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INDIAN STAMP ACT, 1899

1. SCOPE, APPLICABILITY& OBJECT BEHIND THE ACT

✓ It came into force on 1st day of July 1899.
✓ The Act Contains total 94 Sections and divided into 8 Chapters and there is
Applicability
a SCHEDULE which contains the RATES of stamp duties on various
instruments.
Scope Under this act stamp duty is leviable on an instrument and NOT on transaction.
✓ It is a fiscal legislation envisaging levy of stamp duty on certain instruments.
✓ The tax is levied on in the shape of stamps recording the transactions.
✓ Primacy object of this act is to raise revenue for the state.
Object
✓ Levy of stamp duty is a state object, but in certain cases parliament has the
power to fix the rates of duty.
✓ For eg. Bills of Exchange, Promissory notes, transfer of shares are such instruments.

2. IMPORTANT DEFINITIONS

a) Bill of Lading

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b) CONVEYANCING

AS PER STAMP ACT:

The term “Conveyance”, is defined under Section 2(10) of the Indian Stamp Act, 1899,
Conveyancing “includes:
(a) a conveyance on SALE and
(b) Every instrument-
(i) by which property, whether movable or immovable, is transferred inter vivos (between the
living) and
(ii) which is not otherwise specifically provided by Schedule I of the Act.”

➢ It does not include a will.

➢ Transfers which are otherwise provided for in the Schedule are Composition Deed, Exchange of
Property, Gift, Lease, Mortgage, Re-conveyance, Release, Settlement, Transfer, Transfer of Lease
and Declaration of Trust.
➢ Transfer which are not otherwise provided for in the schedule are Adoption Deed, Apprenticeship
deed or Affidavit, etc.

CONVEYANCE

Includes transfer of any right in

the property and not necessarily all Does not Includes,
the interest of the transferor in Transfer by operation of law.
the property;

It may be PARTIAL such It may be

as lease and Mortgage, For example, acquisition of
ABSOLUTE such as
` in which case not the ➔ Sale, property by inheritance does
whole interest but
conveyance of specific
➔ Exchange, not amount to transfer.
rights only amounts to ➔ Gift and
transfer. ➔ Will.

“Cheque” means a bill of exchange drawn on specified banker, not expressed

Cheque to be payable otherwise than on demand.
[Sec. 2(7)] It should be mentioned that in India, cheques are no longer subject to stamp duty.
Entry 21 in the Schedule levying duty on cheque was deleted by Act 5 of 1927

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3. INSTRUMENT CHARGEABLE WITH DUTY [SECTION 3]

INSTRUMENT

Only those instruments Amount Indicated in Schedule 1

mentioned in schedules are
chargeable to stamp duty List of instruments mentioned in
otherwise not schedule

INSTRUMENTS CHARGEABLE WITH THE STAMP DUTY

Following instruments shall be chargeable with the amount of duty integrated

in the schedule.

• Instrument executed in India, whether it relates to property situated or to any matter or things to
be done in or out of India, is chargeable to stamp duty.
• Instruments executed out of India are chargeable to duty if they relate to some property situated
in India or some matter or thing done or to be done in India.
• Bills of Exchange and promissory notes
Exception: - Bills exchange payable on demand is not chargeable to stamp duty.

Instruments Exempted from Duty

• Instruments in favour of government these include instruments executed by or on behalf of or in
favour of government.
• Bills of exchange and promissory notes executed outside India and acted upon outside India.
• Instruments for the sale, transfer or other disposition of any ship or Vessel.

Thus, Section 3 charges certain instruments to be liable to stamp duty.

The Court has observed as under in Commissioners of Inland Revenue v. G. Angus, 1889, followed in re
Swadeshi Cotton Mills, 1932,
“It is not the transaction of purchase and sale which is struck at; it is the
instrument whereby the purchase and sale are effected which is struck at. And if
any one carries through a purchase and sale without an instrument, then the Legislature has not
reached that transaction”.

