Can un­used stamp duty be re­funded?

The In­dian Stamp Act and state stamp acts list con­di­tions un­der which refund or re­pay­ment of any amount against un­used stamps is per­miss­able

HT Estates - - HTESTATES - Sunil Tyagi

Pay­ment of pre­scribed stamp duty is im­por­tant for suc­cess­ful com­ple­tion of any trans­ac­tion re­lated to im­mov­able prop­erty such as sale, gift, cer­tain kinds of mort­gages, etc or doc­u­men­ta­tion re­lated to mov­able as­sets such as trans­fer of shares, deben­tures etc. Stamp duty is payable on such in­stru­ments, as men­tioned un­der stamp duty sched­ule of rel­e­vant state stamp acts. Rates of stamp duty levied on in­stru­ments dif­fer from state to state.

The In­dia Stamp Act, 1899, gov­erns the law re­lat­ing to pay­ment of stamp duty. Sev­eral states such as Ut­tar Pradesh, Ra­jasthan, Ker­ala, Kar­nataka and Ma­ha­rash­tra have en­acted their own stamp acts and rules. The In­dian Stamp Act states that an in­stru­ment ex­e­cuted by any per­son in In­dia and charge­able with stamp duty needs to be stamped be­fore or at the time of ex­e­cu­tion. Ac­cord­ingly, the prac­tice is to pay the stamp duty and get stamp pa­pers be­fore exe- cut­ing the doc­u­ments. How­ever, there have been cases when, af­ter pay­ment of the stamp duty but be­fore the ex­e­cu­tion of the doc­u­ments, the trans­ac­tion fails to ma­te­ri­alise and the stamp duty pa­pers pur­chased by the par­ties to the trans­ac­tion re­main un­used. The party which pur­chased then is left with huge losses, as stamp duty amount could in many cases run into lakhs or even crores. What is the way out for such par­ties?

The In­dian Stamp Act and­state stamp acts pro­vide for con­di­tions un­der which refund/ re­pay­ment of any amount against un­used stamps is per­mis­si­ble. The amount paid to­wards value of stamp af­ter req­ui­site de­duc­tions is al­low­able to be re­funded if it was pur­chased within the pe­riod of six months (ex­cept for Kar­nataka, where this pe­riod is one year) im­me­di­ately pre­ced­ing the date on which the stamp pa­per was sur­ren­dered, pro­vided such stamp pa­per was not spoiled or ren­dered un­fit or use­less for the pur­pose in­tended.

In re­spect of the va­lid­ity of the stamp pa­pers, it may be noted that there is no time limit pre­scribed un­der the stamp laws within which the stamp pa­pers pur­chased are to be utilised, ie to say that there is no ex­piry date for stamp pa­pers and there is no pre­scrip­tion on any time pe­riod within which such stamp pa­pers pur­chased are to be used. Once the stamp duty has been paid and the stamp pa­pers have been pur­chased by the party, the stamp pa­per can be used at any point of time. This po­si­tion has been clar­i­fied by the Supreme Court in the mat­ter of Thiru­ven­gada Pillai v Na­va­neetham­mal and Anr in which the Supreme Court dis­cussed the sim­i­lar pro­vi­sion be­ing Sec­tion 54 un­der The In­dian Stamp Act.

It is clear from the pro­vi­sion of The In­dian Stamp Act as well as re­spec­tive state stamp acts and the above stated judg­ment that the con­di­tion of va­lid­ity pe­riod of six months (one year in case of Kar­nataka) is ap­pli­ca­ble only in cases of seek­ing refund of amounts/al­lowance paid for un­used stamp pa­pers. How­ever, no time limit is ap­pli­ca­ble or has been pre­scribed for use / va­lid­ity of the stamp pa­pers.

The au­thor is a se­nior part­ner of ZEUS Law As­so­ci­ates, a cor­po­rate com­mer­cial law f i r m. One of i t s ar­eas of spe­cial­i­sa­tion is real es­tate trans­ac­tional/lit­i­ga­tion work


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