CHAPTER VI

STAMP DUTY AND REGISTRATION FEES

6.1 Results of Audit

Test check of the records of offices of District Registrars and Sub-Registrars
conducted during the year 2003-2004 revealed short-levy of stamp duty and
registration fees amounting to Rs 20.68 crore in 360 cases which broadly fall
under the following categories.

(Rupees in crore)
Sl. No. of
Nature of irregularity Amount
No. cases
1. Misclassification of documents 48 0.38
2. Adoption of incorrect rate of stamp duty 50 10.87
3. Under-valuation of properties 22 0.27
4. Incorrect exemption of duties 72 0.29
5. Short levy of stamp duty and registration fees 97 0.57
6. Loss of revenue due to incorrect adjustment of stamp 15 1.15
duty
7. Deficit stamp duty and registration fees on lease of 12 6.59
tolls/BOTs
8. Other irregularities 43 0.33
9 Review on Stamp Duty 1 0.23
Total 360 20.68

During the year 2003-04, the department accepted under-assessments etc., of

Rs 73.19 lakh in 64 cases, of which 32 cases involving Rs 29.13 lakh were
pointed out during the year 2003-04 and the rest in earlier years. An amount
of Rs 7.02 lakh in 21 cases was realised during the year.

A few illustrative cases and a review on Stamp Duty involving Rs 19.16

crore are mentioned in the following paragraphs.

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Audit Report (Revenue Receipts) for the year ended 31 March 2004

6.2 Review on Stamp Duty

Highlights

There was transit loss of stamps worth Rs.6.81 crore

(Paragraph 6.2.7)

Inadequacy of internal controls resulted in un-authorised sale of non-

judicial stamp papers worth Rs.23.28 lakh.
(Paragraph 6.2.11)
Purchases of stamps valued Rs.1.56 crore from private vendors/agencies
by Insurance Companies resulted in loss of revenue.
(Paragraph 6.2.13)

6.2.1 Introduction

The levy of stamp duty in registration of instruments is regulated under the

Indian Stamp Act, 1899 as adopted by the Government of Andhra Pradesh and
amendments made thereto from time to time. Stamp duties are realised by
means of use of stamp papers and deficit duty, if any, is collected in the form
of cash under Section 41 & 42 of the Act.

The procedure for accrual of revenue from stamps and registration entails the
following sequence, involving Department of Stamps and Registration and
Treasury offices:

 Assessment of requirement of stamps periodically;

 Consolidation of requirements keeping in view the

excesses/savings at various ends;

 Furnishing indents and receiving supplies;

 Distribution of stamps;

 Sale of stamps to private persons, and licensed stamp vendors

and

 Registration of impressed documents

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 Chapter VI - Stamp Duty and Registration Fees

6.2.2 Organisational set up

The Commissioner and Inspector General of Registration and Stamps, Andhra

Pradesh {C&IG (R&S)} is the administrative head of the Stamps and
Registration Department. There are 28 District registries and 380 sub
registries headed by District Registrars (DR) and Sub Registrars (SR)
respectively in the State. Treasury offices function under the control of
Director of Treasuries in Finance Department. There are 23 district treasuries
and 297 sub treasuries in the state headed by District treasury officers (DTO)
and sub treasury officers (STO) respectively.

6.2.3 Scope of audit

The review covering the period from 1998-99 to 2002-03 was conducted
between February 2004 to June 2004 with reference to the records of
C&IG(R&S), DTOs, STOs, DRs and SRs of eight out of 23 Districts in the
state.

6.2.4 Audit Objectives

The review was conducted with a view to

 examine the system of assessment of requirement, indenting,

accounting of stock and sale proceeds;

 ascertain whether action was taken to ensure adequate supply of stamp

papers to/from various treasuries/registries;

 assess the adequacy of internal control in respect of procurement, sale

and usage of stamps and

 ascertain leakage of revenue under stamp duty.

6.2.5 Trend of revenue

Revenue under Registration and Stamps showed a constant growth during the
review period except for the year 1998-99 where revenue actuals were less
than the Budget Estimates during the review period. The following table
contains the details of Budget estimates and actual receipts during the period
from 1998-99 to 2002-03 under Major Head 0030 (Stamps & Registration
Fees).

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Audit Report (Revenue Receipts) for the year ended 31 March 2004

(RUPEES IN
CRORE)
Year Budget Actual Variation Percentage
Estimates Receipts increase(+)/ increase(+)/
shortfall(-) shortfall(-)
(1) (2) (3) (4) (5)
1998-99 518.83 493.51 (-) 25.32 (-) 4.9
1999-00 579.63 591.84 (+) 12.21 (+) 2.1
2000-01 650.00 670.93 (+) 20.93 (+) 3.22
2001-02 728.06 804.89 (+) 76.83 (+) 10.55
2002-03 821.01 999.64 (+) 178.63 (+) 21.76

It is clear from above that shortfall/increase ranged between minus 4.90 per
cent and 21.76 per cent during the years 1998-99 to 2002-03. No reasons for
substantial increase of revenue during the year 2002-03 were reported by the
Department.