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QUESTIONS FOR PRACTICE

Q-1 Abhay's agricultural land was purchased by the government for the purpose of construction of a
factory but no duty was paid for this transfer by the government. Abhay wanted to take back his
land on the ground that government has not paid the duty and, therefore, no sale deed was executed:
Will Abhay succeeds? Give reasons.
Ans. “Abhay” will not succeed. Section 3 of the Indian Stamp Act, 1899 charges instruments with duty
specified therein. At the same time, it inter-alia provides that no duty shall be chargeable in respect of
any instrument executed by or on behalf of or in favour of the Government, in cases where, but for this
the Government would be liable to pay the duty chargeable in respect of such instrument.
Hence, in the present case, sale deed will be supposed to be effective and Abhay will not succeed.

Q-2 Is endorsement of promissory note require payment of stamp duty?

Ans. No.

4. SINGLE TRANSACTION EFFECTED BY SEVERAL INSTRUMENTS [SECTION 4]

Single transaction like sale, mortgage or settlement is completed by several
MEANING documents. In such a case it would inequitable/ unfair of all these instruments are
subjected to stamp duty.
Sec.4 provides as follows: -
A principal instrument only shall be chargeable to duty.
AMOUNT Transaction: -
OF a) Principal Document shall be chargeable, where a single transaction of conveyance,
DUTY mortgage, and settlement with duty prescribed in Schedule 1.
b) Other instruments called subsidiary instruments shall be chargeable with duty of
Rs. 1 which may depend upon from state to state.
Sec.4 applies when 3 conditions are satisfied:
a) Several instruments should be there for completing A transaction.
CONDITIONS b) Several instruments should be employed to complete the Same transaction.
c) Transaction must be a sale, mortgage, or settlement.
(1) A lease is executed and got registered. A second document is executed altering
the terms of the first document. The 2nd document has to be stamped as a lease.
NOT
(2) ‘A’ purchaser of land executes a mortgage of the land in favour of the vendor
APPLICABLE
for a portion of the purchase money. The mortgage is liable to full duty as a
separate instrument.

DECIDED CASES
‘A’ executed a conveyance of immovable property. On the same deed his nephew
(undivided in status) endorsed his consent to the sale, as such consent was
considered to be necessary. It was held that the conveyance was the principal
instrument. The consent was chargeable with only 1 rupee.

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[In Re. Maharaj Someshar Dutt]

Brother A executed in favour of brother B a GIFT of all his property. By another deed, brother B
made provision for the living expenses of brother A and hypothecating in favour of brother A.
It was held that the 2 documents were part of the same transaction. They amounted to a
settlement and Section 4 applied.

5. INSTRUMENTS RELATING TO SEVERAL DISTINCT MATTERS

[MULTIFARIOUS INSTRUMENTS] [SECTION 5]
Where several distinct matters or transactions are embodied in a single instrument.
MEANING
The instrument is called multifarious instruments. [i.e. The matter of different kind]
Any instrument comprising or relating to several distinct matters shall be chargeable
AMOUNT with the aggregate amount of duties with which separate instruments each comprising
OF DUTY or relating to one such matter would be chargeable under this act”. (This is the reverse
of the situation governed by Section 4)
Section 5 applies even where the 2 (or more) matters are of the same description.

DECIDED CASES
1) A document containing both an agreement for the dissolution of a partnership and a bond, is
chargeable with the aggregate of the duties with which 2 such separate instruments would be
chargeable. The 2 are “distinct matters” [Chinmoyee Basu v. Sankare Prasad Singh].
2) A lease to joint tenants requires only one stamp.

3) Where a person having a representative capacity (as a trustee) and a personal capacity
delegates his powers in both the capacities, section 5 applies. In law, a person acting as a
trustee is a different Entity from the same person acting in his personal capacity.

6. INSTRUMENTS COMING WITHIN SEVERAL DESCRIPTIONS IN

SCHEDULE-1 (MULTI DISCRETION INSTRUMENTS) [SECTION 6]
MEANING & When an instrument falls within the provisions of 2 or more articles in schedule 1 and
AMOUNT OF the instrument does not certain distinct matters it is to be charged with the
DUTY highest of the duties when the duties chargeable are different.
SCOPE The provisions of Sec.6 are subject to the provision by Sec.5 [Section 5 overrule Sec.6]
Where a deed:
(i) Contains a stipulation binding the executant to deliver his sugarcane crop to the
obligee under the deed and
EXAMPLE (ii) Also provides that the sugarcane crop is hypothecated as security for payment
of money advanced by the obligee,
the deed fulfills the dual character of the mortgage and a bond and is therefore
chargeable to the highest of the duties by virtue of section 6.

