Introduction

Meaning: The Indian Stamp Act, 1899 is the law relating to stamps which
consolidates and amends the law relating to stamp duty.

It is a fiscal legislation envisaging levy of stamp duty on certain instruments.

The Indian Stamp Act, 1899 is a fiscal legislation dealing with tax on transactions.

The Act is divided into eight Chapters and there is a schedule which contains the
rates of stamp duties on various instruments.

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 Contd….
Union List: The Union List or List-I is a list of 100 items (the last item is
numbered 97) given in Seventh Schedule in the Constitution of India on which
Parliament has exclusive power to legislate.

The legislative section is divided into three lists:

(i) Union List,
(ii) State List and
(iii) Concurrent List.

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 Important Definition
Executed / Execution:
(i) The words “executed” and “execution” (used with reference to instruments),
mean “signed” and “signature” respectively.
(ii) Signature includes mark by an illiterate person.
(iii) An instrument which is chargeable with stamp duty only on being “executed”
is not liable to stamp duty until it is signed.

The instrument is duly stamped if it has been duly stamped at the time of execution and is
admissible in evidence, though the stamp is subsequently removed or lost (Mt. Mewa Kunwari
v. Bourey, AIR 1934 All.388).

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 Contd….
The Collector can receive the stamp duty without penalty and certify an
instrument as duly stamped, as from the date of execution.
“impressed stamp” includes:
(a) labels affixed and impressed by the proper officer; and
(b) stamps embossed or engraved on stamp paper.

Case Law: The rules framed under the Act invariably prescribe to what
documents impressed stamps are to be used. The term includes both a stamp
impressed by the Collector and also a stamp embossed on stamp paper. Special
adhesive stamps are labels (Ganga Devi v. State of Bihar, 1 LR 45 Pat. 198).

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 Contd….
Chargeable: The term “chargeable” as applied to an instrument executed or first
executed after the commencement of the Act means chargeable under the Act
and as applied to any other instrument, chargeable under the law in force in
India when such instrument was executed or where several persons executed the
instrument at different times, first executed.

Stamp: “Stamp” means any mark, seal or endorsement by any agency or person
duly authorized by the State Government and includes an adhesive or impressed
stamp for the purposes of duty chargeable under this Act. This definition of the
stamp has been inserted by the Finance (No. 2) Act, 2004.

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 INSTRUMENTS CHARGEABLE WITH DUTY
Point No. 01: Every instrument mentioned in that schedule which, not, having been
previously executed by any person, is executed in Bangladesh on or after the first day of
July, 1899.

Point no. 02: Every bill of exchange payable otherwise than on demand or promissory note
drawn or made out of Bangladesh on or after that day and accepted or paid, or presented
for acceptance or payment, or endorsed, transferred, or otherwise negotiated, in
Bangladesh; and

Point No. 03: Every instrument (other than a bill of exchange or promissory note)
mentioned in that schedule, which, not having been previously executed by any person, is
executed out of Bangladesh on or after that day relates to any property situate, or to any
matter or thing done or to be done, in Bangladesh and is received in Bangladesh.

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 Contd….
No duty shall be chargeable in respect of:
1. any instrument executed by or on behalf of or in favour of the Government, in
cases where, but for this the Government would be liable to pay the duty
chargeable in respect of such instrument.

2. any instrument for the sale, transfer or disposition, either absolutely or by way
of mortgage or otherwise, of any ship or vessel or any part, interest, share of
property of or in any ship or vessel registered under the Merchant Shipping Act,
1894 or under Act XIX of 1838 or the Indian Registration of Ships Act, 1841 as
amended by subsequent Acts.

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 Contd….
3. Any instrument executed by, or, on behalf of, or in favour of, the Developer or
Unit or in connection with the carrying out of purposes of the special Economic
Zone.

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 EXTENT OF LIABILITY OF INSTRUMENTS TO DUTY (SEVERAL INSTRUMENTS IN
SINGLE TRANSACTION OF SALE, MORTGAGE OR SETTLEMENT)
Section 4 provides that, where in the case of any sale, mortgage or settlement,
several instruments are employed for completing the transaction –

(i) Only the principal instrument shall be chargeable with the duty prescribed for
the conveyance mortgage or settlement and

(ii) Each of the other instruments shall be chargeable with a duty of one rupees
(instead of the duty if any prescribed for the other instruments)

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 Contd….
Illustrations (Section 4 held applicable):
Point No. 01: A executed a conveyance of immovable property. On the same
deed his nephew (undivided in status) endorsed his consent to the sale, as such
consent was considered to be necessary. It was held that the conveyance was the
principal instrument. The consent was chargeable with only one rupee.

Point No. 02: Subsequent to a sale of immovable property, two declarations

were executed reciting that the sale was subject to an equitable mortgage
created by the vendor. These declarations were held to be chargeable, together
with the sale deed, as having completed the conveyance.