6.2.6 Procurement, Distribution and Sale of stamps

The C&IG(R&S) directly controls the General Stamp Office (GSO),

consolidate quarterly indents of all non-postal stamps, indents received from
district treasuries and forwards the same to India Security Press/Central Stamp
Depot (ISP/CSD), Nasik for high denominations i.e. Rs.50 and above upto
1997-98 and above Rs.500 from the year 1998-99 and Security Printing Press
(SPP),Hyderabad for low denomination stamps i.e. Re.1 to Rs.20 upto 1997-
98 and Rs.500 and below from 1998-99 onwards respectively. From February
1999, GSO, Hyderabad became the nodal point for distribution of higher
denomination stamps received from ISP, Nasik. Prior to this, stamps were
directly received at the treasuries from ISP.

District Treasuries are designated as Local Depots and all Sub-Treasuries are
branch depots for sale/supply of stamps. The STO is the Ex-officio stamp
vendor, who sells stamps of all values to applicants including the licensed
stamp vendors and supplies to all Registries under his jurisdiction. The Sub-
Registries of the Registration department where sale counters are opened are
called as sub-depots of the branch depot (Sub-Treasury) concerned. As such,
there are two departments engaged in sale of stamp paper.

Private parties may be licensed as stamp vendors by the DR/GSO. Record of

stamps procured and sold is required to be maintained by the SR/Licensed
Stamp Vendor. Entries of stocks drawn and each sale made are to be reflected
in the Sale/Stock Register.

All the Sub-Registries have to render accounts of stock and sale to the STO
concerned. The District Treasuries prepare a schedule of receipts based upon
the total sales including sales at Sub-Registries and forwards to the AG
(A&E) with monthly accounts for preparation of Finance Accounts.


Accountant General (Accounts and Entitlements)

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6.2.7 Transit loss of Rs.6.81 crore.

The Government of India in August 1987 suggested setting up of nodal

points in the State in order to reduce the number points to which the
consignment of stamps are to be sent by the CSD Nasik so that the instances
of delays, theft and pilferage can be avoided. The same was once again
communicated in May 1988 wherein, it was also suggested that personal
delivery of stamps was to be taken by the authorised nominees of these nodal
points. However, two nodal points were set in the State one at Hyderabad in
February 1999 and the other at Vijayawada in February 2003.

It was observed that there was transit loss of NJ Stamps worth Rs.6.81 crore
during the years 1992-93, 1997-98 and 1998-99 on the supplies directly made
to District Treasuries Visakhapatnam and Srikakulam by the ISP Nasik
through Railway Wagons as detailed below:

(Rupees in crore)
Sl. Name of the DTO Year in Value of NJ Value of NJ Value of NJ
No which NJ stamps stamps stamps lost
stamps were despatched actually in Transit
despatched from Nasik received by
DTO
1 Visakhapatnam 1992-93 3.00 2.64 0.36
1997-98 2.00 1.00 1.00
1998-99 6.00 1.00 5.00
2 Srikakulam 1997-98 NA NA 0.45
TOTAL 6.81

6.2.8 Non-observance of prescribed procedure for indenting and

monitoring of supply of stamps by ISP/SPP

As per Board Standing Order, each local depot is required to maintain a

reserve stock of stamps not less than the probable consumption of three
months, in addition to the stock required for the quarterly or annual
consumption as the case may be.

Under the rules for supply and distribution of stamp, the C&IG(R&S) should
send to the Controller of Stamps a consolidated quarterly indent of all non-
postal stamps required in the State of Andhra Pradesh after obtaining the
necessary particulars of requirements from the Local Depots. Further, the
procedure such as whether a supply is required or not, the balance on the date
of indent, the quantity sold during the preceding year, the quantity due against
the previous indents, etc., prescribed under Board Standing Order shall be
followed while indenting the stamps.

During the course of audit, it was observed that prescribed procedure was not
followed by the Department in indenting stamps. While placing quarterly
consolidated indents neither DTOs nor the Registration and Stamps
Department kept in view the following factors:

Lr.No. F 7(1)/86-UY (ISP), dated 17 August 1987

Lr.No. F-7(1)/SG-CV(ISP), dated 11 May 1988

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Audit Report (Revenue Receipts) for the year ended 31 March 2004

 Receipts of stock with reference to previous quarters indents;

 Watch supply of Stamps with reference to indents placed and

 Increase in demand of Non-Judicial Stamps due to revision of market

values of properties.

