INTERPRETATION OF INSTRUMENT AND CONVEYANCE
The instrument has been defined under Section 2(14) of the Indian Stamp
Act of 1899 (hereinafter referred to as Stamp Act) as “Instrument
includes every document by which any right or liability is, or purports to
be, created, transferred, limited, extended, extinguished or recorded.”
The instrument can include many things, ‘Instrument of Partition’ is also
a part of it. It has been defined under Section 2(15) of the Stamp Act as
“It means any instrument whereby co-owners of any property divide or
agree to divide such property in severalty, and includes also a final order
for effecting a partition passed by any Revenue-authority or any Civil
Court and an award by an arbitrator directing a partition.” Various
judgements have widely interpreted the term instrument. Courts have
even considered industrial awards by Industrial Tribunals as
Instruments.1 Anything liable to stamp duty has been considered as an
instrument.2 It in the case of Hindustan Lever vs. State of Maharashtra a
wide interpretation was given and any document creating or transferring
any right was considered an instrument.
Conveyance as a term has been defined under the Stamp Act. Section
2(10) defines it as “Conveyance includes a conveyance on sale and every
instrument by which property, whether movable or immovable, it is
transferred inter vivos and which is not otherwise specifically provided
for by Schedule I. Conveyance includes many terms like ‘conveyance on
sale’, in Inland Revenue v. G. Anous & Co. and Anr. (1891) it was
interpreted as “The term conveyance on sale includes every instrument
and every decree or order of any Court or of any commissioners,
whereby any property upon the sale thereof is legally or equitably
transferred to or vested in the purchaser or any other person on his
behalf or by his direction.”
1
Purshottam H. Jadve and Ors. v . V . B . Potdar, (1966) ILLJ412SC.
2
Inland Revenue v. G. Anous & Co. and Anr. (1891).
In Delhi the value of stamp duty is 3% on immovable property which is
valuated on the basis of the consideration amount of the instrument. 3
Amalgamation is when one company absorbs into another or a merger
which forms a third entity, which is not a simply a voluntary act of the
two companies or their members, but is established by a statutory
instrument. As such, it possesses a statutory origin and nature, thereby
distinguishing it from a mere bilateral arrangement to merge or join in a
common endeavor, undertaking, or enterprise.4 In the case of Madhu
Intra Limited and Anr. v. Registrar of Companies and Ors. 5, it was
held that in an instrument wherever the property is legally and equitably
transferred is made liable for payment of stamp duty. Section 394(2) of
the Companies Act, 1956 states that properties and liabilities of the
transferor company are transferred to transferee company on the order
of the court. In light of the above judgement, the orders transferring the
right of the property under 394(2) are instruments. Thus, ‘instruments’
are also ‘conveyance’ which are chargeable with stamp duty.
The Full Bench of the Madras High Court, in the case of The Chief
Controlling Revenue Authority, Board of Revenue, Madras vs. R.
Thirthalu, pronounced the expression ‘conveyance’ under Section 2(10)
of the Stamp Act. It was established that the essence of conveyance is the
transfer of property or an interest therein, and the use of the terms
'transfer' or ‘assign' is not essential for such a transaction. The
determination of a transfer is based on the language used in the
disposition. If a document indicates that the person has delivered
possession of the property, constituted the property as belonging to
another person, and affirmed the divestment of their title, the transfer
process is concluded. This signifies the vesting of title in one party and
the divesting of title from the other. The existence of a transfer is
3
https://revenue.delhi.gov.in/sites/default/files/revenue/generic_multiple_files/order-
113670001.pdf
4
112 (2004) DLT 627 Hotline Hol Celdings Private Limited and Ors.
5
Madhu Intra Limited and Anr. v. Registrar of Companies and Ors.(2006) 130 Com Cas
510 (Cal).
inferred from the intention expressed in the document. The Court’s
ruling established that mere affidavit conveying title to properties in
favor of a company and divesting title in the deponents are considered a
transfer and thus are conveyance under Section 2(10). Consequently,
they are chargeable to stamp duty under Entry 23 of Schedule 1 of the
Stamp Act.
