In a recent decision of the Hon’ble Division Bench compromising of Hon’ble Justice Shri. G. S. Patel and Smt. Neela Gokhale, in the case of Adityaraj Builders v. State of Maharashtra & Ors. & Group Matters, wherein several Petitions were decided on a common question of law under the Maharashtra Stamp Act 1958, relating to Stamp Duty sought to be levied on Permanent Alternate Accommodation Agreements (“PAAA”).
- The cause of action arose pursuant to the following impugned circulars:
- Circular dated 4th June 2013 by the State Government stating that stamp duty would be chargeable on PAAAs, and the value would be computed on the basis of the costs of construction of the flats and the market value of the additional area, if any.
- Circular dated 7th November 2013 issued by the Chief Controlling Revenue Authority of the Maharashtra State with guidelines for charging stamp duty on PAAAs, that would be computed on the costs of construction of the retained area. Where fungible FSI was used, stamp duty would be computed on the construction cost and the premium paid on the fungible area.
- Circular dated 23rd June 2015 issued by the Chief Controlling Revenue Authority states that if the development agreement is executed only between the Co-operative Housing Society and Developer, the document to transfer the premises/ tenements, which is for the personal benefit of the original member of the housing society, is not to be construed as an incidental agreement pursuant to the original development agreement (“DA”) and shall be treated as an independent agreement. The impugned circular contemplates that any PAAAs between the Society members and the developer is different from the DA between the Society and the developer.
- Circular dated 30th March 2017, issued by the Chief Controlling Revenue Authority as a clarificatory circular which purports to specify criteria that must be complied with and goes on to specify that only on such compliance PAAAs with individual society members would be treated as documents incidental to the DA, attracting the application of Section 4 of the Maharashtra Stamp Act. This ‘clarificatory’ circular purports to say that compulsorily the individual society members must join in the execution of the original DA, i.e., that every single society member must countersign the DA and that the DA is thus to be multipartite.
- To resolve the issues arisen pursuant to the above impugned circulars, the Hon’ble Bench discussed the provisions of Maharashtra Stamp Act (“Act”), particularly section 4(1) which provides for payment of stamp duty only on the principal instrument as prescribed in Schedule I of the Act, where in the case of any conveyance, development agreement, lease, mortgage or settlement, several instruments are employed for completing the transaction.
- In view thereof, the Hon’ble Bench observed that for the purposes of Section 4(1), all the PAAA executed with each member of the society may be physically included in a DA. If that be done, then there is only one Agreement covering the whole of the DA and charging of stamp duty by the stamp authority simply would not arise because there is no method by which the stamp authority could levy stamp on every annexure to a DA.
- The Hon’ble Bench set aside the impugned circular dated 30th March 2017 requiring every member to also sign the DA, for the reasons that firstly, it is entirely beyond the jurisdictional remit of the revenue authorities to dictate what form the instrument must take and that a revenue authority must take the instrument as it finds. Secondly, there is no concept in law of a society not representing the interests of all its members while entering into a DA and the requirement by the stamp office that unless a member personally signs the DA, Section 4(1) of the Act would not attract is erroneous. Further, the circular dated 23rd June 2015 that purports to exclude PAAAs from Section 4(1) was held ultra vires the Stamp Act and was quashed.
- The Bench clarified that in situations regardless of how the redevelopment takes place, from the perspective of a society member, when she or he is getting:
(a) a home in replacement of a home;
(b) a larger home in replacement of a smaller home; and
(c) the option of purchasing additional area for the replacement home.
It is only in the third case i.e., (c) that stamp duty becomes payable and not otherwise as in the former two cases of (a) & (b).
The Bench thus, finally summarised its finding as follows:
(a) A DA between a cooperative housing society and a developer for development of the society’s property (land, building, apartments, flats, garages, godowns, galas) requires to be stamped.
(b) The DA need not be signed by individual members of the society and the same is optional. Even if individual members do not sign, the DA controls the re-development and the rights of society members.
(c) A PAAA between a developer and an individual society member does not require to be signed on behalf of the society and the same is also optional.
(d) Once the DA is stamped, the PAAA cannot be separately assessed to stamp beyond Rs. 100 requirement of Section 4(1) if it relates to and only to rebuild or reconstruct premises in lieu of the old premises used/occupied by the member, and even if the PAAA includes additional area available free to the member because it is not a purchase or a transfer but is in lieu of the member’s old premises. The stamp on the DA includes the reconstruction of every unit in the society building and the same cannot be levied twice.
(e) To the extent that the PAAA is limited to rebuilding of the premises without the actual purchase for consideration of any additional area, the PAAA is an incidental document within the meaning of Section 4(1) of the Stamp Act.
(f) A PAAA between a developer and a society member is to be additionally stamped only to the extent that it provides for the purchase by the member for actual stated consideration and a purchase price of additional area over and above any area that is made available to the member in lieu of the earlier premises.
(h) The provision or stipulation for assessing stamp duty on the PAAA on the cost of construction of the new premises in lieu of the old premises was held unsustainable.
Most importantly, the aforesaid findings were ordered as not limited to the facts of the cases before the bench but to be applicable as a rule in general.