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 Contd….
Point No. 03: Brother A executed in favour of brother B a gift of all his property.
By another deed, brother B made provision for the living expenses of brother A
and hypothecating in favour of brother A a part of the property included in the
above mentioned gift deed, in order to secure the payment of the living
expenses. It was held that the two documents were part of the same transaction.
They amounted to a settlement and Section 4 applied.

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 INSTRUMENTS COMING WITHIN SEVERAL DESCRIPTIONS IN SCHEDULE-I
Documents mentioned in Schedule I: Any instrument mentioned in Schedule I
to Indian Stamp Act is chargeable to duty as prescribed in the Schedule. These
include affidavit, lease, memorandum and articles of company, bill of exchange,
bond, mortgage, conveyance, receipt, debenture, share, insurance policy,
partnership deed, proxy, shares etc.

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 SECURITIES DEALT IN DEPOSITORY NOT LIABLE TO STAMP DUTY
(a) an issuer, by the issue of securities to one or more depositories shall, in
respect of such issue, be chargeable with duty on the total amount of security
issued by it and such securities need not be stamped;

(b) where an issuer issues certificate of security under sub-section (3) of Section
14 of the Depositories Act, 1996, on such certificate duty shall be payable as is
payable on the issue of duplicate certificate under this Act;

(c) the transfer of—

(i) registered ownership of securities from a person to a depository or from a
depository to a beneficial owner;

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 Contd….
(ii) beneficial ownership of securities, dealt with by a depository;

(iii) beneficial ownership of units, such units being units of a Mutual Fund
including units of the Unit Trust of India established under sub-section (1) of
Section 3 of the Unit Trust of India Act, 1963, dealt with by a depository, shall not
be liable to duty under this Act or any other law for the time being in force.

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 CORPORATISATION AND DEMUTUALISATION SCHEMES AND RELATED INSTRUMENTS
NOT LIABLE TO DUTY
(a) a scheme for corporatisation or demutualisation, or both of a recognized
stock exchange; or

(b) any instrument, including an instrument of, or relating to, transfer of any
property, business, asset whether movable or immovable, contract, right, liability
and obligation, for the purpose of, or in connection with, the corporatisation or
demutualisation, or both of a recognized stock exchange pursuant to a scheme,
as approved by the Securities and Exchange Board of India.

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 VALUATION FOR DUTY UNDER THE ACT
Category 01: Where an instrument is chargeable with ad valorem duty in respect
of any money expressed in any currency other than that of India, such duty shall
be calculated on the value of such money in the currency of India, according to
the current rate of exchange on the date of the instrument.

Category 02: The Central Government notifies from time to time, in the Official
Gazette the rate of exchange for conversion of certain foreign currencies into
Indian currency for this purpose and such rate shall be deemed to be the current
rate.

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 Contd….
Category 03: That in the case of an instrument chargeable with ad valorem duty
in respect of any stock or any marketable or other security, such duty shall be
calculated on the value of such stock or security according to the average price
or the value thereof on the date of the instrument. The term “marketable
security” has been defined in Section 2(16-A) of the Act.

Category 04: Where interest is expressly made payable by the terms of the
instrument, such instrument shall not be chargeable with a duty higher than that
with which it would have been chargeable, had no mention of interest been
made therein. For instance, a promissory note for INR 10,000 is drawn with the
recital of interest at the rate of 18 percent per annum, payable by the promissor;
stamp is leviable on the basis that the instrument is for Rs. 10,000 only.

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 PERSONS LIABLE TO PAY DUTY
Section 29 deals with the persons responsible for payment of duty. Under this
section, in the absence of an agreement to the contrary, the expense of
providing the proper stamp shall be borne:
(a) in the case of any instrument described in any of the following articles of
Schedule-I, namely, -
(i) No. 2 (Administration Bond),
(ii) No. 6 (Agreement relating to Deposit of Title-deeds, Pawn or Pledge),
(iii) No. 13 (Bill of Exchange),
(iv) No. 15 (Bond),
(v) No. 16 (Bottomry Bond),

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• No. 26 (Customs Bond),
• No. 27 (Debenture),
• No. 32 (Further Charge),
• No. 34 (Indemnity-bond),
• No. 40 (Mortgage-deed),
• No. 49 (Promissory-note),
• No. 55 (Release),
• No. 56 (Respondentia Bond),

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 Contd….
• No. 57 (Security Bond or Mortgage-deed),
• No. 58 (Settlement),
• No. 62(a) (Transfer of shares, in an incorporated company or other body
corporate),
• No. 62(b) (Transfer of debentures, being marketable securities, whether the
debenture is liable to duty or not, except debentures provided for by Section
8),
• No. 62(c) (Transfer of any interest secured by a bond, mortgage-deed of policy
of insurance), - by the person drawing, making or executing such instrument;

