Property transactions done via Power of attorney in outsider : Stamp duty Can rise - Supreme Court

The state government can fix higher stamp duty on property transactions done through power of attorney vested in an outsider, as against such power executed through one's blood relatives like father, mother and wife, the Supreme Court has ruled.

Classification..!
A bench of justices Mr. R.M. Lodha and Mt. H. L. Gokhale said, "Such classification can not be termed as unconstitutional as the government can adopt differential stamp duties to check evasion & sale transactions resorted through and for extraneous considerations".

The bench upheld an appeal filed by the Madhya Pradesh state government challenging the state high court's decision to quash Clause (d), Article 45 of Schedule 1-A of the Indian Stamp Act, 1899 which was brought in by the Indian Stamp (Madhya Pradesh Amendment) Act, 2002 Act) as unconstitutional being violative of Article 14 (equality clause) of the Constitution of India.

The said legislation had sought to impose a  2 % stamp duty on the property's market rate on any power of attorney executed through an outsider, instead of blood relatives like father, mother, wife, sons, daughters and brothers.

The idea according to the state was to prevent evasion of tax by sellers which was causing huge loss to the exchequer. But on the basis of a petition filed by certain individuals, the high court quashed the provision as being violative of Article 14 of the Constitution.

Justice Mr. Lodha writing the judgement said, "By creating 2 categories, namely, an agent who is a blood relation, i.e. Father/Mother, Wife/Husband, Son/Daughter, Brother/Sister and an agent other than the kith and kin, without consideration, the Legislature has sought to curb inappropriate mode of transfer of immovable properties"

The India's apex court Supreme Court said,''The statute enacted by Parliament or a state legislature can not be declared unconstitutional lightly."

"The court must be able to hold beyond any iota of doubt that the violation of the constitutional provisions was so glaring that the legislative provision under challenge cannot stand.

"Sans flagrant violation of the constitutional provisions, the law made by Parliament or a State Legislature is not declared bad," Justice Mr. Lodha said.

The Supreme Court cited the Constitution Bench ruling in the R K Garg (1981) case that laws relating to economic activities should be viewed with greater latitude than laws touching civil rights such as freedom of speech and religion.

The bench said while dealing with constitutional validity of a taxation law enacted by Parliament or State Legislature, the court must have regard to the following principles – there is always presumption in favour of constitutionality of a law made by Parliament or a State Legislature.

Secondly, no enactment can be struck down by just saying that it is arbitrary/unreasonable/irrational but some constitutional infirmity has to be found.

The Supreme Court is also not concerned with the wisdom/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.

Fourthly hardship is not relevant in pronouncing on the constitutional validity of a fiscal statute or economic law and fifthly in the field of taxation, the legislature enjoys greater latitude for classification.

Stamp duty at  2%..!

"By making a provision like this, the state government has sought to collect stamp duty on such indirect &  inappropriate mode of transfer by providing that power of attorney given to a person other than kith or kin, without consideration, authorising such person to sell immovable property situated in Madhya Pradesh will attract stamp duty at  2% on the market value of the property which is subject matter of power of attorney," the bench said.

The Supreme  court said that by bringing in the 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."

Hence it said, "The classification, thus, can not 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."

 Src: FE

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