Stamp duty on charity-trust property sold with Charity Commissioner’s approval must be based on auction price, not ASR value, Bombay High Court rules

A.H. Wadia Trust sought approval under Section 36 of the Maharashtra Public Trusts Act, 1950, to sell encroached trust property by public auction.

After the sale, the Collector of Stamps sought to reassess the property’s market value.

The Trust challenged the Inspector General of Registration and Controller of Stamps’ Circular dated 15 December 2021, which cancelled earlier circulars and directed that the value of private property sold with the approval of the Charity Commissioner or DRT be determined according to the Annual Statement of Rates (ASR).

The Trust relied on earlier decisions concerning court-supervised and Charity Commissioner-approved sales by public auction.

1. Whether the Circular dated 15 December 2021 could exclude private property sold with the approval of the Charity Commissioner from the treatment accorded to public-auction sales under Rule 4(6) of the Maharashtra Stamp (Determination of True Market Value of Property) Rules, 1995.

2. Whether, in the circumstances of a public auction supervised by the Charity Commissioner, the sale-confirmation value could be accepted as the property’s true market value for stamp-duty purposes, rather than reassessed by reference to ASR.

Sections 3, 2(na) and 31 of the Maharashtra Stamp Act, 1958, read with Articles 16 and 25 of Schedule I, govern stamp duty on sale certificates and conveyances, with duty calculated by reference to market value; Section 2(na) defines market value as the price the property would fetch in the open market on the date of execution or the consideration stated in the instrument, whichever is higher.

Rule 4(6) of the Maharashtra Stamp (Determination of True Market Value of Property) Rules, 1995, provides for verification against ASR and referral to the Collector where the stated value is lower, subject to its provisos.

In Pinak Bharat & Co. v. Anil Ramrao Naik, the Court held that a court-supervised public auction preceded by valuation should be assessed by reference to the valuation used for the auction, or the higher confirmed bid; M/s. Crystal Construction Company v. Additional Controller of Stamps applied that reasoning to a Charity Commissioner-approved auction sale.

The Court also relied on Registrar of Assurances v. ASL Vyapar Pvt. Ltd., which held that a registering authority should not sit in appeal over the price approved in a court-monitored public auction.

The Court held that the statutory scheme and prior decisions did not confine the relevant treatment to sales by government bodies: a public auction preceded by valuation and conducted under the Charity Commissioner’s supervision is a transparent process directed at obtaining the best value for the trust.

ASR may not reflect a property’s actual value where it is encumbered or otherwise impaired, as with the Trust’s encroached land.

The Circular’s blanket direction to use ASR for such private sales therefore conflicted with the governing approach and the Court’s prior decisions.

It directed that the value stated in the sale-confirmation certificate be treated as the true market value and that stamp duty be charged accordingly; the writ petition was made absolute in those terms.