It was further noticed that GSO did not maintain any record to show the stock,
indent and supply status treasury wise, for various denomination of stamps.
Thus there was no mechanism to estimate the stock position in comparison
with the indents received from the DTOs. It was also observed that the GSO
supplies to the District Treasuries were not as per their indents.

The position of stock, indent and supply during the years 1999-00 to 2002-03
in the State was as under:

(Rupees. in crore)
Year Opening Stamp duty NJ Stamp Supply of NJ
Balance realised indented Stamps by
ISP Nasik
and SPP
Hyderabad
1999-00 500.61 606.77 733.63 715.20
2000-01 720.06 727.49 858.94 643.21
2001-02 937.33 813.68 1867.41 713.45
2002-03 785.60 1045.35 2247.48 817.80

It was observed that the supply of stamps throughout the period was less than
what was indented for though the usage of stamps during the years 2000-01 to
2002-03 was comparatively on the higher side. But even this short supply
along with stock in hand was sufficient to meet the needs in the state. Hence,
the indents placed were highly unrealistic.

6.2.9 Failure of a Treasury to procure and supply stamps

In DTO, Hyderabad (Urban), the strong room was certified as unfit by the
competent authority. Further, the guard provided by the Police Department
for security of the strong room was withdrawn during the period 22 June 2002
to 28 August 2003.

The AG(A&E) observed during inspection of treasuries that in the absence of

a proper strong room with adequate police security, the DTO, Hyderabad
(Urban) did not place indents for over one year and thus did not procure
requisite stamps. He could not supply Non-Judicial Stamps to the STOs of
Rangareddy District to the extent of Rs.67.30 crore. In turn the inability of
the STOs to supply stamps against demand to the stamp vendors contributed
to the scarcity of stamps in the local area.

6.2.10 Large variation in usage of stamp to sale of stamp

 The GSO Hyderabad sells all kinds of NJ Stamps to the general

public as well as to the stamp vendors of DR Hyderabad. The GSO,

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Hyderabad has three sales counters i.e. Public counter, Stamp Vendor
counter and High Court counter.

During the course of audit of sale and stock registers of GSO,

Hyderabad, it was observed that there was a huge reduction in sale of
NJ (impressed) Stamp during the years 2000-01 and 2001-02 as
compared to the figures for years 1998-99 and 1999-2000, though the
documents registered in R.O; Hyderabad increased during the above
years as detailed below:
(Rupees in lakh)
Year No.of Stamp Duty Stamp duty Sale of NJ
Documents realised by the realised by the Stamps by
registered Department Department GSO
during the year (including though NJ
DSD in Cash) stamps
1998-99 Figures not 7,501.17 4,018.71 4,456.43
available (3,482.46)
1999-00 31,469 6,342.41 1,978.71 4,479.59
(4,363.70)
2000-01 35,049 7,809.84 5,047.27 3,048.98
(2,762.57)
2001-02 33,868 8,883.09 2,836.68 2,950.50
(6,046.41)
2002-03 35,593 11,145.56 1,275.38 4,501.62
(9,870.18)

A scrutiny in audit showed that during the year 2000-01, usage of stamp paper
was more than the sale by Rs.19.98 crore.

When brought to the notice, the Department stated that the variation was very
negligible. Further, it was stated that the sale of higher denomination stamps
in High Court Counter was dispensed with and one of the counters was closed
for a period of six months. The reply is not acceptable as the circulation of
unauthorised stamps was detected in audit during the year 2000-01. Thus, it
reveals that the Department has no control mechanism to correlate the sale of
NJ stamps with the stamp duty realised by the Department.

 Of the eight districts, it was found that the usage of stamps was
more compared to the sale of stamps in three district treasuries (Eluru,
Mahabubnagar and Rangareddy). The variations in respect of these
districts


Deficit Stamp Duty

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Audit Report (Revenue Receipts) for the year ended 31 March 2004

during the period from 1998-99 to 2002-03 works out to Rs.405.57

crore as detailed below:
(Rupees in crore)
Year WG Dist. At Eluru Mahabubnagar Dist Rangareddy Dist.
Usage Sale of Variat Usage Sale of Variat- Usage Sale of Variat-
of NJ NJ -ion of NJ NJ ion of NJ NJ ion
Stamps Stamps Stamps Stamps Stamps Stamps
1998-99 28.39 25.32 3.07 7.20 6.44 0.76 80.07 47.97 32.10
1999-00 35.51 28.41 7.10 8.75 9.32 (-)0.57 92.63 55.86 36.77
2000-01 41.29 36.84 4.45 9.40 7.68 1.72 112.38 33.95 78.43
2001-02 48.04 42.58 5.46 10.49 8.98 1.51 134.10 30.48 103.62
2002-03 53.95 48.97 4.98 14.51 14.75 (-)0.24 156.57 30.16 126.41
TOTAL 25.06 3.18 377.33

