P.Mu. No. 19836/P1/2023, Stamp Duty Decision on Two Lease Deeds
The Tamil Nadu Registration Department's Inspector General of Registration and Chief Controlling Revenue Authority, in proceedings P.Mu. No. 19836/P1/2023 dated 11 August 2023, confirmed the District Registrar's deficient stamp duty assessment for lease deeds 1944/2007 and 193/2008 registered at the Thiruthuraipoondi Sub-Registrar Office. The decision confirms deficient stamp duty of Rs.5,83,119 and Rs.3,11,819 respectively, and holds that later cancellation of the deeds does not remove stamp duty liability arising when they were executed.
What the proceedings decide
Proceedings P.Mu. No. 19836/P1/2023 dated 11 August 2023 concern two lease deeds executed by Mr. M. Jothipragasam, also known as Leo Muthu of Leo Real Estate, in favour of Mr. Jo. Saiprakash, trustee of Leo Muthu Educational Trust. The deeds were registered as document numbers 1944/2007 and 193/2008 at the Thiruthuraipoondi Sub-Registrar Office.
The Inspector General of Registration and Chief Controlling Revenue Authority confirmed the certificate issued by the District Registrar under section 33A(1) of the Indian Stamp Act, 1899.
How the deficiency was calculated
The District Registrar found that the original calculations did not account for a lease clause requiring a 10 per cent increase in the current total rental amount for every year.
- Document 1944/2007 covered 33,136 square feet for 25 years. Stamp duty of Rs.2,01,000 had been paid on rent and advance totalling Rs.2,00,81,600. After accounting for annual increases, the District Registrar calculated total rent at Rs.7,84,11,875 and deficient stamp duty at Rs.5,83,119.
- Document 193/2008 covered 43,600 square feet for 29 years. Stamp duty of Rs.78,000 had been paid on rent and advance totalling Rs.76,86,400. After accounting for annual increases, the District Registrar calculated total rent at Rs.3,89,81,851 and deficient stamp duty at Rs.3,11,819.
- The two deficiencies total Rs.8,94,938.
Effect of cancelling a lease deed
Proceedings P.Mu. No. 19836/P1/2023 reject Leo Muthu Educational Trust's argument that no deficient stamp duty was payable because the lease deeds were later cancelled and no money was exchanged under them.
Relying on the cited court decisions and section 17 of the Indian Stamp Act, 1899, the authority concluded that stamp duty liability arises before or when an instrument is executed. Later cancellation does not end that liability.
Who is affected
The decision directly affects the parties to document numbers 1944/2007 and 193/2008. It is also relevant to parties using long-term leases with annual rent escalation clauses, because the full escalation may be considered when assessing the rent amount for stamp duty.
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Common questions
Does cancelling a registered lease remove the deficient stamp duty demand?
No. The Inspector General of Registration and Chief Controlling Revenue Authority held that later cancellation does not remove stamp duty liability that arose when the lease deed was executed.
Why was additional stamp duty demanded for these lease deeds?
The original calculations did not include the clauses requiring a 10 per cent increase in the current total rental amount every year. The District Registrar recalculated the total rent by including those annual increases.
How much deficient stamp duty was confirmed?
The confirmed deficiency was Rs.5,83,119 for document 1944/2007 and Rs.3,11,819 for document 193/2008, totalling Rs.8,94,938.
Had any part of the demanded amount already been collected?
Yes. Under an interim order of the Madras High Court, Rs.2,91,560 for document 1944/2007 and Rs.1,55,910 for document 193/2008 were collected on 29 November 2013.
