charging duty on the ground that transfer of the entire undertaking has taken place was not permissible while assessing duty to be payable on an instrument under the Indian Stamp Act, 1899. It was submitted that Section 33 gives power to the authorities only to look into the instruments and impose duty whereas in the present case authorities have acted beyond the powers vested in them Under Section 33, as they have conducted enquiry on the basis of the Sales Tax return, balance-sheet of respondent. No. 4 Company, opinion and guidelines Annexure-K dated 24-10-1996 issued by the Inspector General of Registration so also the spot inspection and on the basis of collateral material collected by them, this would amount to taking proceeding Under Section 47-A which was not permissible, as Section 47-A of the State Amendment to the Stamp Act is not applicable in the present case and even if it is held to be applicable, no notice or hearing Under Section 47-A was given. It was submitted by learned Counsel that the instrument was only executed by way of abundant caution for transfer of the "superstructures". There is no evasion of duty by the respondents and therefore imposition of penalty is also not proper. Placing reliance on the following judgments, learned counsel had argued that the action of the respondents in imposing the duty is not tenable and therefore he prays for quashing the impugned orders and allowing his petition. (1) Minister of Stamps v. Annie Quayle Towend, 1909 AC 633. (2) Babu Lal v. Hari Baksh, AIR 1918 Lahore 250. (3) Amar Nath v. Khudu Mal AIR 1919 Lahore 19. (4) Nanak Chand v. Fattu, AIR 1935 Lahore 567. (5) Commissioner of Income-tax v. Bhurangya Coal Co., AIR 1959 SC 254. (6) Deb Dutt Seal v. Raman Lal Phumra, AIR 1970 SC 659. (7) Shri Digambar Jain v. Sub-Registrar, Stamps, Indore, AIR 1970 MP 23 (FB). (8) Balkrishna Biharilal v. Board of Revenue, AIR 1970 MP 74 (FB).
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Srf Limited vs State Of Madhya Pradesh And Ors. on 29 November, 2004

(9) Himayala House Co. Ltd. v. The Chief Controlling Revenue Authority, AIR 1972 SC 899. (10) Cement Marketing Co. of India Ltd. v. Assistant Commissioner of Sales Tax, Indore (1980) 1 SCC 71 : (AIR 1980 SC 346). (11) Sirpur Paper Mills Ltd. v. Collector of Central Excise, Hyderabad (1998) 1 SCC 400 : (AIR 1998 SC 1489). (12) State of Rajasthan v. Bhilwara Spinners Ltd., AIR 2001 Rajasthan 184. (13) Shrimant Shamrao Suryavanshi v. Pralhad Bhairoba Suryavanshi (2002) 3 SCC 676 : (AIR 2002 SC 960). (14) Collector of Stamps v. Hemlata (2003) 6 (JT) SC 91. (15) L and T Komatsu Ltd. v. Senior Sub-Registrar, AIR 2004 Karnataka 308. (16) Commissioner of Income-tax v. Bhikaji Dadabhai and Co., AIR 1961 SC 1265. (17) Hindustan Steel Ltd. v. State of Orissa (1969) 2 SCC 627 : (AIR 1970 SC 253). (18) Akbar Badrudin Jiwani v. Collector of Customs (1990) 2 SCC 203 : (AIR 1990 SC 1579). (19) E. I. D. Parry (I) Ltd. v. Assistant Commissioner of Commercial Taxes (2000) 2 SCC 321 : (AIR 2000 SC 551). (20) Commissioner of Income-tax v. Hindustan Elector Graphites Ltd. (2000) 3 SCC 595 : (AIR 2000 SC 1481). (21) Commissioner of Income-tax, Bihar and Orissa v. Bhurangiya Coal Co., AIR 1953 Patna 298. (22) Mohinder Singh Gill v. Chief Election Commissioner, New Delhi, AIR 1978 SC 851. (23) Board of Revenue, U.P. Allahabad v. Sardarni Vidyawati, AIR 1962 SC 1217. 10. Refuting the contentions raised by learned counsel for the petitioner Shri R. N. Singh, learned Advocate-General for State submitted that, in this case action has been taken and the orders impugned have been passed by exercising powers vested in the revenue Under Section 33 of the Indian Stamp Act, 1899 and action is not taken Under Section 47-A of the Indian Stamp Act (State Amendment). It is the case of the State Government that In the present case assessment of stamp duty has been done strictly keeping in view the deed in question Annexure-F and therefore the arguments of learned counsel for the petitioner with regard to taking action Under Section 47-A and collecting of duty by taking into consideration collateral evidence and extraneous material is refuted by learned Advocate General, Learned Advocate General argued that if the document Annexure-F, the instrument in question is considered as a whole, it would be seen that along with the instrument in question, even though instrument speaks about transfer of "superstructure" but at the same time the resolution passed by the petitioner and respondent No. 4 so also the joint declaration are enclosed as Schedule 2, 3 and 4 to the instrument and therefore these documents form part of the instrument/deed in question and in the document, at Schedule No. 3 resolution dated 29-6-1995 passed by the petitioner/company it is mentioned that the Tyre Cord Division of M/s. Ceat Ltd. is being taken over as a going concern on a consideration of Rs. 325 crores. Accordingly, it was submitted that as transfer by the aforesaid document is of "going concern" valued at Rs. 325 crores revenue has rightly assessed duty and accordingly it is stated that in doing so no illegality has been committed by the Revenue. It is stated by learned Advocate-General for the
