2000 JTR(SC) 1133
2000 AIR(SC) 2571 ; 2000 AIR(SCW) 2664 ; 2000 5 ALD(SC) 47 ; 2000 4 BomCR(SC) 17 ; 2000 3 BomLR 882 ; 2000 102 CompCas 6 ; 2001 2 GLR 1065 ; 2000 8 JT 65 ; 2000 3 RCR(Civ) 547 ; 2000 5 Scale 237 ; 2000 6 SCC 345 ; 2000 SCR 623 ; 2000 WLC 576 ; 2000 KHC 1256 ; 2000 5 Supreme 272
2000(5) Supreme 272
SUPREME COURT OF INDIA
(From Bombay High Court)
M.B. Shah & S.N. Variava, JJ.
Hanuman Vitamin Foods Pvt. Ltd. & Ors. -Appellants
versus
The State of Maharashtra & Anr. -Respondents
Civil Appeal No. 3707 of 1990
With
Writ Petition (C) No. 379 of 1995
(Under Art. 32 of the Constitution of India)
Decided on 20-7-2000
Counsel for the Parties :
For the Appellants : Krishan Mahajan, Ms. Musharaff Choudhary, R.F. Nariman, P.H. Parekh and Sunil Dogra, Advocates.
For the Petitioners : Ashok Kumar Gupta, Advocate.
For the Respondents : S.B. Wad, Sr. Advocate, S.V. Deshpande, and A.S. Bhasme, Advocates.
IMPORTANT POINT
Transfer of Share in Co-operative Housing Society would amount to conveyance attracting stamp duty under Article 25(b)(i) of the Bombay Stamps Act, 1958.
Act Referred :BOMBAY STAMP ACT : S.25(b)(i)
(A) The Bombay Stamp Act, 1958, particularly Article 25(b)(i), was engaged when an instrument formally transferring shares in a Co-operative Society was treated as a conveyance of property for stamp duty purposes. The State Legislature asserted legislative competence under Entry 91 of List I read with Entry 63 of List II of the Seventh Schedule, contending that the transaction attracted stamp duty not on the transfer of shares as such but because the instrument operated as a conveyance of immovable property, triggering state-level stamp duty leviable under the Act.
(B) The core legal principle established is that a transfer of shares in a Co-operative Society, where membership entails the right to occupy specific premises, is not a mere share transfer but is in effect an agreement to sell and constitutes a conveyance of property chargeable with stamp duty under Article 25(b)(i) of the Bombay Stamp Act, 1958, irrespective of the constitutional division of legislative entries.
Facts of the case:
The 1st Appellant was a member of a Co-operative Society holding five distinctive shares and occupying office premises in a building owned by the Society. The Appellant executed an instrument transferring those shares to several transferees for a consideration of nine lakh forty-six thousand nine hundred rupees. The instrument described the Societys ownership, the membership, and the right to occupy the premises. The instrument was forwarded to the Superintendent of Stamps for adjudication, who held it to be a conveyance of property chargeable with stamp duty. Writ petitions were filed challenging stampability and the States legislative competence. The impugned judgment dismissed the petitions.
Findings of Court:
The Court held that the instrument amounted to a conveyance of property and was attractable to stamp duty under Article 25(b)(i) of the Bombay Stamp Act, 1958. It was further held that the State possessed legislative competence to levy stamp duty on such a conveyance. The challenge under Entry 91 of List I and Entry 63 of List II was rejected. The earlier precedent in Veena Hasmukh Jains case was relied upon and reaffirmed.
Issues:
(i) Whether transfer of shares in a Co-operative Society is subject to stamp duty under the Bombay Stamp Act, 1958.
(ii) Whether the State Legislature has the legislative competence to levy stamp duty on the transfer of shares in a Co-operative Society.
Ratio Decidendi:
The instrument of transfer, although in form a transfer of shares, was in substance a conveyance of immovable property because possession of the premises was transferred as an incident of membership. Consequently, it fell within Article 25(b)(i) of the Bombay Stamp Act, 1958, and the State had legislative competence under the relevant entries in the Seventh Schedule to levy stamp duty on such a conveyance.
Result:
The Appeal and Writ Petition are dismissed with no order as to costs.