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ANALYSIS OF (SECTION 4, 5 AND 6)

[Section 4]
[Section 5] [Section 6]
Single Transaction effected
Multifarious Instruments Multi discretion Instruments
by several Instruments
1 =Transaction 1 = Instruments
1 = Instruments
2=Instruments 2= Transaction
FALLS UNDER THE 2 HEADS
DUTY ONLY ON PRINCIPAL DUTY ON BOTH
HIGHEST OF DUTY PAID
INSTRUMENT TRANSACTIONS

Author’s Note- Securities dealt in Depository not liable to Stamp Duty due to insertion of
[Section 8A]

Q-3 Arjun executed a power of attorney both in his personal capacity and in the capacity as an
executor, trustee, manager and liquidator in favour of Bheem. Decide the liability of duty payable on
the instrument.
Ans. Under Section.5 of the Indian Stamp Act, 1899 an instrument comprising or relating to several
distinct matters is chargeable with the aggregate amount of the duties with which each separate
instrument, relating to one of such matters, would be chargeable under the Act.

7. REDUCTION, REMISSION AND COMPOUNDING OF DUTIES [SECTION 9]

Section 9 empowers the Government, (Central or the State as the case may be), to reduce or remit,
whether prospectively, or retrospectively, the duties payable on any instrument or class of instruments
or in favour of particular class of persons or members of such class.

8. MODE OF PAYMENTS STAMP DUTY [SECTION 10]

METHODS OF STAMPING
[Section 10]

Adhesive stamp Impressed Stamp

[Section 11] [Section 13]

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Adhesive Stamp
(Section 11)
The following instruments MAY BE stamped with adhesive stamps namely:
Instruments chargeable with duty not exceeding 10 paise EXCEPT Bills of
exchange payable otherwise then on demand.
Bills of exchange and promissory notes drawn or made out of India.
Entry as an advocate, vakil or attorney on the roll of a High Court.
Notarial Acts.
Use of adhesive
Instruments relating to transfer of shares of company.
stamps
The use of the words ‘may be stamped’ really connotes ‘shall be stamped’.
Sec.12 provides for the cancellation of adhesive stamps at the time the stamp
is affixed if the instrument has already been executed or at the time of execution.

The object of cancellation is to prevent the same stamps to being used again.
Sec.12 further provides that: -
Whoever affix any adhesive stamp on any instrument
chargeable with duty which has been executed by any person
shall, when affixing such stamps cancel the same by writing
Cancellation of on all across the stamp his name or initials of his firm along with the date or
Adhesive Stamps in any other effectual manner.
(Section 12) 1) Drawing a solitary (single) line across the stamps.
Effectual 2) Drawing of Diagonal lines across the stamp with the ends
Manner of extending on the paper or instrument.
Cancellation It may be notes that any instrument bearing an adhesive stamp,
which has not been cancelled shall be deemed to be unstamped.
1) A cross marked by an illiterate person indicating his acknowledgement, was held
to be an effective cancellation of the stamp in Kolai Sai v. Balai Hajam.

2) Where one of the 4 stamps used on an instrument had a single line drawn
across the face of the stamp, the second had 2 parallel lines, the third 3
parallel lines and the fourth 2 lines crossing each other, it was held that the
stamps must be regarded as having been cancelled in manner so that they could
Judicial not be used again (In re Tata Iron Steel Company, 1928). Putting 2 lines
pronouncement crossing each other is effective.

3) However, putting a date across the stamp by a third party on a date

subsequent to the date on which the bill had been drawn, was held to be not
proper cancellation in [Daya Ram v. Chandu Lal, 1925]

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Impressed Stamp
(Section 13)
‘Impressed Stamp’ means stamp is impressed on the
paper by mechanical means (these are the stamp papers
Definition
we purchase from stamp vendor).
[Sec. 2(13)]
“Impressed stamp” means & includes:
Labels affixed and impressed by the proper officer; and
Stamps embossed or engraved on stamp paper.

The instrument is duly stamped if it has been duly stamped at the time of
execution and is admissible in evidence, though the stamp is subsequently removed
or lost [Mt. Mewa Kunwari v.Bourey].

