The Hon'ble
High Court of Madras in its judgment dated 07-01-2009 in Government of Tamil
Nadu, Commercial Taxes (JI Department), and two others versus S. Jayalakshmi
and others has, inter alia, made the following observations while deciding the
issue of under valuation of property for purposes of payment of stamp duty :
In AIR 1982
(Mad.) l38 - Collector of Nilgiris at Ootacamund vs. MIs. Mahavir Plantations
Pte. Ltd., ithas been held that:
"The valuation guidelines prepared by the Revenue Officials at the
instance of the Board of Revenue were avowedly intended merely to assist the
Sub-Registrars to find out, prima facie, whether the market value set out in
the instruments had been set forth correctly "
The learned
Judge in the said decision has taken into consideration the judgment of a
Division Bench of the Madras High Court reported in AIR 1974 (Mad.) 117 - State
of Tamil Nadu vs. Chandrasekharan, which considered rationale behind Section
47-Aofthe Stamp Act.
In the
above said decision, the observations made are as follows:-
" ...
we are inclined to think that the object of the Amending Act being to avoid
large scale evasion of stamp duty, it is not meant to be applied in a matter of
fact fashion and in a haphazard way. Market value itself as we already
mentioned, is a changing factor and will depend on various circumstances and
matters relevant to the consideration. No exactitude is, in the nature of
things possible. In working the Act, great caution should be taken in order
that it may not work as an engine of oppression.
Having
regard to the object of the Act, we are inclined to think that normally the
consideration stated as the market value in a given instrument brought for
registration should be taken to be correct unless circumstances exists which
suggest fraudulent evasion"
In (1994)4
SCC 595 - Jawajeenagnatham vs. Revenue Divisional Officer, Adilabad, A.P. and
others, it has been held by the Supreme Court that in respect of market value
to be computed under Section 23 of the Land Acquisition Act, Basic Valuation
Register maintained by the Registering Authority for collection of stamp duty,
has no statutory foundation to determine the market value and the evidence of
price fetched in comparable sale transaction, is generally accepted as the best
method to determine the market value.
In 1999 (2)
L. W. 231 - M.Ponnusamy and others vs. The District Collector, Erode and
others, the act of reference made to the Collector under Section 47-A(2) of the
Indian Stamp Act after lapse of two years and retention of the sale deeds after
completion of registration came up for consideration and it has been held as
follows:-
"It is essential to point out that before registration, the
Registering Authority has to record that he has reasons to believe that the
value of the property has not been duly set forth in the instrument. Only after
recording such reasons, the Registering Authority has to complete registration
of the instrument in question and thereafter alone, he could refer the same to
the Collector under Sub-Section (1) of Section 47-A of the Indian Stamp Act.
Such is not the case of the respondents term.
"To this extent, the function of the Registering Authority is
quasi judicial in nature and he has to come to a conclusion that the market
value of the property dealt under the document had not been truly set forth and
after completion of registration, he could make a reference At least some reasons should be recorded and
immediately after completion of registration or sooner thereafter, a reference
has to be made under Sub-Section (1) of Section 47-Aofthe said Act."
"What
is required under Sub- Section (1) of Section 47-A of the Indian Stamp Act is
that the Registering Authority had to come to a conclusion before registration
that the market value of the property, dealt under the instrument of conveyance
or release, has been under-valued and he should have entertained reasonable
belief in this respect and also, he should have recorded such a reason.
Immediately after recording such reason, he has to complete the registration
and thereafter refer the instruments to the Collector in terms of Sub-Section
(1) of Section 47-A of the Indian Stamp Act."
Further, in
another case a Division Bench of Madras High Court has taken into consideration
the decision reported in S.P. Padmavathi vs. The State of Tamil Nadu, [1997(II)
CTC 617 (DB)] (cited supra) and held " In
the absence of document or material produced to show that the documents in
question have been undervalued, the Registering Officer cannot decide the same
and apply provisions under Section 47 -A
of the Indian Stamp Act without forming an independent decision"
In 2006(4)
L.W. 695 - The Sub Registrar, Adayar, Chennai vs. Canara Bank, Saidapet Branch
and another, the question came up for consideration with regard to the
calculation of stamp duty in respect of value of properties which were subject
matter of a compromise decree as fixed and directed by the Court.
In the said
decision it was held that market value is always a changing factor depending on
various circumstances and no exactitude is, in the nature of things possible
and that normally the consideration stated as market value in a given
instrument brought for registration should be taken to be correct unless
circumstances exist which suggest fraudulent evasion. On a consideration of the
principles laid down in those decisions, it is clear that the term market value
itself is vague, uncertain and a matter of guesswork.
