MCD Empowered to Levy Transfer Duty on Agreements to Sell Post-2003 Amendment During Mutation Proceedings

The Petitioner purchased the subject property in Vasundhara Enclave via an Agreement to Sell (ATS) and General Power of Attorney (GPA) dated August 29, 2000, for a consideration of Rs. 15,00,000/-.

In 2007, the DDA executed a conveyance deed converting the property from leasehold to freehold upon payment of conversion charges, which was registered with a stamp duty and transfer duty of Rs. 870/- each.

When the Petitioner applied for mutation of the property in MCD records on December 13, 2007, the MCD issued a demand letter dated January 3, 2008, seeking transfer duty at 3% of the ATS sale consideration.

The Petitioner challenged this demand, arguing that the ATS predated the relevant amendment to the Delhi Municipal Corporation (DMC) Act and that duty was already paid on the conveyance deed.

1. Whether the MCD is entitled to levy transfer duty on an Agreement to Sell executed prior to the 2003 amendment of the DMC Act when the application for mutation is filed post-amendment.

2. Whether the payment of transfer duty on a conveyance deed for leasehold-to-freehold conversion exempts the owner from paying duty on the underlying sale consideration mentioned in a prior ATS.

Section 147 of the Delhi Municipal Corporation Act, 1957, which empowers the MCD to levy transfer duty as a surcharge on instruments like sale deeds and "contracts for transfer of immovable property".

Entry (vi) regarding "contracts for transfer" was inserted via amendment on August 1, 2003.

Section 128(5) of the DMC Act, which mandates that the Commissioner must satisfy themselves that transfer duty under Section 147 has been paid before recording any mutation.

The court distinguished the precedent of Raghu Nayyar v. MCD, which held that transfer duty could not be demanded for an ATS if the demand/application occurred prior to the August 2003 amendment.

The Court reasoned that transfer duty is an independent levy under the DMC Act, and while collected as a surcharge on stamp duty, it remains distinct.

The Court rejected the Petitioner’s argument regarding retrospective application, holding that the relevant date for determining the applicable law is the date the mutation application is filed.

Since the Petitioner applied for mutation in December 2007, the 2003 amendment (including ATS as a taxable instrument) was fully applicable.

Regarding the prior payment during the conveyance deed registration, the Court noted that the deed only covered the "reversionary interest in the land" for conversion purposes and did not reflect the actual sale consideration of the flat itself as recorded in the ATS.

Consequently, the MCD had the statutory authority under Section 128(5) to ensure the full duty on the actual transfer value was recovered before granting mutation.

The Court clarified that since the mutation application was filed in 2007, the applicable rate is 2% (the rate for females at that time) levied on 90% of the sale consideration mentioned in the ATS dated August 29, 2000. The petition was disposed of with directions for the Petitioner to pay the balance duty to facilitate mutation.