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Srf Limited vs State Of Madhya Pradesh And Ors. on 29 November, 2004

State that if the document is read in its totality it would be seen that the contentions of the petitioner to the effect that what was transferred by the instrument was only the "superstructure" consisting of 48 items mentioned in Schedule No. 1 is misconceived. The document infact, amounts to transfer of a "going concern" valued at Rs. 325 crores and in that view of the matter stamp duty has been rightly assessed which does not call for any interference by this Court. In support of his contentions reliance was placed by Shri R. N. Singh, learned Advocate General to a judgment rendered by the Allahabad High Court in the case of Oral Oil Chemicals Pvt. Ltd. v. State of Uttar Pradesh, AIR 1997 Allahabad 92, so also another judgment in the case of Duncans Industries Limited, Kanpur v. State of U. P., AIR 1998 Allahabad 72 which were upheld by the Supreme Court. In the case of Duncans Industries Ltd. v. State of U. P. (2000) 1 SCC 633 : (AIR 2000 SC 355) referring to the aforesaid judgment it was submitted by Shri R. N. Singh, learned Advocate-General that the contentions of the petitioner are unsustainable. During the course of hearing he invited my attention to the following Judgments namely Jainabai v. State of M.P., 1980 MPLJ 795 (FB), Satna Central Co-operative and Land Mortgage Bank Ltd., Satna v. Puranlal Agrawal, 1969 MPLJ 879, Official Liquidator v. Sri Krishna Deo, AIR 1959 Allahabad 247 and J. H. Subhaiah v. Govindrao Bhiwaji, AIR 1953 Nagpur 224, to refute the contentions made by the learned counsel for the petitioner with regard to transfer to undertaking, concept of movable and immovable property so also the question of imposing penalty. It is the case of the respondents that what has been assessed is value of the property transferred by the instrument as mentioned in the resolution and joint declaration submitted as Schedule 2, 3 and 4 to the instrument, assessment has not been made by resorting to the procedure contemplated Under Section 47-A of the State amendment to the Stamp Act but stamp duty on the document is charged on the basis of the transfer made in the deed in question which includes the joint declaration and the valuation of the property made therein. Accordingly it is the case of the respondents that in the facts and circumstances of the case concurrent findings recorded by the Collector of Stamp and upheld by Board of Revenue on the basis of judgment of Supreme Court in the case of Duncans Industries Ltd. (AIR 2000 SC 355) does not call for any interference. 11. Even though learned counsel for petitioner has referred to the definition of movable and immovable property, concept of transfer of undertaking and the fact that the plant and machinery being transferred were movable property, the same in the opinion of this Court need not be considered in this petition in view of the contentions that were raised and the submission made by Shri R. N. Singh, learned Advocate General in reply. 12. I have heard learned counsel for the parties at length. On a perusal of the records it is seen that the main dispute and the question which requires consideration and determination by this Court is as to what was transferred and conveyed by the instruments in question. While deciding such disputes with regard to charging of duty on an instrument or document in accordance with the Indian Stamp Act, it is well settled in law that duty is payable on the instrument in question and not on the transaction. This proposition of law is accepted and there can be no dispute in this regard. As far back as in the year 1909, in the case of Annie Quayle (1909 AC 633) (supra) the Privy Council has observed that "statute tax instrument and does not tax transaction". This proposition has been accepted in various other cases which have been referred to by learned counsel for the parties in the present case. While construing a document the intention of the parties has to be gathered from the document itself, if the words of the document are clear and unambiguous it is the cardinal principle of law that "effect must be given to them and no other extraneous enquiry with regard to what the parties thought or what they intended to has to be ruled out. While construing a document intentions has to be gathered from the document itself and no extraneous enquiry into what the parties thought or intended is permissible. When the terms of the sale deed are clear it is not permissible to go beyond it to find the intention of the parties. It is well settled in law that if words of the sale deed or document are clear and specific resorting to external aid is not permissible for the purpose of finding out the intention of the parties. Narration in the document would be the sole guiding factor in determining the question as to what has been transferred by the instrument in question. It is in the back drop of the aforesaid legal principle that this Court is required to proceed to decide the question involved in this petition. Therefore it becomes necessary to refer to the conveyance/deed in question.