The said
issue also came up for consideration in the judgment reported in 2001 Supp. CTC
page. 1 J.Jayalalitha and five others vs. State and the High Court has held as
follows:
The term
"Market value" itself is vague, uncertain and a matter of guesswork.
It is also not defined in the Indian Stamp Act. Explanation to Section 47- A of
the said Act reads as follows:
"For
the purpose of this Act, market value of any property shall be estimated to be
the price which, in the opinion of the Collector or the Chief Controlling
Revenue Authority of the High Court as the case may be, such property would
have fetched or would fetch, if sold in the open market on the date of
execution of the instrument of conveyance, exchange, gift, release of benarni
right or settlement. "
Manohar N.
Dange in his book titled 'Valuation of Immovable Properties' has stated that
the price that a willing purchaser pays to a willing seller for a property
having due regard with its existing conditions, with all its existing
advantages and with its potential possibilities when laid out with most advantageous
manner, excluding any disadvantages due to the carrying out of the scheme for
the purpose for which the property is transacted.
He has
quoted the judgment rendered by Justice Eve in South Eastern Rail Company v.
L.C.C., that the value to be ascertained is the value to the vendor, and not
its value to the purchaser and that in fixing the value to the vendor all
restrictions imposed on the user and enjoyment of the land in his hand are to
be taken into account but the possibility of such restrictions being modified
or removed for his benefit is not to be overlooked and that the market price is
not a conclusive test of real value.
According
to the author, the concept of market value has to be understood in the light of
what has been explained for the purpose of land acquisition and that the market
value of a property may be different in practice for different angles.
The term
"Market value" itself is vague, uncertain and a maner of guessworllt
is also not defined in the Indian Stamp Act According to him, the market value
for a purpose is to be decided with due relations to laws and purpose of the
concerned valuer and the market value, though appears to be a very simple term,
is very difficult to decide under particular circumstances.
The author
went on to add that a proper research is necessary which could determine the
market value since in one case, there can be heavy demand for smaller tenements
with inadequate supply and in another case, the supply may be more than
adequate but without any demand. According to the author, the size of the plot
has got a direct bearing on the willing purchasers in the market.
The market
value of a land can be fixed only by taking into consideration several factors,
like potentiality of a plot for development, shape of the plot, frontage and
depth, modification for depth, value in the sense of value of additional cost
less depreciation and the most important factors which a valuer should study in
respect of a property are
(1)
advantages to the property and (2) disadvantages to the property.
J.A. Parks
in his book, 'Principles and Practice of Valuation' (Fifth Edition by D.N.
Banerjee) has referred to the judgment of the Supreme Court of British Columbia
(Canada) in Rowan vs. City of Vancouver, wherein it was held
1] "A
recent market price is not the best test of actual value. The whole evidence
surrounding the transaction, the condition of market and other factors have to
be weighed carefully" ,
2]
Valuation of immovable property is not an exact science and it is an inquiry
relating to a subject abounding in uncertainties where there is more than
ordinary guesswork and where it would be unfair to require an exact exposition
of reasons for the conclusions arrived at.
The learned
author has relied on the following observations of Bhagwati J., as he then was,
in Administrator-General W.B. v.
Collector, 1988 (2) SCC 150.
3]"
.... We are conscious that this process of determination of market value adopted
by us may savour of conjecture or guess, but the estimation of market value in
many cases must depend largely on evaluation of many imponderables and hence,
it must necessarily be to some extent a matter of conjecture or guess."
The author
has also relied on the observations of the Supreme Court in Prithvi Raj Taneja
v. State of M.P., 1977 (1) SCC 694, wherein the Supreme Court held that there
is an element of guesswork inherent in most cases involving determination of
the market value.
In G.
Loganathan v. S. Chenniya Chettiar, 1995 (2) CTC 492, this Court observed that
the Supreme Court and other courts including Madras High Court have held that
guideline value is not market value and it will be dangerous to value a
property according to the guideline value because there is no guarantee of
truth or correctness of the data given in the guideline value.
It is clear
that the guideline value cannot be the market value of the property as the
guideline value is intended for the collection of revenue and market value is
the criteria to value the suit. When we consider the above principles, it is
clear that guideline and market value are two different concepts and that the
term "Market value" is vague, uncertain and a matter of guesswork.
The market value does not lie in the property contemplated to be purchased but
lies in the mind of the person contemplating to purchase the said property.
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