Bombay Stamp Act: Stamp duty is on the instrument and not on the transaction. An agreement which contemplates the delivery of possession of the property within the stipulated time should be deemed to be a conveyance for the purpose of duty leviable under the Bombay Stamp Act

(i) The legal position is very clear that the stamp duty is on the instrument and not on the transaction. Furthermore, it is immaterial, whether the possession of the property has been handed over at the time of execution of the agreement to sell or whether it has been agreed to transfer the possession.

(ii) The object of Explanation 1 to Article 25 of Schedule I of the Bombay Stamp Act is clear that if an agreement is entered into and that agreement itself contemplates the delivery of possession of the property within the stipulated time, then, such an agreement should be deemed to be a conveyance for the purpose of duty leviable under the Bombay Stamp Act.

(iii) Since the possession was admittedly given to the appellant even before the date of agreement, implying acquisition of possessory rights protected under Section 53A of the Transfer of Property Act, the same requires payment of proper stamp duty. As indicated above, the agreement to sell includes a clause stating that physical possession had already been handed over to the appellant, regardless of the basis of such possession. This satisfies the requirement to treat the instrument as a ‘conveyance’ within the meaning of Explanation I to Article 25 of Schedule I of Bombay Stamp Act, with only the formality of executing the sale deed remaining. Therefore, the said document is liable for payment of stamp duty at the hands of the appellant.

(iv) However, we make it clear that as per the second proviso to Article 25, if the stamp duty is already paid or recovered on the agreement to sell, then, the same shall be deducted while computing the stamp duty payable, when the sale deed is executed; and the recovery shall be restricted only to the extent of difference in stamp duty and the entire penalty from the date of execution of the agreement to sell till the date of payment of stamp duty. Needless to state that until the defect is cured by satisfying the requirements under Section 34, the document impounded cannot be used in evidence.