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Srf Limited vs State Of Madhya Pradesh And Ors. on 29 November, 2004

13. The instruments in question is a conveyance deed for transfer by sale of certain property entered into on the 13th of June, 1996 between respondent No. 4, Ceat Ltd. v. Public Limited Company incorporated under the Companies Act and S.R.F. Ltd., petitioners. It is indicated in para 3 of the deed that whereas the vendor namely M/s. Ceat Ltd. has constructed the Tyre Cord Division in the year 1992-93 for the purpose of manufacturing Nylon Tyre Cord and fabrics for which piece of land was leased to them by M. P. Audhyogik Kendra Vikas Nigam, Gwalior, a Government of M. P. Undertaking, the said Tyre Cord Division comprises of civil structure including administrative building, factory building, boundary wall, stores, tanks, pump houses and other civil works and immovable plant more particularly described in the First Schedule to the deed referred to subsequently in the deed as "superstructure" and movables including movable machinery, vehicles other instruments, spares material, furnished goods, work in progress etc. Thereafter in para 4 reference is made to a resolution dated 24th March, 1995 passed by the 4th respondent, the resolution dated 29-6-1995 passed by the petitioner Company so also joint declaration dated 8/9-2-1996 and it is stated that same is annexed hereto as Schedule 2, 3 and 4. Thereafter in para 5 it is stated that simultaneously with the execution of these resolutions and declaration further execution of this instrument is being carried out. In para 6 of the Instrument it is mentioned that consistent with the sale of the Tyre Cord Division as a "going concern" by the vendor to the purchaser various movable assets have been transferred by delivery on the mid night of 8th Feb.. 1996 together with handing over of possessioni management and control of the Tyre Cord Division to the purchaser by execution of a separate document. Thereafter it is stated that upon completion of transfer by execution of the present deed, all immovable property including the "superstructure" conveyed therein, ownership interest in the Tyre Cord Division would vest with the purchaser. Thereafter in para 7 valuation of "superstructure" is done at Rs. 27,66,18,912/ - and stamp duty is assessed at Rs. 2,18,62,489/-. Para 8 says that the purchaser has requested the vendor to execute this deed of conveyance in its favour in respect of the said "superstructure" which the vendor has agreed to do in the manner provided therein. It is therefore clear from a reading of paras 4, 5, 6 and 8 of the documents that what was proposed to be conveyed by the deed in question was the "superstructure" referred to in First Schedule in para 4, the resolution and joint declaration have been mentioned as annexed thereto with the documents and in the mar -gin Schedule 2, 3 and 4 is mentioned. However the intention of the parties while executing the deed which is evident from the paras 6 and 8 is that the document was to record transfer of the "superstructure" transfer of the assets having already been effected by delivery on the mid night of 8th Feb. 1996, for the sake of convenience relevant parts of the documents are reproduced hereinunder :(2) The said TCD comprised civil structures including administrative building, factory building, boundary wall, stores, tanks, pump houses and other civil works and immovable plant more particularly described in the First Schedule annexed hereto (hereinafter referred to as "superstructures") and movables including moveable machinery, vehicles, office equipment, spares, materials, finished goods, work-in-progress etc. (4) Pursuant to (i) the resolution dated 24th March, 1995 of M/s. Ceat Ltd. passed by the shareholders in annual genera! meeting, (ii) the resolution of 29th June, 1995 passed by the Board of Directors of M/s. SRF Limited and (iii) the Joint declaration dated 8-2-96 of Ceat Ltd. and SRF Limited. Copies of which are annexed hereto, the parties have executed this deed. (5) Simultaneously with the execution of these presents, (a) The vendor has by joining as consenting party also confirmed transfer of the vendors leasehold interest in the Factory Land for the residual period of 94 years. 1 month and 6 days by MPAKVN in favour of SRF by the execution of an Amendment in the said lease deed. (6) Consistent with the sale of the Tyre Cord Division as a going concern by the Vendor to the Purchaser, various movable assets have been transferred by delivery on the midnight of 8th February, 1996 together with handing over of possession, management and control of the Tyre Cord Division to the purchaser by execution of a separate document.
