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PETITIONER: HIMALAYA HOUSE CO.  LTD.  BOMBAY

       Vs.

RESPONDENT: CHIEF CONTROLLING REVENUE AUTHORITY

DATE OF JUDGMENT01/02/1972

BENCH: HEGDE, K.S. BENCH: HEGDE, K.S. REDDY, P. JAGANMOHAN

CITATION:  1972 AIR  899            1972 SCR  (3) 322  1972 SCC  (1) 726  CITATOR INFO :  D          1990 SC 485  (5)

ACT: Indian Stamp Act (2 of 1899), Sch. I, art.  23-Determination of value ,of consideration by Revenue-How should be done.

HEADNOTE: The  lessee of a plot of land from Government sub-leased  it and  the  sub-lessee built a building on  it  consisting  of Rats, shops and offices.  The sub-lessee assigned the rights of occupation of those flats etc. under various .agreements. Thereafter,  the appellant-company was incorporated and  the sub-lessee  purported  to  assign  all  his  rights  in  the building  to the appellant company.  In the preamble to  the deed  it was recited that the company had been  formed  for the  better  administration  of the  building  and  for  the protection  of  the interests of the persons  occupying  the flats etc., and that ;the sub-lessee had agreed to assign to the appellant-company all his interests in the, land and the building.  The consideration, mentioned in the document  was nil  and the document bore a stamp% of 12 annas.   When it was presented for registration, the authority impounded  the deed, held that the appellant-company was formed of and  for the persons who had purchased the flats etc., that the  real consideration for the assignment was .made up partly of what was paid by the occupiers of the flats etc., and determined the  stamp  duty and penalty under s. 40 of the  Stamp  Act, 1899. On  a  reference  to the High Court it was  held,  that  the article  in  the ,Schedule to the St-amp Act  applicable  is art.  23.  On the question of consideration,’however,  while one Judge held that the consideration was ,nil’ as mentioned in  the  deed, the majority held that the  Revenue  was  not bound  to accept the quantum of consideration  mentioned  in the deed, that the deed incorporated into itself the various agreements  entered  into  between the  sub-lessee  and  the persons to whom rights were assigned in the flats etc.,  and that  the consideration was the total amount payable to  the sub-lessee by those assignees. Allowing the appeal to this Court, HELD:  (1) Before the terms and conditions of  an  agreement can  be said  to  have  been  incorporated  into   another

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document,  it must be shown that the parties intended to  do so.  In the present case, the mere reference to the  earlier transactions in the deed did not amount to an  incorporation in  it  of the terms and conditions of  those  transactions. [338 F-H] (2)  In  view  of s. 27 of the Stamp Act the  parties  to  a document are required to set forth in the document fully and truly,  the consideration (if any) and all other  facts  and circumstances  affecting the chargeability of that  document with  duty.   But a failure to do so  is  merely  punishable under  s.  64  of  the Stamp Act.   There  is  no  provision empowering  the Revenue authorities to make  an  independent inquiry   of  the  value  of  the  property   conveyed   for determining the duty, even assuming that the charging  words in art. 23 do not mean that the Revenue must have regard  333 only  to what the parties to the instrument have elected  to state the consideration to be, but can assess the duty  upon the  value  of  the  consideration  as  disclosed  upon   an examination of the terms of the instrument as a whole.  [339 A-D] (3)  There  is a long line of decisions of the  High  Courts holding  that the Legislature had not empowered the  Revenue to  make an independent inquiry as regards the valuation  of the  right sought to be assigned.  That view is correct  and the  question  must  also be held to  be  settled  by  state decision. [340 D-F] Ramen Chetty v. Mohomed Ghouse, I.L.R. 16 Cal. 432, Sakharam Shankar  v.  Ramchandra  Babu Mohire, I.L.R.  27  Bom.  279, Muhammad  Muzaffar  Ali,  In re.  I.L.R. 44  All.  339,  Sri Sitaram Ramalla & Anr. v. State of Bihar, I.L.R. 39 Pat. 228 and  Bharpet  Mohammad  Hussain Sahib  &  Anr.  v.  District Registrar, Kurnool, I.L.R. [1964] A.P. 1, approved. (4)  In any event, there was no basis for holding  that  the consideration  for the deed was the amount received  by  the sub-lessee  from the persons to whom he assigned  rights  in the flats etc.  Those persons acquired an independent  right and  title-whether  perfect or not en before  the  impounded deed  was executed, and their rights did not flow  from  the impounded deed. [340 F-G]