Every instrument written upon paper stamped with an impressed stamp shall be written
Manner of use
in such manner that the stamp may appear on the face of the instrument and
[Section 13]
cannot be used for or applied to any other instrument.
[Dowlat Ram Harji v. Vitho Radhoji],

It was held when the face of a deed or document is mentioned, no particular side of
the parchment or paper, on which the deed or document is written, is thereby
indicated. Even the last line may constitute the face.
Instrument Section 15 of the Act deems every instrument written in contravention of Section 13
deemed or Section 14 to be unstamped and to be inadmissible in evidence as not being duly
unstamped stamped.

Q-4 Explain the methods of stamping under the Indian Stamp Act, 1899 OR
What are the mode of cancellation of adhesive stamps? (CS June 2012, 2015)
Ans. Refer heading no. 8

Q-5 Four adhesive stamps were used on an instrument. First adhesive stamp had a single line drawn across the
face of the stamp. On the second stamp, there were two parallel lines. The third stamp had three parallel lines,
and the fourth stamp had two lines crossing each other. What are the provisions for cancellation of adhesive
stamps and which adhesive stamps referred to above will be considered to have been properly cancelled?
Ans. Section 12(3) of the Indian Stamp Act, 1899 dealing with the mode of cancellation of stamps
provides that the cancellation of an adhesive stamp may be done by the person concerned by writing on
or across the stamp his name or initial or the name or initials of his firm with the true date of his so
writing, or in any other effectual manner. Sub-section (3) merely lays down as a guidance one of the
ways in which an. Adhesive stamp can be cancelled.
The problem is based on the facts of the case in re Tata Iron Steel Company,1928 Bombay. In this case
it was held that all the four stamps must be regarded as having being cancelled in the manner so that
they cannot be used again.

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9. TIME OF STAMPING OF INSTRUMENT

TIME OF STAMPING OF INSTRUMENT

SECTION 17 SECTION 18 SECTION 19

INSTRUMENTS INSTRUMENTS
EXECUTED IN EXECUTED BOE &
INDIA OUTSIDE PROMISSORY
INDIA DRAWN O/F INDIA
Within 3 months of its first Any BOE payable
Stamped must be paid
receipt [arrival] in India. (otherwise than on
before or at the time of
demand) or Promissory
Execution. This relates to foreign
note drawn or made out
instruments [other than Bills
of India
of Exchange and Promissory
➔ must be stamped and
notes], received in India;
➔ the stamp cancelled,
before the first
Thus, where a promissory Sec 18 is intended to mitigate holder in India deals
note is executed by ‘A’ and the inconvenience and with the instrument,
‘B’ and a stamp is hardship that will entail if the [i.e., presents the
afterwards affixed and instrument concerned is same for acceptance
cancelled by ‘A’ by again required to be stamped before or payment, or
signing it, the stamping has or at the time of execution as endorses or otherwise
taken place subsequent to laid down in Section 17. negotiates the same
the execution and hence, the Instrument executed in India is in India.]
provisions of Section 17 are not within Section 18.
not complied with [Nath Bank v. Andhar Mamik
[Rohini v. Fernandes]. Tea Co.]

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10. VALUTION FOR DUTY [SECTION 20 -26]

VALUE OF Author’s Note-

AMOUNT IS
EXPRESSED Such Duty shall be Calculated on the value of Indian Currency according to

IN FOREIGN “Current Rate of Exchange” on the Day of the Date of the Instrument.

CURRENCY [i.e. DATE OF EXECUTION]

[SECTION 20]
Where an instrument is chargeable with ad valorem duty in respect of any shares
VALUATION OF
or of any marketable securities such as debentures or bond such duty shall be
STOCK &
calculated on the value of such shares and securities on the- [MUTALLY DECIDE]
MARKETABLE
➔ Average Price [i.e. Average of Market Price]- IN CASE OF LISTED CO. or
SECURITIES
➔ The value of day of date of the instruments. IN CASE OF UNLISTED- [BOOK
[SECTION 21]
VALUE]
❖ Where the shares are quoted on the stock exchange, it is easy to ascertain
the price of the shares or stock.

EFFECT OF ❖ However, where the shares or stocks are not quoted on any stock exchange, the

STATEMENT OF valuation has to be based upon the AVERAGE of the latest private

RATE OF transactions, which can generally be ascertained from the principal officer of

EXCHANGE the company.