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Srf Limited vs State Of Madhya Pradesh And Ors. on 29 November, 2004

Upon the completion of the transfer by execution of the present deed of the immoveable property including the superstructures conveyed herein, the ownership interest in the Tyre Cord Division would vest with the purchaser as aforesaid. (7) The value of the said superstructure has been determined to be Rs. 27,76,18,912/- (Rupees twenty seven crores seventy six lacs eighteen thousand nine hundred twelve only) and the stamp duty payable @ 7.5% and 5% thereon is Rs. 2,18,62,489/- (Rupees two crores eighteen lacs sixty two thousand, four hundred eighty nine only). (8) The purchaser has requested the vendor to execute this deed of conveyance in its favour in respect of the said superstructures which the vendor has agreed to do in the manner hereinafter appearing :NOW THIS INDENTURE WITNESSETH AS UNDER:1. As agreed between the vendor and the purchaser and for consideration received, the receipt whereof the vendor doth hereby admit and acknowledge and of and from which and every part thereof, the vendor doth for ever acquit, release and discharge the purchaser as well as the superstructures and the vendor doth herewith GRANT, sell, assign, release, convey, transfer and assure unto the purchaser absolutely and forever all those buildings, structures and other items being the "superstructures" more particularly described in the First Schedule hereunder written, together with all appurtenances, incidents, licences, benefits of covenants, profits, privileges, advantages, rights, liberties, easements whatsoever to the said superstructures now or at any time heretofore usually held. 4. The terms of this conveyance shall be subject to the terms agreed between the vendor and the purchaser for sale of the Nylon Tyre Cord Division (TCD) at Madhya Pradesh. The possession of the said superstructures has already been given to the purchaser on the midnight of 8th/9th, February. 1996. 14. Referring to the last part of the deed as mentioned hereinabove so also by referring to the resolution and joint declaration and indicating them to be Schedule Nos. 2, 3 and 4 of the agreement, Shri R. N. Singh, learned Advocate-General had argued that what is conveyed by this document is in fact, the entire on going concern and therefore the charge on the document made by the revenue is proper. However, a complete reading of the entire document indicates that the purpose of executing this deed was only to transfer the "superstructure" mentioned in First Schedule to the conveyance and the joint declaration and resolution were only annexed to the document for the purpose of , showing the source on the basis of which the conveyance was being executed and they only form the foundation for executing the deed. Merely because the document is annexed to the instrument it cannot be construed to mean that the deed in question relates to transfer of the entire undertaking. On the contrary a meticulous analysis of the terms as contained in the instrument indicates that intention of the parties namely petitioner and 4th respondent was only to transfer the "superstructure" mentioned in the First Schedule and mere reference to the resolution and joint declaration and the transfer that took place on 8th Feb., 1996 in the instrument cannot be construed to mean that the document was executed for the purpose of transferring the entire undertaking as an on going concern. 15. At this stage it would be appropriate to refer to a judgment of the Supreme Court in the case of Municipal Corporation of Delhi v. Pramod Kumar Gupta, AIR 1991 SC 401 wherein the expression "instrument" as defined in Section 147 of the Delhi Municipal Corporation Act was considered and it is observed that the said expression has the same meaning as the word "instrument" used in the Stamp Act. After considering the definition of the word instrument, it has been observed by the Supreme Court that a document has to be a vehicle for the transfer of right, title and interest. A document merely stating as a fact that transfer has already taken place cannot be included within this expression. It has been observed by the Supreme Court that a paper which is recording a fact or is attempting to furnish evidence of an already concluded transaction under which title has already passed cannot be treated to be such an "instrument". If in the backdrop of the aforesaid judgment the submissions made by learned counsel for the respondents State is considered the same cannot be
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accepted. 16. Instrument is defined in Section 2(14) of the Stamp Act and conveyance is defined in Section 2(10) of the Stamp Act. Instrument is a document by which right or liability is created or transferred and conveyance is said to include the conveyance on sale and every instrument by which property immovable or movable is transferred inter vivos. Section 10 of the Stamp Act deals with payment of duty, Section 33 relates to impounding of document and Section 47-A of the M. P. Act relates to assessment of stamp duty on the basis of the market value. While considering the question as to what stamp duty is chargeable on instrument it has been held by the Supreme Court in the case of the Madras Refineries Ltd. v. The Chief Controlling Revenue Authority, Board of Revenue, Madras (1977) 2 SCC 308 that in order to determine whether any, and if what stamp duty is chargeable upon the instrument the legal rule is that the real and true meaning of the instrument is to be asserted. 