NO STAMP DUTY ON NEW FLATS ACQUIRED BY REHAB MEMBERS AFTER REDEVELOPMENT

In a major relief for residents moving into their new flats after redevelopment, the Department of Registration and Stamps (hereinafter referred to as the ‘Department’) has ruled that they need not pay any stamp duty on additional area given by the Developers in their new houses while executing the Tripartite Agreement i.e. Permanent Alternate Accommodation Agreement (hereinafter referred to as ‘PAAA’).

Earlier, when the Development Agreement was executed with the Society, the Department levied stamp duty. This levy was based on various parameters like construction cost for rehab component, rent i.e. Displacement Compensation for temporary alternative accommodation paid to the rehab members, corpus i.e. compensation for inconvenience and displacement, transportation charges and brokerage for finding temporary alternate accommodation. On the basis of this, the stamp duty was calculated and charged on the Development Agreement and same was paid by the Developers redeveloping the property of the Society.

Before the Developers completed the project and handed over the redeveloped building to the rehab members, another Tripartite Agreement i.e. PAAA was executed for the new premises between the Developers, the Society as confirming party and the rehab members. The Department used to again charge the stamp duty on the newly constructed building based on the construction cost to be paid by the Developers. Housing experts said this amounted to double duty on cost of construction and had been urging the Department to abolish it.

The National Real Estate Development Council (NAREDCO) had pointed out this anomaly to the Department that if stamp duty on the cost of construction is already paid on the Development Agreement then how can the Department charge the same stamp duty again while registering the PAAA which the Developers were required to pay as per the agreed terms with the Society.

Circular No.K.5-Stamp-17-Pra.Kr.10/13/303/17 issued on dated 30th March 2017 by Inspector General of Registration & Controller of Stamps (Maharashtra State) stipulates that the stamp duty on the new premises will be applicable as per provisions of Section 4 of Maharashtra Stamp Act since there is no transfer of property in redevelopment projects as also there shall be no stamp duty payable on the areas previously held by the rehab members of the Society or any additional areas agreed to be given to them in new buildings.

Section 4 of The Maharashtra Stamp Act, 2018 reads as under:

Section 4: Several Instruments used in single transaction of [Development Agreement] sale, mortgage or settlement. - (1) Where, in the case of Development Agreement, any sale, mortgage or settlement, several instruments are employed for completing the transaction, the principal instrument only shall be chargeable with the duty prescribed in Schedule-I for the conveyance, Development Agreement, mortgage or settlement and each of the other instruments shall be chargeable with a duty of one hundred rupees instead of the duty (if any) prescribed for it in that Schedule.

(2) The parties may determine for themselves which of the instruments so employed shall, for the purposes of Sub-Section (1), be deemed to be the principal instrument.

(3) If the parties fail to determine the principal instrument between themselves, then the officer before whom the instrument is produced, may, for the purposes of this Section, determine the principal instrument;

Provided that the duty chargeable on the instrument so determined shall be the highest duty which would be chargeable in respect of any of the said instruments employed.

On deliberations of the above factors, the following explanation can be derived at:

(1) In cases where the Development Agreement has been made only between the Society and the Developers, the rehab member is not a party to such Development Agreement, the provision of Section 4 will not be applicable to the PAAA executed in rehab members’ favour and the stamp duty will have to be charged as mentioned in Section     2(B) of the said Act.

(2) In cases where the following criterions are being complied with –

(a) If a Tripartite Development Agreement has been made between the Society, the members and the Developers

And,

(b) If a condition of making separate transfer document of new flat in favour of each member is incorporated in the original Development Agreement and,

(c) If there is limited objective of transferring the built-up area in the transfer document in favour of the said member as per the terms and conditions of the original Development Agreement and,

(d) If the Society is a consenter party in the transfer document in favour of such individual member and in such circumstances, the transfer document in favour of the individual member shall be treated as incidental document of the original Development Agreement and the provision of Sec. 4 should be made applicable to it.

(3) Here, it is clarified that the above explanation will be applicable only to the additional area agreed in the Development Agreement. In case the member is getting/purchasing more than the said agreed area, the stamp duty should be charged on the valuation arrived at as per the Annual Market Value Rate Chart for such additional area (flat/shop unit/office/industrial) or the consideration amount whichever is more, as clarified in the Circular under reference.

(4) However, in regard to the criterion regarding the document in favour of individual member as mentioned in Sr.No.2 above especially regarding confirmation about the compliance of the criteria which is a quasi-judicial process. Hence the directions are also being given that if the parties in such document are of the opinion that these criterion in regard to the document are being complied with and that the provision of Sec. 4 is becoming applicable, then they may get one such transfer document in the redevelopment scheme adjudicated from the Collector of Stamps and accordingly the Sub-Registrar may directly register other similar documents having same draft in the scheme as per the adjudication decision.

To be more specific, while the members of the Society shall also be the parties to the execution of the Development Agreement, no additional stamp duty shall be payable on the PAAA to be executed with the members in respect of new premises as per the provisions of Section 4 of the Maharashtra Stamp Act read with Circular/Notification issued by the Government of Maharashtra.  However, in the event, if one or more of the members of the Society does/do not became party/signatory to the Development Agreement, then the stamp duty and registration charges payable on his/her/their PAAA shall be borne, paid and discharged by such Individual members, without holding the Developers and the Society liable or responsible for the same.

Reproduced is a copy of the said Circular which is also is available on website www.igrmaharashtra.gov.in of Registration & Stamp Department under the category publication at ‘Circulars’.