Memorandum of family settlement recording prior oral partition is not exigible to stamp duty.

The dispute concerns the partition of "the Property" (No. 10, Friends Colony West, New Delhi), originally a HUF property.

A preliminary decree (20.10.2016) and a final decree (08.05.2017) were initially passed, finding the property could not be divided by metes and bounds and ordering its sale.

Subsequently, the parties reached an oral settlement on 22.11.2018 to partition by metes and bounds, later recorded in a Memorandum of Family Settlement.

The Single Judge modified the final decree in 2018 but later dismissed an application (I.A. No. 6709/2024) challenging a Registry demand for ₹1.81 crore in stamp duty, ruling the settlement was not bona fide and intended to evade tax.

The parties appealed, and during the pendency, moved an application to convert the decree from partition to declaration as they had already taken physical possession.

1. Whether the Memorandum of Family Settlement recording a prior oral settlement is exigible to stamp duty and registration.

2. Whether the oral settlement and subsequent memorandum were bona fide or a colorable device to avoid stamp duty.

The Court applied the principle that a family arrangement acknowledges antecedent title and does not constitute a "conveyance," as established in Madho Das v. Mukand Ram.

Following Kale v. Deputy Director of Consolidation, the Court noted that oral family arrangements do not require registration, and a subsequent memorandum prepared merely for record or court information does not create or extinguish rights under Section 17 of the Registration Act.

Regarding tax planning, the Court relied on CIT v. Shiv Raj Gupta, which holds that an assessee may choose a legal method to minimize tax liability as long as the transaction is not a sham or a colorable device.

The Court reasoned that the Memorandum did not itself effect the partition but merely recorded an oral arrangement concluded by exchange of possession.

Since the parties held antecedent titles as family members, the settlement was a recognition of rights rather than a transfer of property, exempting it from stamp duty and registration.

The Court rejected the Single Judge's finding of mala fides, clarifying that choosing a legally permissible path (oral settlement) that results in zero stamp duty is a legitimate exercise of financial management and not "abusive tax avoidance".

Furthermore, the court found no evidence of a "sham" because the parties had already bifurcated the property and taken physical possession.

The High Court allowed the appeals, set aside the order dated 18.11.2024, and quashed the Registry’s demand for stamp duty. The Court modified the 2018 decree into a decree of declaration, affirming the exclusive ownership of the respective parties over specific portions (ABCD and CDEF) as per the site plan in the family settlement.