In the Delhi Towers vs. GNCT of Delhi6 case, the court examined
notification No. 1 dated 16th January, 1937, which specified that
transfers between two subsidiary companies with at least 90% share
capital owned by a common parent company were exempt from paying
stamp duty. A 2nd notification dated 25th December, 1937 superseded it,
the court repealed the earlier notification and clarified that no stamp
duty would apply to asset transfers through an amalgamation scheme
involving a wholly-owned subsidiary and its parent company. It was also
clarified that stamp duty is liable on the ‘instrument’ and not on a
transaction of purchase and sale.
In Re: Chief Controlling Revenue Authority7, the above judgement
was challenged on the basis that stamp duty would be applicable on the
basis that the 1st Notification dated 16Th January, 1937 has been repealed.
The court rejected the same stating the repealing the 1st notification has
no relation with the applicability of 2nd Notification dated 25th January,
1937.
POWERS OF THE COLLECTOR UNDER SECTION 31 AND 32
In Government of Uttar Pradesh and Ors. vs. Raja Mohammad
Amir Ahmad Khan8, powers of the collector under Section 31 and 32 of
the Stamp Act were clarified. The arrangement of the Act illustrates that
when a person seeks the Collector’s opinion on the correct duty for an
instrument, they do so under section 31. If the document is properly
6
Delhi Towers vs. GNCT of Delhi, [2010]97CLA106.
7
Re: Chief Controlling Revenue Authority, AIR2019Delhi90.
8
Government of Uttar Pradesh and Ors. vs. Raja Mohammad Amir Ahmad Khan,
AIR1961SC78.
stamped and the individual wishes to proceed with implementing or
using it as evidence, they must pay the duty under section 32. At this
point, the Collector will endorse and treat the instrument as duly
stamped from its inception. However, if no further action beyond
determining payable duty is intended, there are no consequences; an
executed document remains in a similar position to an unstamped
unexecuted one. Once duty determination occurs, the Collector’s role
ends and he becomes Functus Officio. The provisions of section 33
provisions do not apply until additional actions beyond seeking opinion
occur later on.
The terms instrument and conveyance were given wide interpretation in
Ruby Sales and services Pvt. Ltd. and Ors. vs State of Maharashtra
and Ors.9, and it was stated that consent decree falls under the
definition of instrument under which the title has been passed over. It’s
considered a live document which transfers the property in dispute.
Thus, the stamp duty is leviable on it.
LIMITATION PERIOD FOR APPLICATION ADMISSION
In Uno Minda Ltd. vs. Deputy Commissioner Revenue
Department10, the time period for after execution for stamping of the
instrument has been defined as within 30 days, if it was executed within
India. However, if the same involved any complexity or execution outside
India then the maximum period can extend up to 3 months. There has
been no fixed time period for the adjudication of the stamped instrument
under Section 31 of the Stamp Act.
WHETHER RETENTION OF STAMP DUTY CAN BE ATTAINED WHEN THERE IS
ONLY TRANSFER OF SECURITIES?
The question of the applicability of stamp duty on instruments in cases
involving the transfer of securities during amalgamation of two
9
Ruby Sales and services Pvt. Ltd. and Ors. vs State of Maharashtra and Ors.,
(1994)1SCC531.
10
Uno Minda Ltd. vs. Deputy Commissioner Revenue Department, 2023/DHC/3094.
companies was addressed in the Holcim India Pvt. Ltd. The court
determined that the calculation of stamp duty is contingent upon the
shareholders of the transferor company and requires valuation based on
the share exchange ratio, rather than assessing assets and liabilities
separately. It established that applicable stamp duty is determined by
valuing shares allocated and issued by the transferee company,
establishing this as a fundamental principle for determination.