17. During the course of hearing it was submitted by learned Advocate-General that in this case proceedings have been held strictly in accordance with the provisions of Section 33 and the contention of learned Sr. Counsel for the petitioner to the effect that revenue authorities have proceeded to take action Under Section 47-A of the State Amendment Act was said to be incorrect. However the contention of the learned Advocate-General to the effect that the authorities have charged stamp duty only on the basis of the instrument in question and not otherwise has to be viewed in the backdrop of the findings and observation given in the impugned order. In the order dated 7-11-2001 Annex-ure-Q passed by the Collector of Stamp, it is clearly mentioned that proceedings are Under Section 33 of the Stamp Act however in the impugned order he has referred to the spot inspection conducted by the Sub-Registrar on 15-1-1998, the guidelines submitted by the Inspector General of Stamps vide Annexure-K dated 24-10-1996, the statement recorded by him during the pendency of the proceedings of Shri I. J. Joshi, the records collected from the Sales Tax Office, annual report for the year 1995-96 published by respondent No. 4 and various other material that have come to notice in the enquiry conducted by him. It is, therefore clear that the Revenue Authorities have not passed the order on the documents presented for registration but. it is based on other material collected by the authorities during the course of enquiry. 18. It is also clear from the records that the Collector of Stamps has conducted the enquiry on the basis of the guidelines provided to him by the Inspector General of Stamps on 24-10-1996 vide Annexure-K wherein the Inspector General has clearly indicated in paras 3 and 4 of the order to obtain evidence and information from various sources. The findings recorded by the authorities is therefore based not only on a scrutiny of the instruments in question but also on other collateral material and evidence collected by them as indicated hereinabove and in that view of the matter there is much force in the contention advanced by learned Sr. Counsel appearing for the petitioner that the authorities have misdirected themselves and have in fact conducted an enquiry as contemplated Under Section 47-A which was not permissible. At this stage after having arrived at the aforesaid conclusion it would be appropriate to consider the judgments relied upon by the learned Sr. Counsel for the parties. 19. The entire argument of learned Advocate General for the State was based on the fact that the issues involved in this petition stands squarely covered by the judgment rendered by the Allahabad High Court in the case of Orai Oil Chemicals (AIR 1997 All 92) (supra) so also by the judgment rendered by the Supreme Court in the case of Duncans Industries Ltd. (AIR 2000 SC 355) (supra). On going through the aforesaid judgment it is seen that in the said cases and in particular in the case of Duncans (supra) the wordings of the instrument becomes very relevant. In the case of Duncans (supra), the conveyance deed itself contend a stipulation that it pertains not only to the land but the entire fertilizer business including plant and machinery. The agreement is reproduced in para 2 of the judgment of the High Court i.e. Duncans Industries Ltd. v. State of U. P., AIR 1998 Allahabad 72 and a perusal thereof indicates that clause IV of the conveyance deed which was subject matter of adjudication in that case specifically pertained to transfer of the plant and machinery relating to business so also other items mentioned therein and it was in the back drop of the aforesaid specific stipulation in the document that the case has been decided. That apart, the Sub-Registrar in the said case has made a
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reference to the Collector Under Section 47-A of the Stamp Act, 1899 and the proceedings were for the purpose of assessing the market value of the property. It is therefore, seen that the judgment in the case of Duncans Industrial Ltd. (supra) is distinguishable in view of the specific stipulation in the conveyance with regard to transfer of the property mentioned therein for which no stamp duty was paid. In the case of Orai Oil Chemical (supra) also proceedings were Under Section 47-A and the agreement in question was also for transfer and sale with regard to sale of plant and machinery. 20. It is therefore clear that in the present case the revenue authorities have misdirected themselves and have invoked the provisions of Section 33 of the Stamp Act in a manner not permissible in law and by misreading the instrument In question stamp duty has been assessed. In the facts and circumstances of the present case there was no occasion for the petitioner company to transfer any other property, apart from the "superstructure" mentioned therein as the entire property had already been transferred even prior to execution of the instrument. Under law there is no compulsion on the petitioner to acquire the title to the undertaking only through a written instrument and viewed in the light of the aforesaid, the contention raised by the respondents cannot be accepted. In this regard it would be relevant to refer to certain observations made by the Karnataka High Court in the case of L & T Komatsu Ltd. (AIR 2004 Kar 308) (supra) wherein some what similar question was involved. It has been held in this case as under :23. It is a well settled principle of interpretation that in understanding a Deed or a document, particularly a document conveying title, it should be read as a whole and the property transferred under the instrument is the property which is expressly recited as to be transferred under the instrument itself. The question of payment of stamp duty under the Act is essentially dependent on the nature of the instrument namely the nature of the transaction and what is conveyed or transferred under the instrument. It is not in dispute that the instrument is one of conveyance as understood within the meaning of Section 2(1)(d) of the Act and attracting stamp duty under Article 20 of the Schedule to the Act. Then the next question will be what is the subject-matter of conveyance. It is only on this aspect there is dispute. 