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The Sub Registrar, Amudalavalasa vs M/s Dankuni Steels Ltd.

Civil Appeal · 2023 INSC 431Decided 26 Apr 2023
Civil Appeal Nos. 3134-3135 of 2023

Background

A company under liquidation had its entire industrial unit (land, buildings, civil works, plant, machinery and current assets) sold at auction for Rs. 8.35 crores as one consolidated package, later conveyed to Dankuni Steels Ltd. through a court-ordered sale deed. When presenting the sale deed for registration, Dankuni Steels declared its value as only about Rs. 1.01 crore, covering just the land, buildings and civil works, and sought a further 50% stamp-duty exemption meant for industrial units. The registration authorities (the Sub Registrar and District Registrar) held that since the sale deed's own preamble recorded Rs. 8.35 crores as the price for the whole package including plant and machinery, stamp duty had to be computed on that full value, not the reduced figure. The dispute wound through the High Court's single judge and then a Division Bench, which sided with the buyer, reasoning the authorities could not force registration/duty on plant and machinery the buyer wasn't seeking to register.

Decision Breakdown

The Supreme Court, aided by an amicus curiae appointed to represent the largely unopposed dispute, held that the Division Bench erred by ignoring the sale deed's own preamble, which unambiguously fixed Rs. 8.35 crores as the price for the entire bundle of assets: artificially carving out a lower value for only the land and building was an attempt to reduce the stamp duty payable in law. Applying Section 8 of the Transfer of Property Act and precedent on what counts as "immovable property," the Court held that plant and machinery permanently embedded in the earth forms part of what was conveyed along with the land, and its value must be included when assessing stamp duty: registration authorities are empowered to look behind an artificially split instrument to the real underlying transaction. The Court restored the single judge's order (with a modification concerning a stamp-duty exemption claim) and directed the registration authority to properly ascertain the value of the embedded plant and machinery and decide the exemption question afresh in accordance with law.

Lesson Learnt

Parties cannot escape stamp duty by artificially splitting one composite property sale into a "registered" low-value part and an "unregistered" high-value part: the tax authorities can look at the real substance and total value of the transaction as recorded in the document itself, especially machinery permanently attached to land, which counts as immovable property for stamp duty purposes.

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

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