bombay-high-court- Individual Allotment Agreements in Re-development Projects Do Not Require Separate Stamp DutyIndividual Allotment Agreements in Re-development Projects Do Not Require Separate Stamp Duty

The Bombay High Court (HC) ruled in a landmark decision that once the necessary stamp duty has been paid on a development agreement signed between a developer and cooperative housing society (CHS), the ancillary permanent alternate accommodation agreements (PAAAs), executed between the developer and an individual member of the CHS, are not subject to being assessed and stamped separately. PAAAs are contracts that a developer enters into with specific members of housing societies who are either currently in occupation or having their homes redeveloped.

The decision was made by a division bench of justice Neela Gokhale and justice Gautam Patel after they heard a number of petitions contesting circulars that the inspector general of registration and controller of stamps, Maharashtra, had issued on June 23, 2015, and March 30, 2017. These circulars had previously imposed a stamp fee on PAAA and mandated that every member of the society countersign the DA.

The 2015 circular incorrectly reasoned that since individual PAAAs were distinct from DAs, a different stamp duty applied to them. The HC rejects this circular, stating that “once the development agreement is stamped, the PAAA cannot be separately assessed to stamp in excess of the Rs. 100 required by Section 4(1) if it relates to and only to rebuilt or reconstructed premises in lieu of the old premises used or occupied by the member. The stamp on the development agreement includes the redevelopment of every unit in the society building. Stamp duty cannot be imposed again.”

The ruling makes it further clear that PAAA can only be stamped again, if a member is permitted to purchase additional land beyond what had been made accessible to the member. “A PAAA between a developer and a society member is to be additionally stamped only to the extent that it provides for the purchase by the member for actual stated consideration and a purchase price of additional area over and above any area that is made available to the member in lieu of the earlier premise,” states the order.

“The developer is not selling homes to members of the society for redevelopment”, it is further clarified. “Any additional area that a member buys is the only sale. The developer has a duty to do the remaining tasks in consideration of the members, through their society, giving the developer the benefit of the free-sale units.”

On the other hand, the 2017 circular had specified that, because the DA is a multi-party agreement, each society member must countersign it. The HC noted, however, that “the stamp authorities are not entitled in law to issue such a circular or to insist on any such requirement.” Quashing the circular, the bench ordered revenue authorities to accept the document as it is.

“The development agreement need not be signed by individual members of the society. That is optional. Even if individual members do not sign, the DA controls the re-development and the rights of society members,” the HC stated in its order.

The bench has also said emphatically that this ruling is applicable to all instances of societies going through redevelopment. These conclusions are not restricted to the facts of the cases we are now considering…Every kind of societal redevelopment is to be considered when interpreting our references to redevelopment and housing, including garages, galas, commercial and industrial use.

This explanation was considered important because, in the past, the revenue department frequently justified refusing to abide by court rulings by claiming that they only applied in certain circumstances.

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