Delhi High Court lays down the test to ascertain incidence of stamp duty on Release Deed/Relinquishment deed under Indian Stamp Act, 1899
[The firm's dispute resolution team has represented the petitioner in the matter, views expressed are personal of the author.]
The Indian Stamp Act in Delhi provides for fixed stamp duty on instruments of transfer which release/relinquish the share of the transferor in favour of another existing owner; the issues relating to imposition of fixed stamp duty under Article 55 and not conveyance under Article 23 of the Indian Stamp Act, 1899 (Delhi)(conveyance/gift/sale deed attracts ad valorem rates on the market value of the property and current rates of stamp duty can be accessed here.
In its recent judgment, the Hon’ble High Court of Delhi had the occasion to interpret and apply the test to determine when an instrument can be considered as a release/relinquishment deed.
To understand the distinction between the classification of instruments for the purposes of imposing stamp duty, lets us first acquaint ourselves with the facts of the case.
The Petitioner and her son were the owners of the immovable property on the basis of the conveyance deed executed by the Delhi Development Authority (hereinafter called “DDA”) in favour of the Petitioner and her son. The son had executed a relinquishment deed/release deed releasing his one half share of the property in favour of the Petitioner and appeared before the Sub-Registrar, Delhi for registration of the instrument.
Upon presentation, the sub-registrar invoked the provisions of Section 33 of the Indian Stamp Act, 1899 and impounded the instrument/deed and referred the it to the Collector of Stamps(SDM, Delhi) under Section 38 of the Indian Stamp Act, 1899 for assessment of stamp duty on the ground that the relinquishment deed executed by co-owner son in favour of the Petitioner was a gift deed and hence the instrument was insufficiently stamped.
This order of sub-registrar was impugned before the Hon’ble High Court in a petition under Article 226 of the Constitution of India. The Hon’ble Court held inter alia the instrument is a deed of release/relinquishment and not conveyance/gift deed.
The Court referred and exhaustively analysed the precedents on the issue by various High Courts and concluded that renouncing claim in favour of another co-sharer in respect of the same property/land would constitute a release deed and not a gift deed.
The Court relied on the judgment of the full Bench of the Hon’ble High Court of Andhra Pradesh in “The Board of Revenue, Hyderabad v. Validity Ram Krishnaiah”, the full bench fruitfully referred to the observations of the Hon’ble Supreme Court wherein it was observed that a release deed could only feed title, but could not transfer title and that renouncement must be in favour of a person who had already title to an estate, the effect of which was only to enlarge the right.
The court also had the benefit of the precedents of the Hon’ble Delhi High Court wherein the Hon’ble Court held that it is not necessary that in order to qualify as a Relinquishment Deed the document must purport to relinquish the share of the relinquisher in favour of all the remaining co-owners of the property. Even if the relinquishment is in favour of one of the co-owners it would qualify as a Relinquishment Deed.
In a recent judgment, the Hon’ble High Court of Delhi observed that the releasee should also have a legal right in the property and the release deed would operate to enlarge that right. The Court further held that the share cannot be released in favour of one who has no rights in the property as a co-owner.
After careful perusal of all the judgments, the Hon’ble Court devised a test to determine when an instrument can be considered as a release/relinquishment deed. The constituents of the test are as follows:
The Court applied the test laid down in the Judgement and held that the instrument in favour of the Petitioner was relinquishment/release deed and not gift/conveyance deed and further directed that the instrument be registered forthwith.
The judgement settles the vexed issue where relinquishment/release deed are impounded under the Indian Stamp Act, 1899 and referred for assessment of deficient stamp duty.