6.2.11 Irregularities in stamp vendors accounts

The District Registrar/General Stamp Officer for twin cities of Hyderabad and
Secunderabad issue licenses to Stamp Vendors to sell stamps at a particular
place as per rules and conditions. Further as per rules for the supply and
distribution of stamps and Board Standing Order, the Licensed Stamp
Vendors shall maintain sale and stock registers duly reflecting each sale. The
above registers have to be rendered to the concerned authorities on 31
December every year for scrutiny.

During the course of scrutiny of documents registered during the year 2000-
01, it was observed that in two District Registries and eight Sub-Registries,
NJ Stamps worth Rs.23.28 lakh in respect of 181 documents were found to be
sold by a stamp vendor which were not lifted from the Local Depot during the
dates mentioned in the Stamp Papers. Further, no entries relating to sale of
such stamps were found in the sale and stock registers of the vendor during
the said dates.

It was seen in audit that for Document No.2914/2000 registered at District

Registry, Hyderabad, the Licensed Stamp Vendor had lifted the stamp papers
on 22 June 2000 from the GSO, Hyderabad of Rs.5,000 denomination and
sold to the concerned party on 28 July 2000. But on verification of the stock
and sale registers of the vendor, it was observed that the said stamp papers
were neither lifted nor sold to any person on that date i.e. 28 July 2000
mentioned in the document. This indicates that the above stamp papers of the
said document were unauthorised/fake.

The details of similar unauthorized NJ Stamps worth Rs.23.28 lakh which


Hyderabad and Ranga Reddy

Banjara Hills, Chikkadpally, Doodbowli, Golconda, Maredpally, Rajendranagar,
Saroornagar and S.R.Nagar.

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were registered during the year 2000-01 are shown below:

(Rupees in lakh)
Sl. Name of the No. of Total No. of Denomination of Stamps Amount
No. Sub-Registry/ Documents Revenue documents in (in Rupees) which found to be sold involved
District Registered which NJ as unauthorised
Registry during the Stamps found 5000 1000 500 100 50
year as un-
2000-01 authorised
sale
1 Banjara Hills 4,749 3,484.52 123 284 125 36 8 2 15.64
2 Golconda 3,729 1,188.30 15 53 31 - 1 - 2.96
3 Hyderabad 4,771 2,499.86 10 6 - 59 - - 0.60
4 S.R. Nagar 3,312 2,012.33 7 22 - - - - 1.10
5 Chikkadpally 3,987 1,591.90 3 13 - 13 2 5 0.72
6 Marredpally 2,939 1,010.41 3 7 - - - - 0.35
7 Ranga Reddy 10,288 2,115.32 12 21 9 - - - 1.14
8 Saroornagar 5,674 1,161.33 1 2 - - - - 0.10
9 Doodbowli 1,663 378.57 6 6 5 52 2 4 0.61
10 Rajendernagar 6,045 NA 1 1 - 2 - 4 0.06
TOTAL 181 415 170 162 13 15 23.28

After this was pointed in audit, Government stated in October 2004 that a
complaint was lodged with the police authorities against the alleged stamp
vendor and the investigation is under process.

6.2.12 Internal Control

During the course of audit, inadequacy of internal control was noticed at

different stages of stamp procurement and usage. Following are the main
points noticed:

 Purchase of Stamps by the Vendors at other than authorised Treasury

As per Board of Standing Order, stamp vendors of a taluk should draw their
requirement of stamps on indents only from the Sub-Treasury of that taluk.
Further, the DR in the licenses specifies the place of sale by a particular
vendor and is empowered to cancel the license of any vendor in case of breach
of conditions and disobedience.

During the course of audit, it was observed that the following licensed stamp
vendors were drawing the stamps from other than the designated treasury
contrary to the Standing Order. The Treasury Officers issued stamps to the
Licensed Stamp Vendors who were not under their jurisdiction. Due to this,
reconciliation aspect of procurement of stock and genuineness cannot be
ensured.

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Audit Report (Revenue Receipts) for the year ended 31 March 2004

License Number Jurisdiction of Sub-Treasury Year from which

of the Stamp Sub-Registry/ Sub- from where stamps stamps drawn
Vendor Treasury were drawn
29 of 1993 SRO, Champapet/ Rajendernagar 1998-99 onwards
STO, Hayatnagar
15 of 2000 -do- -do- 2000 onwards
5 of 2001 -do- -do- 2001 onwards
22 of 1998 SRO,Medchal/ -do- 1998-99 onwards
STO, Medchal

After this was pointed out in August 2004, the DTO, Ranga Reddy stated in
August 2004 that instructions would be issued to STO, Rajendernagar to stop
issue of stamps to the said Vendors. Further report in this case and reply in
remaining cases has not been received (November 2004).