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 660 of 1967 and 58 of 1972. Appeals  by certificate/special leave from the judgment  and decree  dated August 11 / 12, 1964 of the Bombay High  Court in Civil Reference No.. 6 of 1959. S. T. Desai, P. C. Bhurtari, J. B.  Dadachanji, O. C. Mathur and  Ravinder  Narain,  for  the  appellant  (in  both   the appeals). V. S. Desai and B. D. Sharma, for respondent No. 1 (in  both the appeals). The Judgment of the Court was delivered by Hegde, J. Both these appeals, the former by certificate  and the  later by special leave arise from the decision  of  the High Court of Bombay in a reference under section 54 of  the Bombay Stamp Act. When  Civil Appeal No. 660 of 1967 came up for hearing on  a previous   occasion,   objection  was  raised  as   to   the maintainability  of the appeal on the ground that  the  High Court  was not competent to grant a certificate in the  case under  Art.  133 of the Constitution.  At  that  stage,  the appellant  sought  an  adjournment of the appeal  so  as  to

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enable  it to move this Court for special leave against  the impugned  decision.  That prayer was allowed by this  Court. Thereafter  the appellant sought and obtained special  leave of  this Court to appeal against the decision  in  question. Hence Civil Appeal No. 58 of 1972 came to be filed.  In view of  this appeal, we may now proceed on the basis that  Civil Appeal  No.  660 of 1967 stands withdrawn and  the  same  is disposed of accordingly.  Hereafter we shall only deal  with Civil Appeal No. 58 of 1972. 334 The facts leading up to this appeal are as follows On  November 18, 1950, plot No. 79 at Palton  Road,  Bombay, admeasuring  about  1,368  square yards was  leased  by  the Government of Bombay for a period of 999 years from June 26, 1942  to one Lily Investment Corporation Ltd.   On  December 11,  1950, the said Lily Investment Corporation Ltd. gave  a sub-lease  of the said plot of land to  Uttamchand  Tulsidas for a term of 999 years (less one day), from June 26,  1942. thereafter   Uttamchand   constructed  a   building   called "Himalaya  House" on that plot consisting of several  flats, shops and offices.  Under various agreements, he appears  to have assigned the right of occupation in those flats,  shops and offices to several persons.  One such agreement was with one Motiram Shewarama Vallicha.  That was in respect of  one flat.   That agreement is in the record.  As the High  Court has  placed  considerable reliance on that document,  it  is necessary  to quote the relevant clauses therein viz.  2,  5 and 16.  Those clauses read thus :               "2.  That the Party hereto of the Second  Part               hereby agrees to acquire the block bearing No.               12  on the ground floor of the  said  building               for  the total sum of Rs. 10,000  (Rupees  ten               thousand only).               5. That the possession of the said block shall               be delivered to the party hereto of the Second               Part  provided all the amounts due under  this               agreement   and  particularly   indicated   in               condition  No. 3 hereof are paid by the  party               hereto of the Second Part to the Party  hereto               of  the  First Part and upon the  delivery  of               such possession the party hereto of the Second               Part   shall  be  entitled  to  the  use   and               occupation of the said block without hindrance               PROVIDED  NEVERTHELESS that nothing  contained               in  these  presents shall be  construed  as  a               demise  in law of the said leasehold lands  or               any  part  thereof or the  buildings  thereon,               such  demise  to  take  place  only  upon  the               transfer by a formal conveyance to a Co-opera-               tive Society or Incorporated body to be formed               as hereinafter agreed.               16.  That the party hereto of the  First  Part               shall form a co-operative society or any other               incorporated  body recognized in law  and  the               party  hereto  of the Second Part  shall  join               such   co-operative  society  or   any   other               incorporated  body.  The party hereto  of  the               First Part agrees to convey transfer or assign               to the said society or any other  incorporated               body  as the case may be the  aforesaid  lands               and  buildings  provided that  the  costs  and               expenses in connection with the  335               requisition  of such society  or  incorporated               body,  as  well  as the  costs  of  preparing,