24. The instrument very clearly recites that what is conveyed is the land, building and structures. The instrument also refer to the earlier agreement dated 30-7-1997 and under the agreement, the entire factory so sought to be sold or conveyed and as part of that agreement under the present. Deed, the land, building and structure, portion of which is land, building and structure, portion of which is land, building and structure, portion of which is sought to be conveyed. The instrument Itself recites that the movables had already been transferred and given possession of also etc. It is also expressly mentioned that the value of the land, building and structure which is conveyed under the Deed of Transfer is a sum of Rs. 59,31,00.000/- and the stamp duty paid on the instrument is on such valuation. It is in this regard Sri R. N. Narasimhamurthy, learned Senior Counsel appearing for the petitioner submits that when there was no compulsion on the petitioner either to have a written Deed of Transfer in respect of the movables and when once it is the case of the petitioner that the movables had been independently transferred and possession also taken by the petitioner and the very instrument recites that what is transferred now is only the land, building and structure valued at Rs. 59,31,00.000/- there was no occasion at all to come to any other conclusion other than that the property conveyed under the instrument is only the land, building and structure valued at Rs. 59,31,00,000/- and nothing else. 25. What is to be looked into in the instrument for the purpose of enquiry under Section 33 of the Act is as to whether the stamp duty payable on the instrument and on the valuation of the subject matter has been paid or not. If the instrument is accepted at its face value, the stamp duty paid even according to the respondents, is the correct stamp duty and it is an instrument which is duly stamped. But what the respondents have done is that the version of the instrument itself is disbelieved and the instrument is interpreted and understood as an instrument conveying properties of the value of Rs. 210,64,00,000/-. No doubts respondents have sought to place reliance on But it is not open to the authorities acting under Section 33 of the Act to interpret a document or understand a document in such a manner as to discard the express recitals therein Own.....under; standing of the recitals and arrive at a con- Land as such it is only duly stamped. This is not the or under
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Srf Limited vs State Of Madhya Pradesh And Ors. on 29 November, 2004

Section 39 of the Act. The power under Section 33 of the Act is not one for interpretation of a document, but one for inferring as to whether proper stamp duty on the nature of the transaction has been paid. May be a transaction In the nature of conveyance being wrongly described as a transaction in the nature of a mere lease or a mortgage and stamp duty paid on such an instrument becomes subject matter of Section 33 of the Act, but not on the understanding that the value of the subject-matter and the very subject-matter has not been properly described. The clear intention under the instrument being one to convey the property comprising land, building and structures, stamp duty payable is only on the value of these properties and nothing more. The interpretation sought to be placed on the instrument for exercise of power under Section 33 of the Act was not one which is either tenable or acceptable on the face of the recitals in the instrument itself and said to constitute a justifiable fact situation for exercise of power under Section 33 of the Act and for pursuing further action. I am in full agreement with the observation made by the learned Judge in the aforesaid judgment and if the aforesaid principle is applied in the facts and circumstances of the present case, the orders passed by the respondents is clearly unsustainable. 21. Similar question was considered by the Division Bench of the Rajasthan High Court in the case of Bhilwara Spinnes Ltd., (AIR 2001 Raj 184) (supra) and the Division Bench of the Rajasthan High Court after considering the definition of "instrument" and "conveyance" as appearing in the Stamp Act and after taking note of the instrument concerned in that case, accepted the arguments advanced on behalf of the respondent/company therein to the effect that duty payable under the Indian Stamp Act is on the instrument and not on any transaction. After considering the agreement and wordings of the conveyance in the said case and after taking note of the definition of "Instrument" as contained in Section 2(14) of the Stamp Act it has been held as under :21. The charge of the stamp duty is only on instrument and not on the transaction. The subject-matter of duty is the instrument through which any property is transferred or rights created, not any other transaction which may exist between the parties but are not subject-matter of instrument, which is to be construed and subjected to levy in respect of property it deals with. Nor duty is leviable on any transaction that may exist between one or more parties to instrument and other person or persons not party to the instrument by holding an enquiry whether such other transaction has been carried out in accordance with law or not. 22. It becomes relevant to consider the meaning of expression instrument for the purpose of the Act which has been defined under Section 2(14). (14) "Instrument" includes every document by which any right or liability is, or purported to be created, transferred, limited, extended or extinguished or recorded. 23. The aforesaid definition makes it clear that a document which either creates any right or liability is created, transferred, extended, limited, extinguished or recorded can fall within the category of instrument. Even if no such right or liability is created, transfer, limited, extended, extinguished on recorded in fact but purports to create transfer on record any right or a liability it may invite attraction of stamp duty. But, obviously, the right or liability referred to under above definition can only relate to the right or liability in respect of which the instrument has been executed. If any transaction has been carried out between two parties without execution of an instrument, the provisions of the Stamp Act cannot be attracted on the assumption that in order to create. transfer, limit, extend, extinguish or record validly what instrument ought to be executed. In the absence of any document creating or purporting to create any right or a liability, or purporting to create such right or liability no provision of Stamp Act can be invoked for the purpose of levying Stamp Duty by assuming existence of any document for the said purpose. Else, it would amount to duty on transaction and not duty on the instrument. The instrument is chargeable even the transaction which it recorded or purports to record cannot be effected. For example if a person having no interest in any property which he could transfer executes a document purporting to transfer such interest in immovable property, the