OR ❖ If, there have been no dealings at all, then unless some other reliable evidence

AVERAGE PRICE of market value is forthcoming the value is to be taken at PAR.

[SECTION 22] ❖ Section 22 of the Act, however, provides that if such price or value is
mentioned in the instrument for the purpose of calculating duty, it shall be
presumed (until the contrary is proved) to be correct.
Section 23 provides that where interest is expressly made payable by the terms
of the instrument, such instrument shall not be chargeable with a duty higher
INSTRUMENTS
than that with which it would have been chargeable, had no mention of interest
RESERVING
been made therein.
INTEREST
For instance, a promissory note for Rs.10,000 is drawn with the recital of interest
[SECTION 23]
@ 18 % per annum, payable by the promissor; stamp is leviable on the basis that
the instrument is for Rs. 10,000 only.

VALUATION IN Where any property is transferred to any person in satisfaction of any debt due
CASE OF to such person, such debt shall be treated as consideration for valuation of a duty.
TRANSFER IN Explanation to Section 24 Provides that:
CONSIDERATION In case of sale of property is subject to a mortgage, any unpaid mortgage together
OF DEBT with interest due, if any, will be treated as part of consideration.

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[SECTION 24] [In re Mirabai, in re Laxman and Ganpat, Bom.]

Where property transferred is subject to mortgage, duty already paid

in respect of mortgage will be deducted, In order to entitle the mortgagee to a
deduction of the duties payable the ENTIRE property mortgaged should be
transferred and NOT MERELY A PORTION of it.

(a) ‘A’ owes ‘B’ Rs.1 lakh. A sells a property to B, the consideration being Rs.1,
50,000 and the release of previous debt being Rs.1, 00,000. Stamp duty is payable
on Rs.2, 50,000. [Somayya Organics Ltd. v. Board of Revenue, 1986 SC]
(b) ‘A’ sells property to ‘B’ for Rs. 500, which is subject to a mortgage to C for
Rs. 1,000 and unpaid interest of Rs. 200. The stamp duty is payable on Rs. 1,700.

(c) ‘A’ mortgages a house of the value of Rs. 10,000/- to B for Rs. 5,000/-. B
afterwards buys the house from A. Stamp duty is payable on Rs. 10,000/- less
the amount of stamp duty already paid for the mortgage.
Sec.25 provides for the mode of assessment of duty in case of agreements that
provides for payment for annuity i.e. Installment payments and not lump sum
payment. In such cases valuation is done in the following manner-
VALUATION IN
(1) IF PERIOD OF ANNUITY IS DEFINITE -> Total amount of annuity is to be paid
CASE OF
shall be considered.
ANNUITY
(2) IF PERIOD OF ANNUITY IS INDEFINITE-> Total amount payable within 20
[SECTION 25]
years of the date of first payment.
(3) IF SUBJECT TO LIFE OF A PERSON-> Annuity payable for 12 years from the
date of first payment.

Q-6 Rajesh mortgages a building of the value of Rs. 70,000 to Suresh for Rs.50, 000. Rajesh,
subsequently, sells the building to Suresh. An unpaid amount of Rs. 5,000 against interest is also
outstanding at the time of sale. Determine the value on which the stamp duty is payable in this
transfer of property.
Ans. Explanation to Section 24 of the Indian Stamp-Act, 1999; provides that in the case of sale of
property' subject to mortgage or other encumbrances-any unpaid mortgage money or money charged
together with-interest; if any due on the same shall be deemed to be part of the consideration for the
sale provided that where property subject to a mortgage is transferred to the mortgagee he shall be entitled
to deduct from the duty payable on the transfer the amount of any duty already paid in respect of the
mortgage.
In the present problem, in the light of above rule, a stamp duty is payable on Rs.70, 000 + 5,000 i.e. Rs.
75,000 less the amount of stamp duty already paid for the mortgage. Hence stamp duty is payable on Rs.
25,000 now, if the duty on mortgaged amount of Rs. 50,000 has already been paid.

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11. CONSIDERATION TO BE SET OUT [SECTION 27]

Section 27 provides that the consideration and all other facts and circumstances affecting the
chargeability of any instrument with duty or the amount of duty with which it is chargeable shall be
fully and truly set forth in the instrument.

