The
terminology 'under-valuation' is frequently used in matters of transfer of property, which has a direct bearing on payment of stamp duty and registration charges payable
to Government. Before turning upon the subject 'under-valuation', it is
necessary to understand the constitutional provisions relating to stamp duty.
Articles 246, 265, 268, 269(1) of the Constitution of India are relevant
here. Article 246 refers to the
powers of Parliament and State
Legislature to make laws. The Constitution of India has union list,state list, and concurrent list. The
Parliament has powers to make laws in respect of matters mentioned in
the union list and state legislatures
have powers to make laws in respect of matters mentioned in the state
list and both have powers to make laws in respects of matters mentioned inthe concurrent list.
For
day-to-day functioning and to meet administrative expenses and also for
under-taking develop-mental works, every Government whether in the Central or
States requires revenue which are earned from different sources. Levy of tax is one such source of income to the Government. Article 265 makes it very clear that no tax shall be levied or
collected except under an authority of law.
Stamp
duty registration charges are the
major sources of
revenue to the State
Governments. In Karnataka, the department of registration and stamp duty is ranked among the top five revenue earning departments of the State.
The
stamp duty and registration charges are payable on ad-volerem basis, that is based on the value of property. No maximum limit is prescribed in respect of stamp duty and
registration charges payable on transfer of property. The stamp duty and
registration charges go up with the increase in the value of sale consideration
paid for the property i.e. higher the
sale consideration, the greater the stamp duty and registration charges. These
charges are normally borne by the
purchaser of the property unless there is a contract between the parties to the contrary effect. Apart from payment of
sale consideration, stamp duty and registration charges, the purchaser has to
incur expenditure to get revenue records mutated in his/her name and for
transfer of power and water connections to his / her name. All these expenses put
together would be around 12% of sale consideration.
To save
some money from out of this expenditure, parties to a sale transaction by
mutual consent mention the value of the property in the conveyance deed at a much lower figure
than its actual market value and thereby pay less stamp duty and
registration charges while at the same time, the purchaser makes payment of sale consideration as agreed
upon to the vendor. This process of declaring the value of a property in the
conveyance deed at a figure lesser than the actual sale consideration agreed
upon for purposes of registration is generally known as undervaluation of the property. This modus
operandi has two adverse effect on the
society. Firstly, there is loss of
revenue to the Government and secondly, circulation of unaccounted money in the
market goes up. The Karnataka Stamp Act1957 has certain sections dealing with under-valuation of property. Section 45-A inserted in the Karnataka Stamp Act 1957,
during 1975 and 45-B inserted during
1991 deal with the subject. Section 45-A
deals with the procedure to be adopted where the properties are undervalued in
a sale transaction.
The
parties producing documents for registration have to file the market value of
property calculated in the prescribed form No.1. If registering officer has reasons to believe
that the market value of the property shown in the document produced for
registration is not the actual value of the property in the locality, he may
arrive at the market value of such property and inform the parties to pay the
stamp duty and registration charges according to the market value arrived by him. For arriving at
the market value, the registering officer will use the guidelines value published
by the committee constituted for estimation of market value under Sec.45-B. Thevalues published by the committee are the guidelines value for registeringoffices to determine the market value.
They are the average value of the
property in a particular locality. If the sale consideration of a property
shown in the sale deed is lower than the guidelines value pre-scribed for that
area, then the stamp duty & registration charges are payable on the basis
of the guide-lines value. If the market value of this property is more than the
guidelines value, the stamp duty payableis as per the market value.
The
registering authority informs the market value as arrived by him in form 1-A to
the parties. This gives options to the parties to contest the valuation done by
the registering authority, or to agree or to withdraw the document from
registration.
Theregistering officer may proceed with the registration, if the party pays the stamp duty and registration charges as arrived at by him. If
the parties do not agree with the valuation arrived at by the registering
officer and desire to contest the same, the registering officer shall keep the process of registration pending and refer the matter to the Deputy
Commissioner along with a copy of the document presented for registration for
determination of the correct market
value of property and stamp duty payable thereon.
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