Stamp duty on development agreements cannot be assessed using land’s market value absent statutory guidelines.

The petitioner entered into a registered Development Agreement dated 26 February 2014 for development of four hectares of land at Jabalpur. Stamp duty was paid at 1% of the estimated development cost of ₹1.50 crores, which was subsequently confirmed by the Executive Engineer of the Madhya Pradesh Housing and Urban Development Board; development permission was granted on 11 July 2014.

Following an audit objection, the Collector of Stamps, by order dated 8 June 2016, assessed the development cost at ₹5.52 crores by adopting the Madhya Pradesh Housing Board’s rate of ₹1,381 per square metre and raised a demand of approximately ₹7.25 lakhs towards deficit stamp duty and registration charges. The District Registrar thereafter issued a demand notice dated 23 December 2016. The petitioner’s revision under Section 56(4) of the Indian Stamp Act, 1899, was dismissed by the Board of Revenue on 6 June 2018, leading to the present writ petition under Article 226 of the Constitution.

Whether the Collector of Stamps could reassess the stamp duty payable on a Development Agreement by adopting the development-cost rate charged by the Madhya Pradesh Housing Board in the absence of any statutory rule, circular, executive instruction, or prescribed guideline governing such assessment?

Whether the Collector of Stamps was justified in treating the development agreement as involving an alienation of land and assessing stamp duty on the market value of the land merely because the developer was entitled to alienate 45% of it in the future?

Whether such assessment would result in double recovery or unjust enrichment of the State when stamp duty would subsequently become payable upon the actual alienation of the developer’s 45% share?

The Court exercised jurisdiction under Article 226 of the Constitution and considered the scheme of the Indian Stamp Act, 1899, including the revisional remedy under Section 56(4). It held that stamp duty on a Development Agreement must be assessed according to the legally applicable basis for that instrument and cannot be founded on an assumed market value of the underlying land without statutory authority or prescribed guidelines.

A development agreement, by itself, is not an instrument of alienation merely because it confers a future right to alienate a specified portion of the land. The Court relied on Shyamsundar Radheshyam Agrawal v. Pushpabai Nilkanth Patil, 2024 INSC 730, in support of the principle against imposing the same statutory burden twice in respect of the same subject matter.

It further applied the principles of restitution and unjust enrichment discussed by the Supreme Court in Indian Council for Enviro-Legal Action v. Union of India, (2011) 8 SCC 161, paras 158–160, including the rule that a person should not retain a benefit which, in justice, equity, and good conscience, belongs to another.

The Court found that the Collector’s inquiry was whether the stamp duty payable on the Development Agreement had been correctly calculated, but the Collector instead assessed the market value of the land at ₹5.52 crores by multiplying the total area by the rate communicated by the Madhya Pradesh Housing Board.

That communication only indicated the Housing Board’s development-cost rate and did not determine the market value of the land. In the absence of any statutory or executive guideline making that rate applicable to the petitioner’s private development agreement, the Collector’s assessment was based on conjecture and was legally unsustainable.

The petitioner’s future right to alienate 45% of the land did not convert the Development Agreement into an immediate transfer or alienation; the alienation was to occur subsequently and would attract the applicable stamp-duty consequences at that stage.

Charging stamp duty at the market value stage of the Development Agreement and again upon later alienation would impose a dual liability and unjustly enrich the State.

The petition was accordingly allowed.