The terminology 'under- valuation' is frequently used in
matters of transfer of property, which has a direct bearing on payment of stamp
duty and registration charges payable to Government. Before turning upon the subject
'under-valuation', it is necessary to understand the constitutional provisions
relating to stamp duty. Articles 246, 265, 268, 269(1) of the Constitution of
India are relevant here. Article 246 refers to the powers of Parliament and
State Legislature to make laws.The Constitution of India has Union list, State
list, and Concurrent list. The Parliament has powers to make laws in respect of
matters mentioned in the union list and state legislatures have powers to make
laws in respect of matters mentioned in the state list and both have powers to
make laws in respects of matters mentioned in the concurrent list.
For day-to-day functioning and to meet administrative
expenses and also for undertaking developmental works, every Government whether
in the Centre or State requires revenue which is earned from different sources.
Levy of tax is one such source of income to the Government. Article 265 makes
it very clear that no tax shall be levied or collected except under an
authority oflaw.
Stamp duty registration charges are the major sources of
revenue to the State Governments. In Karnataka, the department of registration and stamp duty is ranked among the top five revenue earning departments of the
State.
The stamp duty and registration charges are payable on ad
valorem basis, that is based on the value of property. No maximum limit is prescribed
in respect of stamp duty and registration charges payable on transfer of
property.The stamp duty and registration charges go up with the increase in
the value of sale consideration paid for the property i.e.higher the sale consideration,
greater the stamp duty and registration charges. These charges are normally
borne by the purchaser of the property unless there is a contract between the
parties to the contrary effect.Apart from payment of sale consideration, stamp
duty and registration charges, the purchaser has to incur expenditure to get revenue
records mutated in his/her name and for transfer of power and water connections
to his/her name.
To save some money from out of this expenditure, parties
to a sale transaction by mutual consent mention the value of the property in the
conveyance deed at a much lower figure than its actual market value and thereby
pay less stamp duty and registration charges while at the same time, the
purchaser makes payment of sale consideration as agreed upon to the vendor.This process of declaring the value of a property in the conveyance deed at a figure
lesser than the actual sale consideration agreed upon for purposes of registration
is generally known as under-valuation of the property. This modus operandi has
two adverse effects on the society. Firstly, there is loss of revenue to the
Government and secondly, circulation of unaccounted money in the market goes
up. The Karnataka Stamp Act 1957 has certain sections dealing with
under-valuation of property. Section 45-A inserted in the Karnataka Stamp Act
1957, during 1975 and 45-B inserted during 1991 deal with the subject. Section
45-A deals with the procedure to be adopted where the properties are undervalued
in a sale transaction.
The parties producing documents for registration have to file
the market value of property calculated in the prescribed form No.l. If
registering officer has reasons to believe that the market value of the
property shown in the document produced for registration is not the actual
value of the property in the locality, he may arrive at the market value of
such property and inform the parties to pay the stamp duty and registration charges according to the market value arrived at by him. For arriving at the
market value, the registering officer will use the guidelines value published
by the committee constituted for estimation of market value under Sec.45-B. The
values published by the committee are the guidelines value for registering offices
to determine the market value. They are the average value of the property in a
particular locality. If the sale consideration of a property shown in the sale deed is lower than the guidelines
value pre- scribed for that area, then the stamp duty & registration
charges are payable on the basis of the guide- lines value. If the market value
of this property is more than the guidelines value, the stamp duty payable is as
per the market value.
The registering authority informs the market value as arrived
at by him in form I-A to the parties. This gives options to the parties to contest
the valuation done by the registering authority, or to agree or to withdraw the
document from registration.
The registering officer may proceed with the registration,
if the party pays the stamp duty and registration charges as arrived at by him.
If the parties do not agree with registering officer and desire to contest the same,
the registering officer shall keep the process of registration pending and refer
the matter to the Deputy Commissioner along with a copy of the document presented
for registration for determination of the correct market value of property and stamp
duty payable thereon.
The Deputy Commissioner after hearing the objections of
the parties during the course of enquiry determines the correct stamp duty payable
and the parties shal1 pay stamp duty and registration charges accordingly.
Many times the parties pay stamp duty as determined by
the registering officer and get the documents registered. Despite this sometimes
the vendor and/or the purchaser receive notice requiring them to pay stamp duty
at a further enhanced figure. This is because the Deputy Commissioner has powers
to initiate suo moto action without any reference to him for examination of the registered documents to ascertain whether the value of the property has been
correctly shown in the (prevention of under-valuation of instruments) Rules
1977, provides guidelines to Deputy Commissioners and Divisional Commissioners
to arrive at the correct market value, the procedure to be adopted to determine
the market value and the procedure for conducting the enquiry, etc. The rules
provide definite parameters to arrive at the market value, depending upon the
nature of property such as, land, house sites, buildings, and other properties.
The guidelines value are general in nature and are for guidance only.
For more details,
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