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Shanti Bhushan (D) Thr. Lr. & Ors. vs State of U.P. & Ors.

Civil Appeal · 2023 INSC 425Decided 25 Apr 2023
Civil Appeal No. 8388 of 2017
Abhay S. Oka · Rajesh Bindal

Background

The appellants (family of the late senior advocate Shanti Bhushan) had been long-time tenants of a large property in Allahabad and eventually bought it from the landlord under a 2010 compromise and sale deed, paying stamp duty based on a low "rent capitalisation" valuation. The Stamp Collector reassessed the market value far higher (based on nearby 2010 sale instances) and demanded over a crore in deficit stamp duty, interest and penalty; the Allahabad High Court upheld the higher valuation but cancelled the penalty.

Decision Breakdown

The Supreme Court agreed that stamp duty must be based on the property's genuine market value on the date of the sale deed, not on the decades-old 1966 agreed price or on a municipal-tax-style capitalised-rent formula. However, it held that the authorities below had wrongly ignored the fact that the buyers were already sitting tenants on the property: a property already occupied by a tenant fetches a lower market price than vacant possession, because a new owner would still have to go through eviction proceedings to get physical possession. The Court therefore set aside the valuation and sent the case back to the Stamp Collector to redo the valuation (using comparable sales of tenanted properties if available, or otherwise making an appropriate deduction from vacant-property rates) while confirming that no penalty was payable.

Lesson Learnt

When land or a building is purchased by a sitting tenant, its true market value (and therefore the stamp duty payable) must account for the discount that any buyer would apply for having to deal with an existing tenancy: an owner-occupied comparable sale cannot be used at face value to value tenant-occupied property.

Official source (sci.gov.in)View Judgment (PDF)

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