Stamp Duty to Be Assessed on Market Value at Time of Sale Deed, Not Agreement to Sell: Punjab & Haryana High Court Resolves Legal Divergence

“Instrument, Not Transaction, Triggers Stamp Duty Liability”, In a significant ruling Punjab and Haryana High Court held that for the purpose of stamp duty under the Indian Stamp Act, 1899, the relevant market value is the one prevailing on the date of execution of the sale deed, not the earlier date of agreement to sell.

A Division Bench of Justice Anil Kshetarpal and Justice Rohit Kapoor, deciding a reference , resolved a long-standing divergence in judicial opinion regarding the correct valuation date for levy of stamp duty on conveyance deeds.

The Court categorically held: “For the purpose of determining the amount of stamp duty on conveyance deed/sale deed, the market rate prevailing at the time of execution of the sale deed would be relevant and not when the parties entered into agreement to sell.” [Para 12]

“Charge Is on the Instrument, Not the Underlying Transaction”: Interpretation of Sections 3 and 17 of the Stamp Act

The Bench relied heavily on the charging provision—Section 3 of the Indian Stamp Act, 1899—to hold that stamp duty is payable on the instrument itself, not the transaction it evidences.

“Though the court is required to look into the nature of transaction represented by the instrument, however, the charging Section refers to the instrument and not to the transaction.” [Para 5]

Further, Section 17 mandates that all instruments chargeable with duty and executed in India must be stamped at the time of execution, reinforcing that the timing of the instrument, not the transaction, governs duty assessment.

Supreme Court Precedents Affirmed: Khandaka Jain Jewellers and Shanti Bhushan Followed

The Division Bench cited and followed the binding precedent in State of Rajasthan v. Khandaka Jain Jewellers, (2007) 14 SCC 339, where the Supreme Court had decisively held:

“Stamp duty on a sale has to be assessed on the market value of the property at the time the instrument of sale was executed. The valuation as at the time of agreement to sell or at the time of filing of the suit is not relevant.” [Para 6]

Also referred was Shanti Bhushan (dead) through LRs v. State of UP, 2023 INSC 425, where the apex court reiterated that the date of agreement is immaterial for stamp valuation under Section 3 read with Section 17 of the 1899 Act.

Harvinder Pal Singla Judgment Overruled: Misplaced Reliance on Lease Assignment Precedent

The Court specifically overruled the earlier decision in Harvinder Pal Singla v. State of Haryana (CWP No. 13233 of 2015), which had erroneously relied upon M/s Residents Welfare Association, Noida v. State of U.P., (2009) 14 SCC 716.

“Judgment in Harvinder Pal Singla’s case is not good law... The Court in that case wrongly relied on a precedent dealing with assignment of lease, not a conveyance deed.” [Paras 7, 11]

The Bench clarified that the Residents Welfare Association case pertained to assignment of leasehold rights, governed by Article 63 of the Schedule to the Stamp Act, and had no relevance to conveyances transferring ownership.

This distinction was also highlighted by the Division Bench in Nripti Bhalla v. State of Haryana (LPA No. 4981 of 2018), which the present judgment affirms.

Misuse of Agreements to Evade Duty Discouraged: Revenue Protection Upheld

The Court also referred to State of Haryana v. Manoj Kumar, (2010) 4 SCC 350, where the Supreme Court found that agreements to sell followed by delayed execution of sale deeds were being used to undervalue property and defraud the government of legitimate stamp duty.

The Bench observed that this ruling underlined the importance of aligning stamp duty liability with the real value at the time of sale deed execution, and not allowing parties to circumvent duty by referring to outdated agreement values.

Legal Principle Clarified and Reference Concluded

Answering the reference conclusively, the Bench held: “Market value specified in the agreement to sell or the market value prevailing on the date of agreement would have no relevance for deciding stamp duty.” [Para 10]

“The correct legal position is that stamp duty must be determined based on the market value on the date the sale deed is executed.” [Para 12]

Accordingly, the Court directed that the matter be placed before the Single Judge for further proceedings.

Landmark Clarification on Stamp Duty Valuation

This judgment brings clarity to revenue authorities, legal practitioners, and property buyers, especially in Punjab and Haryana, by settling the issue of applicable date for stamp duty calculation under the Indian Stamp Act, 1899.

By affirming the supremacy of the instrument's execution date, and disapproving contrary precedents, the Court has aligned with binding Supreme Court law and strengthened the integrity of revenue assessments.

Date of Decision: July 14, 2025