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             approving,   engrossing   and   stamping   the               Assignment,  Transfer, or Deed  of  Conveyance               required to be, executed by the party  hereto               of  the  First  Part shall be  borne  by  such               society, or the incorporated body as the  case               may be." On June 28, 1955, the appellant company was incorporated and registered under the provisions of the Indian Companies Act, 1913.  On December 30, 1955, Uttamchand purported to  assign all  his  rights in the building to  the  appellant  company under  a deed.  In the preamble to that Deed after  tracing, Uttamchand’s  title  to the property, it  is-  recited  "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 flats, offices and shops therein AND WHEREAS the Assignor  has agreed to assign to the Assignee all his interests in the said piece of  land and building." Clause 1 of that Deed provides as  under :-               1.  The Assignor (i.e. Respondent No. 2)  doth               hereby  for no consideration assign  into  the               Assignee (i.e. the Appellant Company) ALL THAT               the  piece  of land comprised  in  the  before               recited Lease together with the buildings  and               erections  now  standing  and  being   thereon               together   with  all  rights   easements   and               appurtenances  thereto belonging and  together               with all the right title and interest whatever               of’  the  Assignor in the  building  known  as               Himalaya  House EXCEPT AND RESERVED as in  the               before   recited   Lease   more   particularly               mentioned  TO HOLD the same unto the  Assignee               or  all the residue now unexpired of the  term               of  years granted by the before recited  Lease               SUBJECT  to  the rent reserved by and  to  the               Agreements covenants and conditions  contained               in the before recited Lease henceforth on  the               part  of the Assignee to be paid observed  and               performed." The  said document bore a stamp of annas 12 only.  When  the same  was presented for registration, the  Sub-Registrar  of Bombay  impounded  the  same and sent it  to  the  Assistant Superintendent  of  Stamps,  Bombay.  That  officer  by  his letter  dated June 26, 1956 informed the  appellant  company that  "as  it  was formed of and for  the  persons  who  had purchased the flats in the building. the real  consideration for  the Assignment was made up partly of what was  paid  by the flat holders and the status of the appellant company was that  of  the  nominee of the flat holders  so  far  as  the Assignment  was  concerned." He further stated that  in  the absence of any mention of consideration in the document, the then value 887 SUP@CT/72 336 of  the  premises  was an index of  the  consideration.   He purporting to act under section 40 of the Indian Stamp  Act, determined  the stamp duty at Rs. 95,997 after  valuing  the building at Rs. 16,00,000.  Further he imposed a penalty  of Rs. 20,000.  He called upon the appellant company to pay the stamp  duty  as  well as the penalty.  On  receipt  of  that communication,  the appellant company applied to  the  Chief Controlling  Revenue  Authority to revise the order  of  the Assistant  Superintendent  of Stamps or in  the  alternative refer  the  matter  to  the  High  Court  for  its  opinion. Thereafter the Chief Controlling Revenue Authority made  the reference  referred  to  earlier  to  the  High  Court.   He submitted  two questions for the opinion of the High  Court,

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viz :               "(1)  Whether  Himalaya  House  Co.  Ltd.  the               Assignee in the Assignment dated 30th December               1955  is  the  nominee  of  the  several  flat               holders  who have purchased the flats  in  the               Himalaya  House and whether the Assignment  in               question is a Conveyance or a sale for a price               which  has  passed from the hand of  the  flat               holders long before the date of assignment.               (2) Whether it was competent to the  Assistant               Superintendent of Stamps, under section 40  of               the Indian Stamp Act, 1899 (now section 39  of               the  Bombay Stamp Act, 1958) to go beyond  the               terms of the document when it is mentioned  in               the  document that no consideration is  passed               and  assess the stamp duty in the manner  men-               tioned by him in his order dated the 26th June               1956." The  matter  came  up for hearing before a  bench  of  three Judges of the Bombay High Court presided over by the learned Chief  Justice.  At the hearing, the learned  Judges  opined that  the  questions  submitted  by  the  Chief  Controlling Revenue Authority were not appropriate and, therefore,  they recast those questions as follows :-               "1.  Under which article in Schedule 1 to  the               Stamp  Act  should  the  Assignment  Deed   in               question be stamped ?               2. If Article 23 applies in this case, what is               the consideration for the Assignment Deed ?" All the Judges unanimously held that the Article  applicable to  the  case  is Article 23 in the First  Schedule  to  the Indian  Stamp Act, which will be hereinafter referred to  as "the  Stamp Ace’.  But while answering the second  question, the  learned  Chief Justice and Naik.  J. opined  that  "the consideration for the Assignment Deed is 337 the total amount which was payable to the Assignor  Tulsidas under the agreements between him and the persons to whom  he had,  under those agreements, given the right to occupy  the Rats,  offices  and  shops in the  building."  But  Mody  J. differed from his colleagues and came to the conclusion that "the   consideration  is  ,as  mentioned  in  the  Deed   of Assignment itself i.e. no consideration- All  the Judges unanimously came to the conclusion that  the consideration  mentioned  in  the  document  is  nil.   This conclusion  is  obvious because Clause I of  the  Assignment Deed  says  that  the Assignor assigns his  rights  ’for  no consideration’.   All of them were also unanimous  in  their conclusion  that  for  finding out  the  consideration,  the concerned  authorities (who will be hereinafter referred  to as ’Revenue’) cannot travel outside the document; it  should be  ’as set forth therein’.  But the majority took the  view that  the  Revenue was not bound to accept  the  quantum  of consideration mentioned in the document; it could  determine the  same by taking into consideration the  facts  available from  the  impounded document.  They further held  that  the impounded  document  incorporates into  itself  the  various agreements  entered into between Uttamchand and the  various persons to whom he had assigned certain rights in respect of flats,  offices  and shops referred to  earlier.   In  their view, the consideration paid by those persons to  Uttamchand formed part of the consideration for the Assignment Deed in. question.   Naik  J.  went a little further  and  held  that alternatively  the Deed in question can be considered  as  a "gift" under Art. 33 of Schedule 1 to the Stamp Act Mody  J.