➔ “Value of any property” would mean that REAL VALUE of the property in the open market at the
time the document was executed and NOT at the time when the executant acquired it.

Where there is no value set forth in the instruments, there would be contravention of
Section 27, but the omission does not render the document inadmissible or liable to be
impounded and taxed in the manner provided in Section 35 [Vinayak v. Hasan Ali, MP].

12. WHO SHOULD PAY THE STAMP DUTY [SECTION 29]

1. In case of promissory notes and bills of exchange – The maker or drawer.

2. In case of mortgage deed – The person executing the instrument i.e. mortgager.
3. In case of Insurance – The insurer.
4. In case of conveyance – The transferee
5. In case of lease – The lessee
6. In case of partition deed – Parties to partition have to pay stamp duty in proportion to their
respective shares in the property.

13. RECEIPTS [SECTION 30]

Any person receiving any money exceeding Rs. 20 in amount or any bill of exchange, cheque or
promissory note for an amount exceeding Rs. 500 or receiving in satisfaction of a debt any
movable property exceeding Rs. 500 in value, shall on demand by the person paying or delivering
such money, bill, cheque, note, or property, give a duly stamped receipt for the same.

14. PARTY LIABLE TO PAY [SECTION 30]

The primary duty of stamping lies in all cases on the person executing the instrument as Section
17 directs that the instruments chargeable with duty shall be stamped at or before executing an
instrument without the same being duly stamped.

Section 29 would apply only in the absence of a special agreement between the parties as stated
in the opening words of the section.

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15. ADJUDICATION AS TO STAMPS [SECTION 31]

When the document or any draft of the document is produced to the Collector he shall determine the
proper stamp duty on payment of a nominal fee..
Under Section 31(1) when:
(i) any instrument, (whether executed or not and whether previously stamped or not), is brought to the
Collector, and
(ii) the person bringing it applies to have the opinion of that officer as to the duty if any, with which
it is chargeable, and
(iii) pays a fee, the Collector shall determine the duty if any with which in his judgment, the
instrument is chargeable.

16. INSTRUMENTS NOT DULY STAMPED – INADMISSIBLE IN EVIDENCE

[SECTION 35 to 37]
Section 35 stipulates that no instrument chargeable with duty shall be–
a) Admitted in evidence for any purpose whatsoever by any person authorised
by law (such as judges or commissioners) or by the consent of the
Instruments not
parties (such as arbitrators) to record evidence; or
Duly Stamped
b) Shall be acted upon; or
Inadmissible in
c) Registered; or
Evidence
d) Authenticated by any such person as aforesaid or by any public officer
[Section 35]
UNLESS such instrument is duly stamped.
An insufficiently stamped instrument is not an invalid document and it can
be admitted in evidence on payment of penalty.
The proviso to Section 35 provides exception to section 35 as under: -
(a) Any instrument be admitted in evidence on payment of the duty with which
the same is chargeable, or, in the case of an instrument insufficiently stamped,
Cases Where
of the amount required to make up such duty, together with a penalty of
Unstamped
Rs. 5/- or 10 times the amount of the proper duty or deficient portion,
Instrument can
whichever is higher.
be Admitted in
(b) Unstamped receipt would be admissible in evidence on payment of a penalty
Evidence
of Re. 1/-.
(c) Any instrument can be admitted in evidence in any proceeding in a criminal
Court.
(d) When such instrument has been executed by or on behalf of the
Government, it is admissible.

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[Guni Ram v. Kodar].

Section 36 provides that where an instrument has been admitted in evidence, such
Admission of an admission shall not be questioned at any stage of the same suit or proceeding
Instruments on the ground that the instrument has not been duly stamped.
(Where not to be
If notwithstanding any objection, the trial Court admits the document, the matter
Questioned)
ends there and the Court cannot subsequently order the deficiency to be made
[Section 36]
and levy penalty [Bhupathi Nath v. Basanta Kumar, 1936 Cal.].