(A) The Bombay Stamp Act, 1958, particularly Article 25(b)(i), was engaged when an instrument formally transferring shares in a Co-operative Society was treated as a conveyance of property for stamp duty purposes. The State Legislature asserted legislative competence under Entry 91 of List I read with Entry 63 of List II of the Seventh Schedule, contending that the transaction attracted stamp duty not on the transfer of shares as such but because the instrument operated as a conveyance of immovable property, triggering state-level stamp duty leviable under the Act.
(B) The core legal principle established is that a transfer of shares in a Co-operative Society, where membership entails the right to occupy specific premises, is not a mere share transfer but is in effect an agreement to sell and constitutes a conveyance of property chargeable with stamp duty under Article 25(b)(i) of the Bombay Stamp Act, 1958, irrespective of the constitutional division of legislative entries.
Facts of the case:
The 1st Appellant was a member of a Co-operative Society holding five distinctive shares and occupying office premises in a building owned by the Society. The Appellant executed an instrument transferring those shares to several transferees for a consideration of nine lakh forty-six thousand nine hundred rupees. The instrument described the Societys ownership, the membership, and the right to occupy the premises. The instrument was forwarded to the Superintendent of Stamps for adjudication, who held it to be a conveyance of property chargeable with stamp duty. Writ petitions were filed challenging stampability and the States legislative competence. The impugned judgment dismissed the petitions.
Findings of Court:
The Court held that the instrument amounted to a conveyance of property and was attractable to stamp duty under Article 25(b)(i) of the Bombay Stamp Act, 1958. It was further held that the State possessed legislative competence to levy stamp duty on such a conveyance. The challenge under Entry 91 of List I and Entry 63 of List II was rejected. The earlier precedent in Veena Hasmukh Jains case was relied upon and reaffirmed.
Issues:
(i) Whether transfer of shares in a Co-operative Society is subject to stamp duty under the Bombay Stamp Act, 1958.
(ii) Whether the State Legislature has the legislative competence to levy stamp duty on the transfer of shares in a Co-operative Society.
Ratio Decidendi:
The instrument of transfer, although in form a transfer of shares, was in substance a conveyance of immovable property because possession of the premises was transferred as an incident of membership. Consequently, it fell within Article 25(b)(i) of the Bombay Stamp Act, 1958, and the State had legislative competence under the relevant entries in the Seventh Schedule to levy stamp duty on such a conveyance.
Result:
The Appeal and Writ Petition are dismissed with no order as to costs.
JUDGMENT
S.N. Variava, J.-This Civil Appeal is against the judgment dated 16/17th February, 1989. The questions raised in this Appeal are :-(a) whether transfer of shares in a Co-operative Society is subject to levy of stamp duty under the Bombay Stamp Act, 1958 and (b) whether the State Legislature has legislative competence to levy stamp duty on transfer of shares.
2. Briefly stated the facts are as follows :
The 1st Appellant was a member of Dalamal Tower Promises Co-operative Society Ltd. As such member the 1st Appellant was the holder of 5 shares each bearing distinctive Nos. 711 to 715. As such member the 1st Appellant was in occupation of office premises No. 904 on the 9th floor of the building known as Dalamal Tower situated at 211, Nariman Point, Bombay 400 021. By an Instrument dated 31st March, 1986 the 1st Appellant transferred in favour of Appellants Nos. 2, 3, 4, 5 and 6 the said 5 shares for a consideration of Rs. 9,46,900. The said Instrument of Transfer, inter alia, set out that the Dalamal Tower Premises Co-operative Society Ltd. was the owner of the building Dalamal Tower; that the 1st Appellant was a member of the said society holding the said 5 shares; that one of the incidents of membership was that the member had a right to occupy specific Office premises in the building Dalamal Tower and as such the 1st Appellant had a right to occupy premises No. 904 on the 9th floor of the Dalamal Tower, which Office premises admeasured 557 Sq. ft. of built up area. The Instrument went on to state that for a consideration of Rs. 9,46,900/- paid by the transferees to the transferor, the transferor transferred the said 5 shares to the transferees and that the transferees accepted the said shares.