 Non-verification of stamp papers purchased by the stamp vendors

As intimated by the Commissioner and Inspector General of (Registration and

Stamps), the concerned Sub-Registrars have to check periodically the sale and
stock registers of licensed stamp vendors under their jurisdiction so as to
verify the fact of purchase of stamps by the stamp vendors. Further, as per the
conditions stipulated in the licence, the stamp vendor is required to maintain a
minimum stock of Rs 20,000, and produce the stock & sale registers from
time to time for verification by concerned authorities.

It was noticed in audit that the Sub-Registrars were not exercising such checks
periodically. Only at the end of each year, the Sub-Registrars concerned were
endorsing their signature without verifying the fact of drawal of Stamp Papers
from the Treasury by the Stamp Vendor. There was no monitoring to ensure
that all the licensed Stamp Vendors under their jurisdiction have produced
their registers. Had the verification been done cautiously, non-lifting of
Stamps and non-maintenance of minimum stock by the vendor could have
been detected and action could be taken to cancel their licenses.

 Non-Intimation of issue of Licenses to Private Stamp Vendors to Sub-

Registry or Sub-Treasury Offices

As per the instructions of Inspector General and under the provisions of

B.S.O. 77(1)(iii), the stock and sale registers of licensed stamp vendors are to
be checked by the Sub/District Registrar.

During the test check of some of the offices, it was observed that the District
Registrars (who were licensing authorities in respect of Stamp Vendors) did
not intimate about the issue of new licenses, cancellations, suspensions of
Stamp Vendors either to the concerned Sub-Treasuries or Sub-Registries.

Consequently, due to lacuna in procedure, the Treasury Officers and Sub-

Registrars had no information about the number of authorised stamp vendors
operating in their jurisdiction and had no independent source to verify the
genuineness of licensed stamp vendors.

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 Chapter VI - Stamp Duty and Registration Fees

6.2.13 Purchase of Insurance Policy Stamps by Insurance Companies from

Private Stamp Vendors

Under the Indian Stamp Rules, the officers specified in Appendix-I and any
officer appointed in this behalf by the State Government are empowered to
affix and impress labels and each of them shall be deemed to be ‘the proper
officer’ for the purpose of the Act and of these rules. The licenced stamp
vendors are not empowered to affix and impress such labels.

The Zonal Manager, Life Insurance Corporation of India, and Regional

Manager, United India Insurance Company Limited, Hyderabad informed in
June 2004 and October 2004 that the said Corporations had purchased
Insurance Policy Stamps worth Rs.20.92 crore, out of which stamps worth
Rs.1.56 crore were purchased from Private Vendors/Agencies during the
period from 1993-94 to 2002-03, though they were not authorised to sell the
stamps.

The C&IG sated that the Insurance companies have been instructed not to
purchase Insurance Policy Stamps from Private Vendors in the year 1999
itself. However, no action has been taken (August 2004) by the C&IG to
realise the loss of revenue on account of unauthorized sale of insurance
stamps.

6.2.14 Recommendations:

Based on the above observations, Government may consider the following:

 Prescribed procedure for indenting and supply of stamps should be

enforced.

 Monitoring mechanism should be instituted to watch the usage of NJ

stamps with the sale of stamps in order to detect circulation of fake
stamps.

 Periodical verification of accounts of Stamp Vendors records by the

concerned Sub-Registrars should be enforced.

 Ensure that the Licensed Stamp Vendors draw stamps from the concerned
treasuries only and sell the Stamps in their jurisdiction. In order to ensure
this, an electronic database could be maintained with suitable
validation/alert.

The matter was referred to the Department and the Government in July 2004;
their reply is awaited.

All the recommendations have been accepted by the Government.

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Audit Report (Revenue Receipts) for the year ended 31 March 2004

6.3 Non/short-levy of stamp duty due to adoption of incorrect

rate

According to Indian Stamp Act, any instrument comprising of or relating to

several distinct matters shall be chargeable with the aggregate amount of
stamp duties with which separate instrument each comprising or relating to
one of such matters would be chargeable under the Act. When Power of
Attorney is given for construction on development of or sale or transfer of any
immovable property stamp duty is leviable at five per cent on the market
value of the property for which the attorney is given power to sell. Further,
security or earnest money deposits paid by developers to land owners are to be
treated as amounts paid as advance for transfer of property and are chargeable
to duty at prescribed rates.