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document will attract Stamp Duty. Conversely also, as the duty is on the instrument even though where the parties have acted in furtherance of the agreement between them by conducting their affairs accordingly but have not executed any instrument to that effect, in the absence of any instrument to that effect between the parties, no duty under the Act can become chargeable. It may also be relevant to mention here that in this case the judgment of the Supreme Court in the case of Duncans Industries Ltd. (AIR 2000 SC 355) (supra) was considered by the Division Bench of the Rajasthan High Court and same has been distinguished on the ground that the wordings of the instruments were different. Similar situation exists in the present case also. 22. The Supreme Court had considered the effect of incorporation in document or instrument terms and condition relating to an agreement and in the case of Himalaya House, (AIR 1972 SC 899) (supra) it was held by the Supreme Court that mere reference to some earlier transaction in a document does not amount to incorporation in that document to the terms and conditions relating thereto. In the said case also while considering the effect of reference to an earlier document in the instrument it has been held by the Supreme Court in para 9 as under :9. For the purpose of this case, we shall proceed on the assumption, without deciding, that the charging words in Articles 23 of the Stamp Act "where the amount or value of the consideration for such conveyance as set forth therein" do not mean that the Revenue must have regard only to what the parties to the instruments have elected to state the consideration to be, but the duty must be assessed upon the amount or value of the consideration for the transfer as disclosed upon an examination of the terms of the instrument as a whole. We are of the opinion that the learned Chief Justice and Naik, J. were not justified in holding that the Deed of Assignment incorporates into itself the various agreements entered into between Uttamchand and the persons to whom he assigned flats, Offices and shops. The only reference to those persons in the Deed of Assignment is in the preamble wherein it is stated "And whereas the Assignor having erected a building known as Himalaya House on the said piece of the land had granted to certain persons the right to occupy flats, offices and shops in the said building. And whereas the Assignee Company has been formed for the better administration of the said building and for the protection of the interests of the persons occupying the flats, offices and shops therein." These clauses merely refer to the earlier transaction. They do not incorporate into the Assignment Deed the earlier agreements with the persons referred to therein. Mere reference to some earlier transactions in a document does not amount to an incorporation in that document, of the terms and conditions relating thereto. From the language used in the Assignment Deed, it is not possible to come to the conclusion that the terms and conditions of the earlier transactions have been made a part of that Deed. Further barring one particular agreement other agreements were not before the Court. Therefore, it is not possible to know what the terms and condition of those agreements were. Before the terms and conditions of an agreement can be said to have been incorporated into another document, the same must clearly show that the parties thereto intended to incorporate them. No such intention is available in this case. 23. The Full Bench of this Court in the case of Balkrishna, (AIR 1970 MP 74) (supra) while considering the question of determining stamp duty on a partition deed has observed as under in paras 6 & 7:6. Shri Dabir's contention as that a partition had already taken place a few days earlier, that is, on October 31, 1959, and that the document (Ex. P-5) was merely a record or acknowledgment of a past fact. This argument is wholly untenable, having regard to the language of the document. There is not the slightest indication of any partition having taken place earlier. In fact, in so many words it is recorded in it that by this document itself a partition was being effected. 7. The following principles govern the application of the Stamp Act to instruments:Indian Kanoon - http://indiankanoon.org/doc/1279081/ 11