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opined  that there is no basis to hold that  the  agreements entered  into between Uttamchand and the various persons  to whom  the  flats, offices and shops had been  assigned  were similar  to  the  agreement entered  into  between  him  and Motiram Shewarama Vallicha.  He held      that on the basis of the- material before the Court, it was  not  possible to come to the conclusion that  they  had entered  into  agreements  with Uttamchand  similar  to  the agreement  entered  into  between  Uttamchand  and   Motiram Shewarania  Vallicha.   He  further held  that  on  a  plain reading  of the Assignment Deed, it is not possible to  come to  the  conclusion  that the terms and  conditions  in  the agreements entered into by Uttamchand with those to whom  he had  assigned  flats, offices and shops,  were  incorporated into the Assignment Deed. None  of the Judges upheld the conclusion of  the  Assistant Superintendent  of  Stamps that the appellant company  is  a nominee of the persons to whom the flats, offices and  shops had  been assigned; nor did they agree with  his  conclusion that  if in a document, the value of the rights assigned  is not mentioned, it is permissible, for the Revenue to  assess their value independently. 338 The  contention that the appellant company is a  nominee  of the  various  persons to whom flats, offices and  shops  had been  assigned was not pressed before us; nor was  it  urged before  us  that  the  Revenue  is  competent  to  make   an independent assessment of the value of the rights assigned. Though  at one stage, it was feebly suggested that the  Deed of  Assignment  may  be  considered  as  a  gift  but   that contention  was not elaborated; nor do we see any  merit  in that  contention  because in the first place,  it  does  not purport  to  be a gift; secondly, the  valuation  of  "gift" under Article 33 of the First Schedule has to be made on the same basis as the valuation of a "conveyance" under  Article 23 of that Schedule.  Article 33 specifically says that  the duty  payable on a gift deed will be "same as  a  conveyance for  a consideration equal to the value of the  property  as set forth in such instrument." For  the  purpose  of this case, we  shall  proceed  on  the assumption,  without  deciding, that the charging  words  in Article  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 is Himalaya House  on  the said piece of 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  transactions.   They do not  incorporate  into  the Assignment  Deed  the earlier agreements  with  the  persons referred  to  therein.   Mere  reference  to  some   earlier