Q-7 Discuss the evidentiary value of an instrument not duly stamped under the Indian Stamp Act,
1899 Or (CS June 2006, 2013)
Explain the consequences of the instruments which are not duly stamped under the Indian Stamp
Act, 1899 Or (CS June 2010)
Comment - An instrument admitted in evidence is not to he questioned. (CS June 2007)
Ans. Refer heading no. 16 [SECTION 35]

Q-8 A document, which is apparently an agreement granting a franchise, produced in the court, but
is not stamped. Examine whether –
i. The document is void;
ii. The document can be admitted on payment of penalty; and
iii. The parties are liable to be prosecuted.
Ans.
(i) As per Section 35 of the Indian Stamp Act, 1899 instruments not duly stamp are inadmissible in
evidence. But in special cases they may be admitted after imposing penalty.
(ii) A document which is not duly stamped is not a void document. It is inadmissible in evidence. Such
documents can be impounded and made admissible evidence upon payment of the prescribed penalty.
(iii) The parties are not liable to be prosecuted. The proviso to Section 43 clarifies that no prosecution
shall be instituted in the case of any instrument in respect of which such a penalty has been
paid, unless it appears to the Collector that the offence was committed with an intention of
evading payment of the prop duty.

Q-9 An instrument bears a stamp of sufficient amount, but for improper description, Can it be certified as duly
stamped? How the instrument can be rectified and what would be the date of its execution? (CS June 2013)
Ans. As per Section 37 of Indian Stamp Act, 1899, an instrument that is stamped with the proper amount
but wrong description of stamps, may, be the state government rules, be satisfied as duly stamped on
payment of the right duty.

The date of execution of this instrument will be deemed to be the date of actual execution, and not the
date of the proper stamping. The reason behind this is that there is no revenue, loss to the government
and if the mistake is bona fide, the right description of the stamps can be subsequently put to use.

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17. INSTRUMENTS UNDULY STAMPED BY ACCIDENT [SECTION 41]

Section 41 deals with cases where a person, of his own motion bring it to the Collector’s notice that
the instrument is not duly stamped. In such cases, if the Collector is satisfied, that the omission to pay
the proper duty was due to accident, mistake or urgent necessity, he may receive the deficit amount
and certify by endorsement on the instrument that the proper duty has been levied.

In order to avail of the benefit of this section, the instrument must be produced before the Collector
within 1 year of the date of its execution.

Q-10. An instrument has not been duly stamped by accident or mistake or due to urgent necessity,
but the same had to be validated u/s 41 of the Indian Stamp Act, 1899 after a lapse of 1 year from
the date of execution. Examine validity?
Ans. Refer Section 41 [Heading no. 17]

18. SOME IMPORTANT TERMS

Section 28 prescribes certain rules for apportionment of the consideration, in cases of
certain conveyances arising out of a property being contracted to be sold and thereafter
conveyed in parts etc.

Apportionment Under Section 28(1) where a person contracts the sale of property as a whole and

[Section 28] thereafter conveys to the purchaser the property in separate parts, the
consideration shall be apportioned in such manner as the parties think fit, provided
that a distinct consideration is set – forth for each separate part in the conveyance
and thereafter the conveyances shall be chargeable with ad valorem in respect of such
distinct consideration.
The object of this section is to spare parties to an instrument, the inconvenience of
having to produce (in cases in which the duty payable on an instrument depends upon
the duty already paid on another instrument), the original or principal instrument in
order to prove that the second instrument has been duly stamped.

Denoting Duty Section 16 provides that where the duty with which an instrument is chargeable, or
[Section 16] its exemption from duty, depends in any manner upon the duty actually paid in respect
of another instrument, the payment of such last mentioned duty, shall, if application
is made in writing to the Collector for that purpose, and on production of both the
instruments, be denoted upon such first mentioned instrument, by endorsement under
the hand of the Collector of Stamps or in such other manner as the rules of the State
Government may provide.

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CS ANKUSH BANSAL
[9996065006]

E-Stamping is a computer based application and a secured way of paying Non Judicial
stamp duty to the Government. The prevailing system of physical stamp paper /
franking is being replaced by E-Stamping system. The benefits of e-Stamping are as
under:
❖ e-Stamp Certificate can be generated within minutes;
E – Stamping
❖ e-Stamp Certificate generated is tamper proof;
❖ e-Stamp Certificate generated has a Unique Identification Number;
❖ Easy accessibility and faster processing;
❖ Security;
❖ Cost savings and User friendly.

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