3. By a letter dated 23rd April, 1986 the Advocates of the 1st Appellant forwarded the instrument of transfer to the Superintendent of Stamps for adjudication under the provisions of Bombay Stamp Act, 1958. In the said letter the Advocates stated that, in their opinion, the instrument of transfer was wholly exempted from duty, but that it was sent for adjudication by way of abundant caution. By a reply dated 22nd May, 1986 the Superintendent of Stamps Informed the Advocates for the 1st Appellant that the document for adjudication was a conveyance of property chargeable with stamp duty under Article 25(b)(i) of the Bombay Stamp Act on the present market value of the said property. By the said Letter the Superintendent of Stamps requested for details regarding premises No. 904 in Dalamal Tower and also called for a valuation report and other relevant documents.
4. The Appellants, therefore, filed Writ Petition 1820 of 1986 in the High Court of Judicature at Bombay to have the said letter quashed. They also sought directions against the Superintendent of Stamps and the State of Maharashtra to desist and forbear from charging, demanding or recovering stamp duty on the said form of Transfer of shares, or from proceeding on the basis that the form of Transfer of shares was not duly stamped and, thus, liable to be impounded. The Appellants contended that the instrument of transfer was a document transferring the shares held in a body corporate and was thus not within the purview of the Bombay Stamp Act, 1958. They also contended that the levy of stamp duty on transfer of shares in a Co-operative Society fell exclusively within Enty 91 of List I of the Seven Schedule to the Constitution of India. The Appellants contended that it was beyond the legislative competence of the State as it did not fall within Entry No. 63 of List II of the Seventh Schedule to the Constitution of India.
5. By the impugned Judgment dated 16/17th February, 1989, the Petition was dismissed on the ground that the instrument of transfer amounted to a conveyance of property and was chargeable with stamp duty under Article 25(b)(i) of the Bombay Stamp Act, 1958. By the said judgment the argument regarding lack of legislative competence was also rejected.
6. The question whether or not a transfer of shares in a Co-operative Society is subject to levy of stamp duty on the basis that it is a conveyance has already been answered by this Court in the case of Veena Hasmukh Jain & Anr. v. State of Maharashtra & Ors.1. In this case it has already been held that such agreements would be covered by Article 25 of the Bombay Stamp Act, 1958. It is held that stamp duty would be leviable as if it is a conveyance. This Court has held that these are in effect agreements to sell immovable property as the possession of such property is transferred to the purchaser before or at the time of or subsequent to the execution of the agreement. It is held such an agreement to sell must be deemed to be a Conveyance. It is fairly conceded that this Judgment fully covers question (a) set out hereinabove.
7. As question (a) is already answered by the above mentioned judgment in Veena s case. In our view, question (b) does not survive. As seen above stamp duty is sought to be levied under Article 25, Schedule I of the Bombay Stamp Act. The stamp duty is being levied not on transfer of shares but on the basis that the agreement is a conveyance. There is no dispute that there is legislative competence in the State Government to levy stamp duty on a conveyance of property. Question No. (b) has been raised on the footing that the instrument of transfer is a form of transfer of shares. Now that it is held that such an instrument is not an instrument of transfer of shares, but it is, in fact, a conveyance question (b) no longer survives.
8. In this view of the matter, the Appeal does not survive. The same stands dismissed. There will be no order as to costs.
Writ Petition (C) No. 379 of 1995
9. S.N. Variava, J.-All the Petitioners are nationals and citizens of India. They are all residents of Bombay. By this Petition, under Article 32 of the Constitution of India, the Petitioners, seek to challenge levy of stamp duty on a transfer of shares in a Co-operative Housing Society on the basis that such agreements are conveyances. It is contended by the Petitioners that the State Legislature has no competence to levy stamp duty on transfer of shares in a Housing Co-operative Society, where the transferee, as an incident of membership, is entitled to the use and occupation of the premises belonging to the Co-operative Society. The Petitioners point out that this question is already pending in Civil Appeal No. 3707 of 1990 before this Court. Thus, the questions raised in this Petition are identical to those raised in Civil Appeal No. 3707 of 1990, viz., (a) whether the transfer of shares in the Co-operative Society is subject to levy of stamp duty under the Bombay Stamp Act, 1958 and (b) whether the State Legislature has legislative competence to levy stamp duty on a transfer of shares.
10. By a judgment passed today in Civil Appeal No. 3707 of 1990, that Civil Appeal stands dismissed. For the reasons set out therein, this Writ Petition also stands dismissed.
(C.R.) Appeal and Writ Petition dismissed.
***************