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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 conditions  of those agreements were.  Before the terms  and conditions of at,  339 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 in available in this case. It was urged that in view of section 27 of the Stamp Act, it was  permissible for the Revenue to look into the terms  and conditions of the agreements entered into by Uttamchand with the  various persons to whom he had assigned flats,  offices and  shops,  particularly  in  view of  the  fact  that  the impounded document makes reference to those agreements.   We are not able to accept that contention.Section 27 prescribes that "The consideration (if any) and all     other facts and circumstances affecting the charge ability of any instrument with  duty,  or  the amount of the duty  with  which  it  is chargeable  shall be fully and truly set forth therein."  It is  true  that in view of this provision, the parties  to  a document are required to set forth in the document fully and truly  the  consideration (if any) and all other  facts  and circumstances  affecting the chargeability of that  document with  the  duty or the amount of the duty with which  it  is chargeable.   But a failure to comply with the  requirements of that section is merely punishable under section 64 of the Stamp  Act.   No  provision in the Stamp  Act  empowers  the Revenue  to make an independent inquiry of the value of  the property  conveyed  for  determining  the  duty  chargeable. Article 23 is the Article that governs the charging of Stamp duty  on "conveyance".  That Article to the extent  relevant for our present purpose reads :               "23.  Conveyance (as defined by section  2(10)               not being a transfer charge or exempted  under               section  52Where  the amount or value  of  the               consideration for such conveyance as set forth               therein............" This  Article has come up for consideration  before  various High  Courts on a number of occasions.  In Ramen  Chetty  v. Mohamed  Ghouse(1)  the  Calcutta High Court  held  that  in determining  whether a document is sufficiently stamped  for the purpose of deciding upon its admissibility in  evidence, the  document  itself as it stands, and not  any  collateral circumstances which may be shown in evidence must be  looked at.   In  Sakharam  Shankar and Others  v.  Ramchandra  Babu ohire,(2)  it  was  held that in  determining  the  question whether  a particular document is sufficiently stamped,  the Court  should look at the instrument as it stands.   A  Full Bench of the Allahabad High Court in the matter of  Muhammad Muzaffar Ali(3) held that if in a deed of gift the value  of the property dealt with is not set forth, the deed does  not require  any stamp, and it is not within the  competence  of the  Collector to have the said property valued in order  to assess the duty (1)   (ILR 16 Cal 432).            2 (ILR 27 Bom 279). (3)  (ILR 44 All. 339). 340 payable.   If,  however,  the  value  of  the  property   is

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intentionally omitted with a view to defraud the Revenue,  a prosecution  will lie under section 64 of the Stamp Act.   A Division  Bench  of  the Patna High  Court  in  Sri  Sitaram Ramalia  and  Another  v. State of Bihar(1)  held  that  the Collector had no power under section 40 of the Stamp Act  to embark  upon an inquiry with regard to the market  value  of the  properties  covered  by the document  and  require  the payment of further stamp duty in accordance with his finding as to valuation and, therefore, that the impugned orders  of the  Collector, Commissioner and the Board were ultra  vires and  were  liable to be set aside under Article 227  of  the Constitution.   Therein the Court was considering the  scope of  section  58  of the Stamp Act  which  requires  that  an instrument  of  settlement should be stamped with  the  same duty  as a bond "for a sum equal to the amount or  value  of the  property settled as set forth in such settlement."  The Court  observed  that  the  words  ’as  set  forth  in   the settlement"  in the section refer back to the  word  "value" and not to the words "property settled".  Recently the  same view  was taken by the Andhra Pradesh High Court in  Bharpet Mohammad  Hussain Sahib and Another v.  District  Registrar, Kurnool(2).  No decision taking a contrary view was  brought to  our notice.  The question arising for decision  in  this case  is  settled  by stare decision.  We  are  entirely  in agreement with the view expressed in those decisions.   Even if we had been inclined to place a different  interpretation on  Article 23, we would have hesitated to do so in view  of the long line of decisions to some of which we have  already made reference.  The Legislature may have had. good  reasons for  not  empowering  the Revenue  to  make  an  independent inquiry  as regards the valuation of the right sought to  be assigned. Under any circumstance, there was no basis to hold that  the consideration  for  the impounded Deed is the  total  amount received  by  Uttamchand under the agreements  entered  into between him and the persons to whom he had assigned  certain rights  in  the flats, offices and shops  in  the  building. Those persons had an independent right of their own.   Their rights  did  not flow from the  impounded  Assignment  Deed. Whether the title obtained by them was perfect or not, there is  no denying of the fact that they had  acquired  valuable rights even before the impounded Deed was executed. For the reasons mentioned above, we allow this appeal and in place of the answers given by the High Court, we answer  the question formulated by that Court thus "1. The Article applicable in this case is Article 23 in the First Schedule to the Stamp Act, and (1) (ILR 39 Pat. 228). (2) TLR. (1964) A.P. 1.) 341 2.  the  consideration  is  as  mentioned  in  the  Deed  of Assignment itself i.e. no consideration." The first respondent shall pay the costs of the appellant in Civil  Appeal No. 58 of 1972.  There will be no order as  to costs in Civil Appeal No. 660 of 1967. V.P.S. 342