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(i) The first is that duty is payable on the instrument and not on the transaction. The leading case on this point is Commissioner of Inland Revenue v. Angus (1889) 25 QBD 579 at p. 589. In that case, Esher, M. R. observed thus :"The first thing to be noticed is, that the thing which is made liable to the duty is an "instrument"........... It is not the transaction of purchase and sale which is struck at; it is the Instrument whereby the purchase and sale are effected which is struck at." It is not open to the revenue to say that the instrument should be deemed to be that which it is not on the record and that the object of the transaction was to achieve a purpose not disclosed in the instrument. (ii) The second rule is that the Court is not (sic) by the apparent tenor of the Instrument; it is the real nature of the transaction which will determine the stamp duty. See, for instance. Mortgage Insurance Corporation v. Commissioner of Inland Revenue, (1888) 21 QBD 352; Inland Revenue v. James John Oliver, (1909) AC 427 and Deddigton Steamship Company Ltd. v. Commissioner of Inland Revenue, (1911) 2 KB 1001. But the true meaning of this rule is really this that the recitals in the instrument should not be lost sight of merely because the parties gave a particular description of its nature. But the rule does not go beyond this. Here may be recalled the weighty observations of Lord Cairns, who said many years ago in Partington v. The Attorney General (1869) 4 HL 100 at p. 122 :"As I understand the principle of all fiscal legislation, it is thus : if the person sought to be taxed comes within the letter of the law he must be taxed, however great the hardship may appear to the judicial mind to be. On the other hand, if the Crown, seeking to recover the tax, cannot bring the subject within the letter of the law, the subject is free, however apparently within the spirit of the law the case might otherwise appear to be." It was observed in Bank of Chettinad v. I.-T. Commissioner, AIR 1940 PC 183 :"Their Lordships think it necessary once more to protest against the suggestion that in revenue cases the substance of the matter may be regarded as distinguished from the strict legal position." Their Lordships then referred to Inland Revenue Commissioners v. Duke of Westminister, 1936 AC 1. See also Board of Revenue v. Narsimkhan, AIR 1961 Mad 504 (FB). (iii) The third rule is that the Court must look at the document itself as it stands and it is not permissible to show, by evidence, any collateral circumstances. The nature of the document can be determined only from the language it employs and the purpose which it is intended to serve. Although it is permissible to look behind the form and at the substance of the transaction, this can be done only by construing the instrument itself and not by taking into consideration any collateral or other evidence de hors the instrument. In Chandrakant v. Kartickcharam, (1903) 5 Bom LR 103, Peacock, C. L. said :"It appears to me that in applying the stamp law the stamp must be paid upon what is stated in the instrument and cannot depend upon collateral evidence......" Thus, the question must be decided essentially with reference to the contents of the instrument and to the intention of the parties which is gathered from the contents. (iv) The fourth rule is that in determining stamp duty, the substance of the transaction as disclosed by whole of the instrument has to be invoked to, and not merely the operative part of the instrument. (v) The fifth rule is that stamp duty is payable on an instrument according to its tenor and it does not matter that it cannot be given effect to for some independent cause. (vi) The sixth rule is that there can be no objection to a device effectuating a transaction in a manner that lower rate of duty is attracted. See, for instance, Littlewoods Mail Order Stores Ltd. v. Inland Revenue
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Commissioner, (1961) Ch 210. 24. In the case of Collector of Stamp v. Hemlata ((2003) 6 JT 91) (supra) Supreme Court after considering the cases of Himalaya House (AIR 1972 SC 899) (supra) it is observed as under in para 4 :4. In our judgment, the views taken by the learned single Judge and the Division Bench of the High Court are perfectly justified and unexceptionable. This Court in Himalaya House Co. Ltd. v. The Chief Controlling Revenue Authority had occasion to consider almost a similar situation. This Court noticed that. Article 23 of Schedule 1A to the Indian Stamp Act, 1899 had come up for consideration, before various High Courts on a number of occasions. Approving the view taken in Raman Chetty v. Mohammed Ghouse, (1889) ILR 16 Cal 432); Sakharam Shankar v. Ramchandra Babu Mohire, (1903 ILR 27 Bom 279); Mohammed Muzaffer All (AIR 1922 All 82 (FB) and Sitaram Karnalia v. State of Bihar, (AIR 1960 Pat 210) it was held by this Court that the question which arose for decision was settled by a series of judgments that stamp duty was chargeable only on the basis of the consideration set forth in the instrument to be stapped. It was also held that the Collector under the Indian Stamp Act had no jurisdiction to embark upon an enquiry with regard to the market value of the property assigned by the document nor did he have the power to adjudicate further stamp duty on the basis of his own evaluation. This Court expressed its agreement with the view taken in the aforesaid decisions. In view of the long line of decisions it was observed that the legislature may have had good reasons not to empower the revenue to make an independent enquiry as regards the valuation of the right sought to be assigned. 25. Having considered the instrument in question so also the facts and circumstances of the present case in the light of the legal position that emerges on an analysis of the judgments referred to herein above, the contentions raised by the respondents in this petition cannot be accepted. 26. Having come to the conclusion on the basis of the discussion and findings recorded hereinabove it is not at all necessary now to deal with various other questions which were advanced by learned counsel for the parties during the course of hearing with regard to implication of the words movable and immovable property as they are not required to be considered now in this petition. 27. Accordingly, it has to be held that the assessment of the stamp duty made and the demand raised by the respondents and impugned in this petition are clearly unsustainable. 28. Accordingly, this petition is allowed. The order impugned orders dated 7-11-2001 (Annexure-Q), Annexure-T dated 3-1-2002 and the demand notices (Annexures-R & S) dated 12-11-2001 and 22-12-2001 respectively are hereby quashed. Parties to bear their own costs.

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