Case Note & Summary
The petitioner, CR Retail Malls (India) Limited, challenged an order dated 21 March 2013 passed by the Chief Controlling Revenue Authority, Maharashtra State, Pune, directing payment of Rs. 91,66,800 as deficit stamp duty on an Indenture of Sub-Lease. The petitioner operates a multiplex cinema at Phoenix Mills Compound, Lower Parel, Mumbai. The Municipal Corporation of Greater Mumbai (MCGM) originally owned the land and leased it to Phoenix Mills Limited for 999 years by an Indenture of Lease dated 17 August 2005. Phoenix Mills Limited and PVR Limited (a group company of the petitioner) entered into an agreement on 22 July 2005, whereby Phoenix Mills agreed to construct a seven-screen multiplex and PVR agreed to take it on sub-lease. This agreement was assigned by PVR to the petitioner on 27 February 2007. The sub-lease was executed on 28 February 2007 for a term of 999 years, with a premium of Rs. 1,00,00,000 and monthly rent of Rs. 1,00,000. The petitioner paid stamp duty of Rs. 10,00,000 on the premium and Rs. 1,000 on the rent. However, the Collector of Stamps, Mumbai, issued a show cause notice proposing to levy deficit stamp duty of Rs. 91,66,800, treating the lease premium of Rs. 1,00,00,000 paid by Phoenix Mills to MCGM as part of the consideration for the sub-lease. The Chief Controlling Revenue Authority confirmed this demand. The petitioner argued that the consideration for the sub-lease is only the amount paid by the sub-lessee to the sub-lessor, and the premium paid by the original lessee to the lessor is not part of that consideration. The respondents contended that the sub-lease is a transfer of a right to use the property and the premium paid by the original lessee should be included. The Court analyzed Article 35(a) of Schedule I of the Bombay Stamp Act, 1958, which provides for stamp duty on a lease at the same rate as a conveyance on the consideration for the lease. The Court held that the expression 'consideration for the sub-lease' refers only to the consideration moving from the sub-lessee to the sub-lessor. The premium paid by the original lessee to the lessor is not consideration for the sub-lease. The Court also noted that the sub-lease was for 999 years and the consideration was a premium of Rs. 1,00,00,000 and monthly rent of Rs. 1,00,000, and the stamp duty was correctly computed on that basis. The Court quashed the impugned order and allowed the petition.
Headnote
A) Stamp Duty - Sub-Lease - Consideration - Article 35(a) of Schedule I, Bombay Stamp Act, 1958 - The issue was whether the lease premium paid by the original lessee to the lessor can be included as part of the consideration for the sub-lease for computing stamp duty. The Court held that the expression 'consideration for the sub-lease' in Article 35(a) refers only to the consideration moving from the sub-lessee to the sub-lessor, and not the premium paid by the original lessee to the lessor. The Chief Controlling Revenue Authority's order directing payment of deficit stamp duty by including such premium was quashed. (Paras 2-26) B) Stamp Duty - Sub-Lease - Market Value - Article 35(a) of Schedule I, Bombay Stamp Act, 1958 - The Court also considered whether the market value of the property could be the basis for stamp duty. It held that since the sub-lease was for a term of 999 years and the consideration was a premium of Rs. 1,00,00,000 and a monthly rent of Rs. 1,00,000, the stamp duty was correctly computed on the premium and rent, and the market value was not relevant. (Paras 20-26)
Issue of Consideration
Whether the lease premium paid by the original lessee to the lessor can be included as part of the consideration for the sub-lease for the purpose of computing stamp duty under Article 35(a) of Schedule I of the Bombay Stamp Act, 1958
Final Decision
The impugned order dated 21 March 2013 passed by the Chief Controlling Revenue Authority, Maharashtra State, Pune, is quashed and set aside. The writ petition is allowed. Rule is made absolute accordingly. No order as to costs.
Law Points
- Stamp duty on sub-lease is payable only on the consideration for the sub-lease
- not on the premium paid by the original lessee to the lessor
- Lease premium paid by original lessee is not part of the consideration for the sub-lease
- The expression 'consideration for the sub-lease' in Article 35(a) of Schedule I of the Bombay Stamp Act
- 1958 refers only to the consideration moving from the sub-lessee to the sub-lessor
- The Chief Controlling Revenue Authority erred in including the lease premium paid by the original lessee to the lessor as part of the consideration for the sub-lease