6.3.1 During the course of audit of three District Registries and five Sub-
Registries it was noticed between March 2003 and December 2003 that stamp
duty of Rs 1.68 crore was charged on 76 documents styled "Development
Agreement-cum-General Power of Attorney" registered during the years
2001-02 and 2002-03 instead of Rs 2.84 crore due to adoption of incorrect
rates resulting in short levy of stamp duty of Rs 1.16 crore.

6.3.2 During the course of audit of six District Registries and 36 Sub-
Registries it was noticed between April 2003 and January 2004 that 3,815
documents styled as ‘Agreement of Sale-cum-General Power of Attorney’
registered during the years 2001-02 and 2002-03 contained two distinct
matters viz., one relating to agreement of sale and another appointing
the purchaser as attorney on behalf of vendor to carry out all acts and deeds
including sale of property. However, on these documents stamp duty for the
part relating to General Power of Attorney was levied at Rs 50 each only
instead of at prescribed rate on the market value of the properties amounting
to Rs 194.71 crore resulting in short levy of stamp duty of Rs 9.72 crore.

When the above two aspects were pointed out in audit, Government stated in
October 2004 that Stamp Act and Registration Act are independent and
separate enactments having separate provisions about charging of a document
with duty/registration fee. This argument is not correct as under notification
prescribing registration fee it was clearly stated that the provisions of Section
5 of Stamp Act are applicable for calculation of value for purpose of
determining the registration fee. As the department is collecting registration
fee of Rs 1,000 for the distinct matter relating to GPA treating it as falling


Hyderabad, Kurnool and Ranga Reddy

Chikkadpally, Golconda, Kukatpally, Maredpally and Uppal

Hyderabad, Nalgonda, Nizamabad, Ongole, Rajahmundry and Warangal

Amalapuram, Banjara Hills, Bhongir, Bodhan, Charminar, Chikkadpally, Gajwel,
Ghatkeswar, Golconda, Gudivada, Hayathnagar, Jedcherla, Kadiyam, Kamareddy,
Kodad, Kukatpally, Kusumanchi, Malkajgiri, Medchal, Miryalguda, Peddamberpet,
Peddapally, Rajanagaram, Rajendranagar, Samalkot, Sanjeevareddynagar, Saroornagar,
Shamshabad, Siddipet, Siricilla, Suryapet, Tadepalligudem, Tallarevu, Uppal,
Vallabhnagar and Warangal (rural)

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under Article 42(g), besides the fee applicable to distinct matter of agreement
of sale/development agreement, it is construed that the department had viewed
the documents of above nature as containing two distinct matters chargeable
with the aggregate of duties under Section 5 of the Stamp Act.

6.3.3 During the course of audit of District Registry, Hyderabad it was

noticed in September 2003 that a document styled as Development Agreement
contained two distinct matters viz., (1) release of rights by the tenants in
favour of the vendors for a consideration of Rs 1.25 crore (market value of
Rs 4.70 crore) and (2) Development agreement between the land owners/
vendors and the developer/builder for construction/development of a
commercial complex.

Though, stamp duty and registration fee as applicable to the Development

Agreement were levied but stamp duty leviable at three percent and
Registration fee for the matter relating to release of rights were not levied.
This resulted in short levy of stamp duty and registration fee of Rs 16.44 lakh.

After this was pointed out in audit, Government replied in October 2004 that
there was no release as the tenants did not have any rights over the property.
This contention is not tenable as there were clear recitals in the document that
the tenants had disclaimed the rights in favour of the owners having disputes
over the property and also in favour of the developer for a valuable
consideration paid by the developer. As such, if there is no release as
contested, there is conveyance of property in favour of the developer who had
no right at all in the property. Further reply has not been received
(November 2004).

6.4 Deficit Stamp Duty and Registration fee on BOT

Agreements and Lease Deeds

According to the Transfer of Property Act, 1882, a 'lease' of immovable

property is transfer of a right to enjoy such property made for certain time in
consideration of a service or any other thing of value (rent) to be rendered by
the transferee (lessee) to the transferor (lessor) who accepts the transfer on
such terms. Further the lessor and the lessee of the immovable property
possess certain rights and liabilities like putting the lessee in possession of the
property, the lessor to allow the lessee to hold the property without
interruption if the lessee performs the contract binding on him, to allow the
lessee to transfer or mortgage whole or any part of his interest in the form of
leasehold interest in the property etc. The Indian Stamp Act, defines lease as a
lease of immovable property and includes an undertaking in writing to occupy
the property and instruments by which tolls of any description are let. Under
the Registration Act, 1908, all leases are compulsorily registerable with effect
from 1 April 1999.

