STAMP DUTY -AMENDMENT IN MP- POWER OF ATTORNEY TO AGENTS NOT BEING SPECIFIED RELATIVES,IS A VALID CLASSIFICATION – LEVY OF STAMP DUTY ON MARKET VALUE IS UPHELD BY THE SUPREME COURT.

[C.A. DEV KUMAR KOTHARI]

Relevant links and references:

State of M.P. Versus  Rakesh Kohli & Anr.  2012 (5) TMI 262 (SC)

        Indian Stamp Act, 1899.

        Stamp Duty Rules in Madhya Pradesh

        Section 3 of the Indian Stamp (Madhya Pradesh Amendment) Act, 1997

Stamp duty in Madhya Pradesh:

In state of  Madhya Pradesh State Legislature  amended the stamp duty provisions so as to provides that power of attorney given to a person other than some of specified close relatives(kith or kin)  without consideration, authorizing such person to sell immovable property situated in Madhya Pradesh will attract stamp duty at two per cent on the market value of such property.The High Court held that the law was unconstitutional being arbitrary. However, the High Court did not discuss and find out how it was unreasonable so as to declare it ultra virse constitution. On appeal the Supreme Court set aside the judgment of the High Court and held that the classification of two types of agents that is some specified close relatives as one class and another persons not being such specified close relative was an intelligible classification and the differentiation carved out by the legislature was not unreasonable and therefore the supreme Court held that the amendment was within powers of the State Legislature and was valid law. 

The Court held that by creating two categories, namely, an agent who is a blood relation, i.e. father, mother, wife or husband, son or daughter, brother or sister and an agent other than the kith and kin ( per author –specified close relatives), without consideration, the Legislature have sought to curb inappropriate mode of transfer of immovable properties.

The court held that in effect, by bringing in this law, the Madhya Pradesh State Legislature has sought to levy stamp duty on such ostensible document, the real intention of which is the transfer of immovable property. The classification, thus, cannot be said to be without any rationale. It has a direct nexus to the object of the 1899 Act. The conclusion of the High Court, therefore, that the impugned provision is arbitrary, unreasonable and irrational is unsustainable.

Therefore categorization of power of attorney given to agents, as those given to relatives and those given to non-relatives cannot be said to be without any rationale, it has a direct nexus to the object of the Stamp Act, and it is with a definite purpose of curbing PA as a device to avoid stamp duty when in fact PA was a mode to transfer the property.

General rules about examining constitutional validity of a law:

1. When a law can be struck down:

Legislative enactment can be struck down by Court only on two grounds:

(i)           LACK OF COMPETANCY:

When  the appropriate Legislature does not have competency to make the law and

(ii)          VIOLATION OF FUNDAMENTAL RIGHTS:

When the law  take away or abridge any of the fundamental rights enumerated in Part – III of the Constitution or any other constitutional provisions.

1. Considerations while examining validity:
   1. Preferable presumption:

  There is always presumption in favour of constitutionality of a law made    by Parliament or a State Legislature

1. Arbitrariness or unreasonableness is not ground:

An  enactment cannot be struck down by just saying that it is arbitrary or unreasonable or irrational but some constitutional infirmity has to be found to declare a law as invalid.

1. Concern of court:

The court is not concerned with the wisdom or unwisdom, the justice or injustice of the law as the Parliament and State Legislatures are supposed to be alive to the needs of the people whom they represent and they are the best judge of the community by whose suffrage they come into existence

1. Hardship is not relevant:

Hardship is not relevant in  declaring on the constitutional validity of a fiscal statute or economic law and

1.  Taxation:  in the field of taxation, the Legislature enjoys greater latitude for classification.