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 Contd….
(b) in the case of a policy of insurance other than fire insurance by the person
effecting the insurance;

(c) in the case of a policy of fire-insurance – by the person issuing the policy;

(d) in the case of a conveyance including a reconveyance of mortgaged property

by the grantee; in the case of a lease or agreement to lease by the lessee or
intended lessee;

(e) in the case of a counterpart of a lease – by the lessor;

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 Contd….
(f) in the case of an instrument of exchange – by the parties in equal shares;

(g) in the case of a certificate of sale – by the purchaser of the property to which
such certificate relates; and

(h) in the case of an instrument of partition – by the parties thereto in

proportion to their respective shares in the whole property partitioned, or, when
the partition is made in execution of an order passed by a Revenue Authority or
Civil Court or arbitrator, in such proportion as such authority, Court or arbitrator
directs.

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 METHODS OF STAMPING
Background: the duty with which an instrument is chargeable is to be paid by
means of stamps indicated in the Act and the rules. Generally, rules deal with the
subject.
The rules may, among other matters, regulate:
(i) in the case of each kind of instrument, the description of stamps which may
be used;
(ii) in the case of instruments stamped with impressed stamps, the number of
stamps which may be used;
(iii) in the case of bills of exchange or promissory notes, the size of the paper on
which they are written.

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 Contd….
(b) There are two types of stamping, namely:
• Adhesive stamping, and
• Impressed stamping.

USE OF ADHESIVE STAMPS: Section 11 deals with the use of adhesive stamps. This
Section provides that the following instruments may be stamped with adhesive
stamps, namely –
(i) Instruments chargeable with a duty not exceeding 10 naya paisa,
(ii) Bills of Exchange and promissory notes drawn or made outside India,
(iii) Entry as an advocate, vakil or attorney on the roll of a high court,

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 Contd….
(iv)Notarial acts, and

(v) Transfer by endorsement of shares in any incorporated company or other

body corporate.

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 CANCELLATION OF ADHESIVE STAMPS
Cancellation of Adhesive Stamps: The act provides that any person affixing any
adhesive stamp to any instrument chargeable with duty which has been executed
by another person shall, when affixing such stamp cancel the same so that it
cannot be used again.

Any instrument bearing an adhesive stamp which has not been cancelled is
deemed to be unstamped.

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 MODE OF CANCELLATION OF ADHESIVE STAMPS
Point No. 01: Writing on or across the stamp: It provides that the cancellation of
an adhesive stamp may be done by the person concerned by writing on or across
the stamp his name or initials, or the name or initials of his firm with the true
date of his so writing, or in any other effectual manner.

Case Law: In Mahadeo Koeri v. Sheoraj Ram Teli, ILR 41 All 169; AIR 1919 All 196,
it was held that a stamp may be treated as having been effectively cancelled by
merely drawing a line across it.

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 Contd….
Case Law: Hafiz Allah Baksh v. Dost Mohammed, AIR 1935 Lah. 716, it was held
that if it is possible to use a stamp a second time, inspite of a line being drawn
across it, there is no effectual cancellation. Again, the question whether an
adhesive stamp has been cancelled in an effectual manner has to be determined
with reference to the facts and circumstances of each case.

Case Law: Melaram v. Brij Lal, AIR 1920 Lah. 374, it was held that a very effective
method of cancellation is the drawing of diagonal lines right across the stamps
with ends extending on to the paper of the document.

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 INSTRUMENTS STAMPED WITH IMPRESSED STAMPS HOW TO BE WRITTEN (WRITING ON
STAMP PAPER)
(i) Every instrument written upon paper stamped with an impressed stamp shall
be written in such manner that the stamp may appear on the face of the
instrument and cannot be used for or applied to any other instrument.
(ii) The expression, ‘face of the instrument’ is not to be interpreted as meaning
that the document must commence on the side on which the stamp is
impressed or that both sides of the paper or parchment may not be written
upon.
(iii) It was held when the face of a deed or document is mentioned, no particular
side of the parchment or paper, on which the deed or document is written, is
thereby indicated. Even the last line may constitute the face.

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 Contd….
(iv) no second instrument chargeable with duty shall be written upon piece of
stamp paper upon which an instrument chargeable with duty has already been
written.

(v) The object of Section 14 is to prevent a stamped paper which has been used
for one instrument, from being used for another instrument thereby avoiding
payment of duty in respect of second instrument.

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 TIME OF STAMPING INSTRUMENTS
(i) Instruments executed inside India: Section 17 provides that all instruments
chargeable with duty and executed by any person in India shall be stamped
before or at the time of execution.

(ii) A receipt stamped subsequent to its execution, but before being produced in
the Court is not stamped in time and accordingly, not admissible in evidence.

(iii) Instruments executed outside India: Section 18 relates to foreign instruments

(other than bills and notes), received in India; Foreign bills and notes
received in India.

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