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Audit Report (Revenue Receipts) for the year ended 31 March 2004

6.4.1 During the course of review of agreements entered into between

January 1996 and January 2001 by the Public Works Department with the
Contractors (entrepreneurs) for construction of bridges across rivers/drains,
approach roads to the bridges, by-pass roads etc., under Build-Operate-
Transfer (BOT) system it was noticed between March 2002 and April 2004
that 10 documents were executed with a stamp duty of Rs 100 each treating
them as chargeable with duty as agreement or memorandum of agreement not
otherwise provided for.

The above BOT agreements contained specific aspects/recitals similar to the

essential features of lease deeds as enunciated above. Since it is the substance
of the transaction as embodied in the instrument and not the form of the
instrument that determines the stamp duty  and the dominant purpose of the
instrument is relevant for attracting the Act, these documents have to be
classified as ‘Leases’ chargeable with duty under clause (a) read with clause
(d) of Article 31 of Schedule 1A to Indian Stamp Act, 1899. The
misclassification of the documents resulted in deficit stamp duty of
Rs 5.97 crore. Further, there is a loss of Rs 25.27 lakh towards registration
fee due to non-registration of these documents, as lease deeds are
compulsorily registerable with effect from 1 April 1999.

After this was referred to the Department in May 2004, the Department stated
in June 2004 that the documents are chargeable at five per cent on the project
cost or tolls collectable by the concessionaire (lessee) whichever is higher
under Article 31(d) of the Act together with stamp duty at five per cent
chargeable on the amount of advance under Article 31(b) applicable to lease
deed and thus agreed with the contention of audit. Government stated in
October 2004 that the matter is under examination and final reply would be
submitted. Further reply has not been received (November 2004).

6.4.2 During the course of audit in December 2002 and December 2003 of
Roads & Buildings Division, Ongole and test check of documents between
May 2003 and March 2004 pertaining to five District Registries and four
Sub-Registries it was noticed that 13 lease deeds for collection of toll fee on
various bridges in the State were concluded with Roads & Buildings
Department by the respective lessees. But requisite stamp duty under above
provisions was not paid resulting in deficit stamp duty of Rs 26.89 lakh. Out
of these 13 lease deeds seven cases were not registered resulting in loss of
registration fee of Rs 4.71 lakh due to non-implementation of the provisions
of the Registration Act by the Roads and Buildings department and there was
short collection of registration fee amounting to Rs 0.26 lakh in four cases
registered.

After this was pointed out in audit, Government stated in October 2004 that
these documents are chargeable as leases but any deficit stamp duty can be
collected only if the deeds are impounded by the Roads and Buildings

Judicial decision in AIR 1951 Mad 209 (FB)

Judicial decision in AIR 1968 Det 1 (FB)

Adilabad, Chittoor, Karimnagar, Medak at Sangareddy and Vijayawada

Jangareddygudem, Kanumolu, Kothagudem and Shamirpet

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department. As regards loss of registration fee, it was stated that the loss
cannot be pointed out as they were not registered and deficit stamp duty and
registration fee would be collected in respect of registered lease deeds. Since
the provisions of Registration Act regarding compulsory registration of these
documents were not followed, there was loss of registration fee. Further reply
has not been received (November 2004).

6.5 Loss of revenue due to incorrect adjustment of stamp duty

According to a clarification issued by the C&IG(R&S) stamp duty paid on
“Agreement of sale” can be adjusted from duty payable on subsequent sale of
the same property if the claimant under the sale deed is either the agreement
holder and agent or his nominee as per terms of the agreement.

During the course of audit of three District Registriesand 12 Sub Registries

it was noticed between July 2003 and March 2004 in 748 documents
registered in 2002-03 that adjustment of stamp duty was allowed even though
claimants in subsequent sale deeds were other than agreement holders and
agents or their nominees resulting in loss of revenue of Rs.1.15 crore.

After this was pointed out between July 2003 and March 2004, Government
stated in October 2004 that adjustment was allowed in accordance with the
above clarification issued by C&IG (R&S), Hyderabad. The reply is not
tenable as the sale deeds were executed by Power of Attorney holders in
favour of third parties who were not empowered to claim adjustment of stamp
duty paid earlier on agreement of sale. Further reply has not been received
(November 2004).

6.6 Under valuation of Properties

According to the Indian Stamp Act, instruments of sale are chargeable to
stamp duty at prescribed rates, depending on the location of the property, on
the amount or value of consideration set forth in the document or the market
value of the property, whichever is higher. Besides transfer duty at five per
cent under the provisions of various Acts of Local Bodies is also leviable.

6.6.1 During the course of audit of Sub Registry, Shadnagar in

Mahaboobnagar district it was noticed in December 2002 in respect of two
sale deeds executed in February 2001 and June 2001 by two existing industrial
units in favour of other industrial units that the registering officer levied stamp
duty and registration fees at agricultural (acreage) rate for the vacant land and
house site rate for the sheds/buildings situated within the same premises
instead of adopting house site rate for the entire property, being non-
agricultural land. This resulted in under-valuation of properties and

S1/3405/1999 dated 2 April 1999

Nalgonda, Ongole and Rajahmundry

Banjara Hills, Charminar, Kukatpally, Malkajgiri, Medchal, Peddamberpet,
Rajanagaram, Samalkot, Shamirpet, Shamshabad, Uppal and Warangal (Rural)

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Audit Report (Revenue Receipts) for the year ended 31 March 2004

consequential short levy of stamp duty and registration fees of Rs 7.31 lakh
including transfer duty of Rs 3.32 lakh.

After this was pointed out, Government stated in October 2004 that the act of
the registering authority in applying the acreage rate fixed by the committees
is correct and there are instructions of C&IG(R&S) to adopt acreage rate for
the lands purchased by industries without insisting on adoption of house site
rate. The reply is not tenable as the documents related to purchase of
industrial properties in each sale deed consisting of structures and vacant
lands. As such, the vacant land attached to the structures have to be construed
as part and parcel of the same property situated in the same ward/block of the
village and hence the same house site rate has to be adopted for the vacant
lands also. Further reply has not been received (November 2004).

6.6.2 During the course of audit of Sub-Registry, Rajendranagar it was

noticed in August 2003 that sale of Acres 3.20 guntas of residential area was
registered in June 2002 adopting the rate of market value applicable to
agricultural land instead of house site rate resulting in short levy of stamp duty
and registration fees of Rs 5.31 lakh including transfer duty of Rs 2.41 lakh. It
is pertinent to mention here that the vendor had already converted the entire
land into house site plots and sold a part of it in September 2001 by a
registered sale deed duly adopting house site rate. However, the same vendor
while executing the present sale deed, did not mention this fact and property
was registered treating it as agricultural property.

After this was pointed out, Government stated in October 2004 that market
value fixed by the committees only are applicable to the document presented
for registration but not the value adopted in a previous document registered
and instructions were issued by C&IG(R&S) to apply acreage rate. The reply
is not tenable in view of the fact that the land in question owned by the vendor
was already converted into house site plots and despite suppression of facts
affecting the chargeability of the document being pointed out in audit no
action was initiated by the Department under Section 27 of the Act which
empowers the Departmental officers to inspect the property and assess the
deficit duties. Further reply has not been received (November 2004).


MVI/20363-A/90 dated 10 August 1990

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6.7 Incorrect classification of lease as licence agreement

Transfer of Property Act, defines lease of immovable property as a transfer of

right to enjoy such property, made for a certain time express or implied, or in
perpetuity, in consideration of price paid or promised or of money. This is
also confirmed by the decision of the Hon’ble Supreme Court.

During the course of audit of District Registry, Hyderabad it was noticed in

September 2003 that a document styled as "licence agreement” was registered
in June 2002 between M/s APTDCL , Hyderabad and M/s E-Giant Screen (I)
Private Limited, Mumbai for the development and management of Family
Entertainment Centre (FEC) project at Secunderabad. The licencee mandated
to complete construction of FEC on the site belonging to the licensor and
manage the same for 33 years duly paying monthly fees of
Rs 3.83 lakh with an annual escalation of five per cent over the previous year.
The licensor handed over possession of its immovable property (site) to the
licencee in consideration of payment of Rs 36.36 crore over a period of 33
years including advance of Rs 23 lakh.

Though the document was styled as licence agreement, it contained all the
covenants of a lease. As the exclusive possession of the site was given to the
licencee for construction and management of FEC for 33 years on monthly
payment, it amounts to transfer of right/interest in the property and hence the
instrument is classifiable as a lease. Incorrect classification of lease as licence
agreement resulted in short levy of stamp duty of Rs 6.95 lakh even after
allowing 70 per cent exemption from payment of stamp duty available for
promotion of tourism sector as envisaged in a Government order .

After this was pointed out, Government stated in October 2004 that the
document was only a license agreement for development of property though it
contained conditions similar to that of a lease, inserted by way of abundant
caution and that the document is to be treated as license only. The reply is not
tenable as it is the sum and substance of the transaction as embodied in the
instrument that determines stamp duty and the substance of the present
document is to lease the property duly reserving rent for the same together
with demise of the property and the document contains all the essential
features of a lease as stated above. Further reply has not been received
(November 2004).


B.M. Lall Vs M/s Dunlop Rubber Co. (India Limited) AIR 1968 175 SC

Andhra Pradesh Tourism Development Corporation Limited

G.O.Ms.No.140 Revenue (Regn. & Mandals) Department dated 24 February 2001

85